We have obtained a copy of the gazetted Personal Income Tax (Amendment) Act 2011. This confirms our views on the original version of the amendment as contained in our previous analysis (see post of 6 January 2012).
Specifically the gazetted copy of the amendment has laid to rest the status of old tax free allowances (housing, transport, leave allowance etc) and the controversy as to whether these allowances could be claimed in addition to the newly introduced consolidated allowance. The section of the law containing the old allowances has been deleted and replaced with a new section thereby confirming that the old tax free allowances are no longer applicable.
Also, based on the gazetted amendment, expenses incurred by an employee in the performance of his duties, and from which it is not intended that the employee will make any profit or gain will continue to be tax free. However, some of the items such as medical or dental expenses, cost of passage etc which were specifically listed in the old law as non taxable have been removed. This implies that for any expense claim by the employee to be eligible as non taxable, it must have been incurred in the performance of employment duties.
The commencement date of the amendment is 14 June 2011, the date the amendment bill was signed into law. As a result, employers will have to recalculate their payroll taxes with effect from 14 June 2011 and re-file their returns under the new amendment. In the event that the recalculations result in overpayment, this should be set off against future PAYE tax payments while refunds should be paid to relevant employees as appropriate.
Going forward, employers need to review their payroll processes including software and packages, staff policy document, employment contracts, compensation structure etc to align with the new amendments.