South African rugby is about to be hit by another administrative storm, as the South African Revenue Service (SARS) and Department of Labour have started investigations into the “non-compliance” of clubs in regards to legislation.
The issue started as a minor dispute between a player and his club over remuneration.
However, rugby365.com can reveal it has now escalated to such an extend that South African Rugby Union President Oregan Hoskins, KwaZulu-Natal Rugby Union CEO Peter Smith, SARS, the Department of Labour and the Commission for Conciliation, Mediation and Arbitration (CCMA) have been dragged into the saga.
It was on the advice of Hoskins that the player reported the matter to SARS and the labour department.
In the words of Hoskins: “It is illegal what has happened and you [the player] would be well within your rights.”
The dispute, between Byron Schamotta and the Crusaders club, started in April – after the then Chairman of Crusaders, Malcom Kennedy, stopped what was termed “monthly gifts”.
Kennedy has since stepped down – although some reports claim he was asked to walk the plank – and the club has an Acting Chairman in Mike Kelroe-Cooke.
However, the matter was never satisfactory resolved between Crusaders and Schamotta.
In the months to follow there was the questionable suspension of the player – because his father’s involvement was “upsetting club members” – and allegations of “intimidation” against players.
It was in this period that Schamotta’s requests for assistance were directed at the KZNRU CEO, Smith, and the SARU boss, Hoskins – with the latter suggesting the matter be escalated to SARS and the labour department.
This, in turn, has now opened a can of worms, with revelations that none of the clubs in KwaZulu-Natal are in compliance with SARU or SARS regulations.
Although Smith initially suggested there were no SARU (national) or KZNRU ( provincial) rules that governed payment of amateur club players, rugby365.com can reveal SARU regulations – which govern provincial unions and clubs – do make provision for this.
According to SARU’s regulations regarding player status and player contracts:
1. Status of players and contracts for material benefit
1.1.1 Any Player receiving Material Benefit from a Province or Club must have in place a written Standard Players Agreement or a Standard Players Club Agreement with such Province or Club, as the case may be.
According to our investigation very few, if any, clubs have written agreements with their players. All these payments – or gifts- are done on a handshake (a verbal agreement).
Then there is also the issue of tax compliance, which it appears the clubs have also overlooked.
This could have serious repercussions, not just for KwaZulu-Natal clubs, but those throughout South Africa – even when clubs pay players minimal amounts.
The fact that the clubs are registered as a public benefit originations, that are not subject to tax, only applies to the income tax of the clubs.
If said clubs pay any amount of income to any person, that person is subject to tax and the clubs need to deduct PAYE.
According to SARS regulations the definition of “remuneration” in paragraph 1 of the Fourth Schedule reads as follows: “Remuneration” means any amount of income which is paid to any person by way of any salary, … , bonus, … gratuity, …., stipend, …, including any amount referred to in paragraph (c) of the definition of “gross income” in section 1.
“Employer” as defined in paragraph 1 of the Fourth Schedule means any person who pays to any person any amount by way of remuneration.
And paragraph (c) of the gross income definition includes any amount, including any voluntary award, received in respect of services.
Furthermore, paragraph 2 of the Fourth Schedule requires the employer (in this case clubs) to deduct tax.
Even though no written contracts exists, the verbal agreements between players and clubs regarding any remuneration are regarded as binding and also mean that the same tax regulations apply.
Thus, according to paragraph 13 of the Fourth Schedule, the employer (club) is required to issue employees (players) tax certificates (It 3 or IRP 5).
The employee/player who received the “gift” from the club needs to include this income in his/her taxable income and then needs to claim expenses (if he/she qualifies) against this income.
According to SARS regulations all clubs that give any player any amount of money are now required to issue employees tax certificates.
Courtesy of Rugby 365Tweet