WITHHOLDING TAX ON PROPERTY SOLD BY NON-RESIDENTS

Withholding tax on property soldA remarkable number of non-residents own property in South Africa. While non-residents are not subject to South African capital gains tax generally, an exception is to be found where non-residents dispose of South African immovable property, or shares in “South African property rich” companies.

A obvious practical difficulty arises though for SARS to collect taxes from non-residents once they have sold their properties and have no further connection with South Africa. There is very little SARS can do to collect a tax debt from such non-residents, let alone compel them to file the necessary tax returns.

Section 35A of the Income Tax Act[1] was introduced for this reason. It levies an interim withholding tax on non-residents selling South African immovable property, required to be withheld from the selling price payable by the non-resident, on the following basis:

  • 5% of the selling price where the seller is a non-resident natural person;
  • 5% of the selling price where the seller is a non-resident company; and
  • 10% of the selling price where the seller is a non-resident trust.

In clause 10(1) of the draft Rates and Monetary Amounts and Amendment of Revenue Laws Bill, which was released concurrently with the Annual National Budget earlier this year, it is proposed that the rates above be increased to 7.5%, 10% and 15% respectively and effective to disposals of immovable property from 22 February 2017.

While ultimately the withholding obligation lies with the purchaser paying the purchase amount, a conveyancer or estate agent may also be liable where the withholding tax is not withheld from payments made to the non-resident seller.[2]

As referred to above, the withholding tax is not a final tax and its purpose is merely to secure the ultimate capital gains tax liability that may ultimately be due (and which would in most circumstances be substantially less the amount withheld). To the extent that a lesser amount is due in the form of a capital gains tax exposure for the non-resident, the balance overpaid is refunded to the seller upon submission of an annual income tax return.

It is also possible for a non-resident to apply for a tax directive that no withholding tax needs to be withheld from the selling price of the property sold. The directive may be based on either:[3]

(a) the extent to which the seller is willing to provide for security for the payment of taxes due to SARS on the disposal of the property;

(b) the extent of the other assets that the seller has in the Republic;

(c) whether the seller is potentially not subject to tax in respect of the disposal of the property; and

(d) whether the actual liability of that seller for tax in respect of the disposal of the property is less than the amount required to be withheld.

[1] 58 of 1962

[2] Section 35A(12)

[3] Section 35A(2)

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

NON-EXECUTIVE DIRECTORS’ REMUNERATION: VAT AND PAYE

A2bTwo significant rulings by SARS, both relating to non-executive directors’ remuneration, were published by SARS during February 2017. The rulings, Binding General Rulings 40 and 41, concerned the VAT and PAYE treatment respectively to be afforded to remuneration paid to non-executive directors.The significance of rulings generally is that it creates a binding effect upon SARS to interpret and apply tax laws in accordance therewith. It therefore goes a long way in creating certainty for the public in how to approach certain matters and to be sure that their treatment accords with the SARS interpretation of the law too – in this case as relates the tax treatment of non-executive directors’ remuneration.

The rulings both start from the premise that the term “non-executive director” is not defined in the Income Tax or VAT Acts. However, the rulings borrow from the King III Report in determining that the role of a non-executive director would typically include:

  • providing objective judgment, independent of management of a company;
  • must not be involved in the management of the company; and
  • is independent of management on issues such as, amongst others, strategy, performance, resources, diversity, etc.

There is therefore a clear distinction from the active, more operations driven role that an executive director would take on.

As a result of the independent nature of their roles, non-executive directors are in terms of the rulings not considered to be “employees” for PAYE purposes. Therefore, amounts paid to them as remuneration will no longer be subject to PAYE being required to be withheld by the companies paying for these directors’ services. Moreover, the limitation on deductions of expenditure for income tax purposes that apply to “ordinary” employees will not apply to amounts received in consideration of services rendered by non-executive directors. The motivation for this determination is that non-executive directors are not employees in the sense that they are subject to the supervision and control of the company whom they serve, and the services are not required to be rendered at the premises of the company. Non-executive directors therefore carry on their roles as such independently of the companies by whom they are so engaged.

