Does one take the members' salaries into account when determining the leviable remuneration for SDL? I have found articles online in which it is clearly stated that in determining the R500 000 limit, one excludes the members' salaries although their salar
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We don’t agree with your interpretation.
Section 3 of the Skills Development Levies Act, 1999, was substituted by section 88 of the Taxation Laws Amendment Act, 2017, Act No. 17 of 2017; and is deemed to have come into operation on 19 January 2017. It followed the repeal of paragraph 11C, of the Fourth Schedule to the Income Tax Act, by the Tax Administration Laws Amendment Act, 2016, Act No. 16 of 2016, that came into operation on 1 March 2017 and applies in respect of years of assessment commencing on or after that date.
We accept that your request doesn’t deal with the 2017 year of assessment, or an earlier one. The answer then is that the old section 3(5)(e) of the Skills Development Act no longer applies – effectively for years of assessment commencing on 1 March 2017 and later.
The purpose of section 3(5)(e) was to ensure that ONLY the actual remuneration, and NOT also the amount of remuneration determined in accordance with the formula in respect of a director of a private company and deemed to have received from that private company during any month, is to be taken into account in determining the employees liability for the skills development levy.
So, where the total remuneration for the year, including the director’s remuneration, is factually more than R500 000, the company had to have registered, and paid, the levy in respect of this remuneration.
For the purposes of the Fourth Schedule, unless the context otherwise indicates "employee" means –
(a) any person (other than a company) who receives any remuneration or to whom any remuneration accrues;
…
(g) any director of a private company who is not otherwise included in terms of paragraph (a);
But, paragraph (g) of the definition of “employee” was deleted by section 4(1) of Act 22 of 2018 with effect from 1 March 2019.
In terms of section 3(1), of the Skills Development Levies Act, the skills development levy is calculated with reference to the ‘leviable amount’. The ‘leviable amount’ means (see section 3(2)) the total amount of remuneration, paid or payable, or deemed to be paid or payable, by an employer to its employees during any month, as determined in accordance with the provisions of the Fourth Schedule to the Income Tax Act for the purposes of determining the employer's liability for any employees' tax in terms of that Schedule, whether or not such employer is liable to deduct or withhold such employees' tax.
You will notice that it uses the phrase ‘or deemed to be paid or payable’. If the exclusion, paragraph (e), was not there the director’s actual remuneration and deemed remuneration would have been subject to the levy – essentially the levy would then have been paid twice on the same amount (or substantially the same amount).
A director of a private company will be an employee if any remuneration accrues to him or her (paragraph (a) of this definition). If no remuneration accrued to him or her during the 2019 year of assessment, the director would have been an employee because of paragraph (g). If, in a year of assessment, no director’s remuneration accrued to the individual, and it was only the paragraph 11C (or the formula amount) in respect of which employees’ tax as paid to SARS, then no skills development levy would have been payable. There is a difference when the director gets a bonus. This will constitute ‘variable remuneration’ (see section 7B of the Income Tax Act) and is included in remuneration in the month it is paid. It will then, together with the other remuneration, be subject to the skills levy.