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New rules for employer contributions to retirement funds

South Africa

March 2015 will bring into effect new tax provisions introduced into the Income Tax Act 1962 by the Taxation Laws Amendment Act of 2013. Taxand South Africa consider these new rules and some of the complexities surrounding this taxable benefit provision relevant to employers.

A taxable benefit will arise if an employer has made any contribution for the benefit of any employee to any pension fund, provident fund or retirement annuity fund. This is detailed in the 7th Schedule and depends on whether a retirement fund constitutes a defined contribution component (DC component) or a defined benefit component (DB component) or a combination of both components. A DC component is defined in relation to how the value of the retirement benefit that the employee will receive as a member of the fund is calculated. A DB component means a component of a pension fund, provident fund or retirement annuity fund other than a DC component of a fund.

In addition the employer contribution or payment to a fund in respect of risk benefits provided by the fund directly or indirectly for the benefit of a member of the fund is deemed to be a contribution made in respect of a DC component of that fund.

Discover more: New tax rules for employer contributions to retirement funds in 2015

Your Taxand contact for further queries is:
Bernard Du Plessis
T. +27 11 269 7891

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Taxand's Take

Employers will need to consider the rules of the specific retirement funds concerned and the PAYE implications of employer contributions to such funds in respect of their employees once the new provisions come into effect.


Taxand's Take Author

Bernard Du Plessis
Taxand Board member
South Africa
Sub-Saharan Africa

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