Taxes Levied
747. Skills Development Levies Act, 1999
December 1999



The Skills Development Levies Act, 1999 has recently been passed by Parliament, questions have been raised concerning which "amount" should be used when calculating the levy. A short summary of what constitutes a "leviable amount" is set out below.


The leviable amount is defined in the Skills Development Levies Act as meaning the total amount of remuneration payable by an employer to his employees as determined in accordance with the provisions of the Fourth Schedule, regardless of whether the employer is liable to deduct or withhold employees’ tax on the amounts in question.


The words "employer", "employee" and "remuneration" are given their meaning as defined in the Fourth Schedule to the Income Tax Act.


Accordingly, any person receiving remuneration is an employee and anyone paying it is an employer.


"Remuneration" in the Fourth Schedule includes inter alia salary, leave pay, allowances, wages, overtime pay, bonuses, commission, fee, pension, superannuation allowances, and retirement allowances. Specifically included are fringe benefits and 50% of any travel allowance. Specifically excluded are any amounts paid to an independent contractor, reimbursive amounts and amounts paid for services rendered by directors of private companies. The total amount of remuneration as defined is used to calculate the levy.


In terms of the Skills Development Levies Act, certain amounts are specifically excluded from calculating the leviable amount:


The practical effect of this is that all "remuneration", unless specifically excluded must be used to calculate the leviable amount. For example a company, with a non contributory pension fund, (whereby all the pension fund contributions are contractually the responsibility of the company), would not include these pension fund contributions in calculating the leviable amount, since such contributions are not included in "remuneration" as defined.


On the other hand, where a portion of the pension fund contributions is contractually the responsibility of the employee himself, regardless of the fact that they are deductible for PAYE or SITE purposes, they will still be included when calculating the leviable amount.


A company that includes travel allowances in its employees’ packages must include 50% of the travel allowance when calculating the leviable amount. By way of contrast a straight reimbursement of actual expenditure would not be included in the leviable amount.


The levy will be deductible for income tax purposes.


Ernst & Young