A taxpayer contributes to a Provident Fund, and the employer contributes an equal amount. The employer portion is recorded on the IRP5 under code 3825 and shown as a deduction under code 4473. His contribution is recorded under code 4003. SARS allows the
Important:
This answer is based on tax law for the year ending 28 February 2018.
Answer:
We don’t agree with your view that “ALL retirement funding paid (subject to … limits) are allowable as a deduction.” It is, in the first instance, only contributions to approved, by SARS, retirement funds that qualify to be deducted.
With respect to the contributions made by the employer, on behalf of or for the benefit of the person (the member of the fund or the employee), we accept they don’t have a ‘no value’ – see paragraph 12D(6) of the Seventh Schedule to the Income Tax Act.
Section 11F(4) deals with contributions made by the employer, on behalf of or for the benefit of the person. We copied it for ease of reference below:
“Any amount paid or contributed by an employer of the person on behalf of or for the benefit of that person must be deemed—
(a)
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to be equal to the amount of the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(l) of the Seventh Schedule determined in accordance with paragraph 12D of that Schedule; or
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if that amount is paid by an employer to a retirement annuity fund, to be equal to the amount of the cash equivalent of the value of the taxable benefit contemplated in paragraph 2(h) of the Seventh Schedule determined in accordance with paragraph 13 of that Schedule; and
(b) to have been contributed by that person.”
To the best of our knowledge, for:
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pension fund contributions, code 4472, is linked to the related 3816 benefit code and 4001 employee deduction code;
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provident fund contributions, code 4473, is linked to the related 3825 benefit code and 4003 employee deduction code; and
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retirement annuity fund contributions, code 4475, is linked to the related 3828 benefit code and 4006 employee deduction code.
Note: we agree with your comment regarding code ‘4473’ - if SARS communicated that in writing, we would like to see that.
We may require more information to provide the guidance required here. It seems that the code 4473-amount was linked, on the IRP5, as was prescribed. We would need the grounds, given by SARS, for the additional assessment or the reasons provided for that assessment.