The National Treasury and the South African Revenue Service (SARS) have recently gazetted a notice that grants a tax exemption for bulking payments made to former members of closed retirement funds. This notice aims to provide consistency in tax treatment, clarity, and certainty for South African taxpayers.
Details of the Notice
The notice was published in the Government Gazette no. 3356 on 3 May 2023 and is based on Paragraph 2D of the Second Schedule to the Income Tax Act. Accordingly, it applies to fund administrators who pay former members of closed retirement funds, provided they meet the specific requirements outlined in the notice.
Benefits for Taxpayers
This tax exemption is a significant development for South African taxpayers as it provides a clear understanding of the tax treatment of bulking payments. The notice also serves as a call to action for those who have previously been non-compliant with tax regulations to rectify the error before the government takes further action.
Explanatory Memorandum
To ensure transparency and understanding of the proposed amendments, taxpayers and stakeholders can access the accompanying Explanatory Memorandum on the National Treasury and SARS websites.
Draft Notice and Public Comments
It is worth noting that the National Treasury and SARS published a draft notice for public comment on 6 March 2023. Taxpayers and stakeholders had 30 days to submit their written words, with the closing date for comments being 6 April 2023.
In summary, the newly gazetted notice by the National Treasury and SARS provides a tax exemption for bulking payments to former members of closed retirement funds. This ensures consistent tax treatment and offers clarity and certainty for South African taxpayers. In addition, the notice serves as a final call to action for those who have previously been non-compliant, effective 3 May 2023. Taxpayers and stakeholders can access the explanatory memorandum on the National Treasury and SARS websites to comprehensively understand the proposed amendments.
