Calculation of South African Medical Tax Credits

This package will calculate Fringe Benefit, Medical Tax Credit and Additional Medical Tax Credit (Applicable to employees who are 65 or older on the last day of the Tax year) - f84pkg.sql.

Prerequisites to use this package

1. This calculation will be done for Earnings / Deductions {FPRG-6} with Calculation Method "5 - Medical Aid" where

• The Medical Aid Structure {FPRG-8} exists
• The Lookup Table Detail {FPRG-5} exists
• The relevant Earnings / Deductions has been set-up (Refer to the Recommended set-up rules below)
  
• The Tax Code of the Medical Tax Credit Earnings is "4116 - Medical Scheme Fees Tax Credit" and the Calculation Method of the Medical Tax Credit Earnings is "5 - Medical Aid" or "U - Medical Aid Local Software".
  

2. Medical Aid Dependents {PBOP-7} should exist where applicable

Note that the calculation as described below will not function as expected if any of the applicable Earnings or Deductions in the Medical Aid Structure {FPRG-8} are advised with Calculation Method "3 - Advised Amount".

• Tax Credits and Additional Tax Credits reduce the Tax Liability of the employee and are show as separate transactions on the payslip (Earning).
• The accumulated Tax Credit amount and Additional Tax Credit Amount for the service period within the tax year may not exceed the accumulated value of the PAYE (Pay as You Earn) deducted for the same period.

• The PAYE Deduction (Tax Code 4102) is reduced by the Tax Credit Amount (Tax Code 4116) and the Additional Tax Credit Amount (Tax Code 4120) i.e the amount reported under Tax Code 4102 is the sum of Tax Codes 4102, 4116 and 4120.
• In addition to the above, the Tax Credit Amount is also reported under Tax Code 4116 and the Additional Tax Credit Amount under Tax Code 4120.
• The Employee`s contribution (Tax Code 4005) is increased by the Fringe Benefit Amount (Tax Code 3810) i.e the amount reported under Tax Code 4005 is the Sum of Tax Code 4005 and 3810.
• In addition to the above Fringe Benefit is also reported under Tax Code 3810.

• Fringe Benefit (Tax Code 3810)

• Medical Tax Credit (Tax Code 4116)

 In order for the Medical Tax Credit to calculate programmatically, the following rules apply:

•  The ED Code must be linked to the Appointment Type of the Employee {FPRG-7}
• The Tax Code linked to the ED Code must be ‘4116’
• The Calc Method defined for the ED Code must be either ‘U’ or ‘5’
• Either Tax Code ‘4005’ and /or Tax Code ‘4474’ must exist for the Employee within the current Tax Year /Continuous Service Period

For Employees who are 65 years or older on the last day of the current Tax Year, an additional Medical Aid Tax Credit is calculated (AMTC>65).
The AMTC>65 reduces the Employee’s Tax (PAYE) liability and therefore the total AMTC>65 amount may equal but may never exceed the total PAYE deduction less Medical Tax Credit, within the reporting period, within the current Tax Year.
               

With effect from 1^st March 2017, an accumulative AMTC>65 is done, therefore if the full amount of the AMTC>65 could not be calculated in a cycle due to insufficient net PAYE (i.e. PAYE less Medical Tax Credit), it may be given in another cycle should there be sufficient PAYE in that cycle.

In order for the Medical Tax Credit to calculate programmatically, the following rules apply:

• The ED Code must be linked to the Appointment Type of the Employee {FPRG-7}
• The Tax Code linked to the ED Code must be ‘4120’
• The Calc Method defined for the ED Code must be either ‘U’ or ‘5’
• Medical Tax Credit (Tax Code 4116) must exist within the continuous Service Period in the current Tax Year.
• Either Tax Code ‘4005’ and /or Tax Code ‘4474’ must exist for the Employee within the current Tax Year /Continuous Service Period