From a VAT perspective, and on the same basis as the above, such an independent trade conducted would however require non-executive directors to register for VAT going forward though, since they are conducting an enterprise separately and independently of the company paying for that services, and which services will therefore not amount to “employment”. The position is unlikely to affect the net financial effect of either the company paying for the services of the non-executive director or the director itself though: the director will increase its fees by 14% to account for the VAT effect, whereas the company (likely already VAT registered) will be able to claim the increase back as an input tax credit from SARS. From a compliance perspective though this is extremely burdensome, especially in the context where SARS is already extremely reluctant to register taxpayers for VAT.

Both rulings are applicable with effect from 1 June 2017. From a VAT perspective especially this is to be noted as VAT registrations would need to have been applied for and approved with effect from 1 June 2017 already. The VAT application process will have to be initiated therefore by implicated individuals as a matter of urgency, as this can take several weeks to complete.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

INTEREST FREE LOANS TO DIRECTORS

A3bIt is very often the case that a company extends an interest free or low interest loan to a director. This manifests either as a true incentive or benefit to that director (mostly the case in larger corporate environments) or in a small business environment in lieu of salaries paid. The latter is especially the case for example where a spouse or family trust would hold the shares in the company running the family business, but which business is conducted through the efforts of the individual to whom a loan is granted from time to time.

In terms of the Seventh Schedule to the Income Tax Act[1] a director of a company is also considered an “employee”.[2] This is significant, since directors can therefore also be bound by the fringe benefit tax regime applicable to employees generally.

Paragraph (i) of the definition of “gross income” in the Income Tax Act[3] specifically includes as an amount subject to income tax “the cash equivalent, as determined under the provisions of the Seventh Schedule, of the value during the year of assessment of any benefit… granted in respect of employment or to the holder of any office…”

Clearly, benefits received by a director of a company would therefore rank for taxation in terms of this provision. The question remains therefore whether loans provided to such directors by the companies where they serve in this capacity would amount to such a taxable benefit, and further how such benefit should be quantified.

Paragraph 2(f) of the Seventh Schedule is unequivocal in its approach that a taxable fringe benefit exists where “… a debt … has been incurred by the employee [read director], whether in favour of the employer or in favour of any other person by arrangement with the employer or any associated institution in relation to the employer, and either-

(i) no interest is payable by the employee in respect of such debt; or

(ii) interest is payable by the employee in respect thereof at a rate of lower than the official rate of interest…”

Paragraph 11 in turn seeks to quantify the amount of the taxable fringe benefit to be included in the gross income of the director. Essentially, the taxable fringe benefit would be equal to so much of interest that would have been payable on the loan at the prime interest rate less 2.5%, less any interest actually paid on the loan. The benefit therefore does not only arise on interest-free loans, but also on loans carrying interest at less than the prescribed interest rate.

It is necessary to note that a fringe benefit otherwise arising will not be a taxable benefit if the loan amount is less than R3,000, or if it is provided to the director to further his/her studies.

[1] 58 of 1962

[2] Paragraph 1 of the Seventh Schedule, paragraph (g) of the definition of “employee”

[3] See section 1

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

THE BUDGET 2017

A1bFollowing the annual national budget speech delivered by Finance Minister Pravin Gordhan on 22 February, we highlight some of the most significant matters arising below:

  1. A new tax bracket will be introduced targeting the wealthy as well as trusts. It is proposed that trusts will from now on be taxed at 45% on all taxable income, while individuals earning more than R1.5million per tax year will pay 45% income tax on such income (estimated to be around 103,000 individuals);
  2. The dividends withholding tax rate is proposed to be increased from 15% to 20%. This is linked to the above increase in individual income tax rates to prevent wealthy individuals from exploiting the arbitrage opportunity that may exist in receiving fees in a company and having these paid out as a dividend;
  3. The much debated VAT rate has been left unchanged, which was widely expected given the political sensitivity coupled with the effect that this may have on the poor;
  4. Increase in withholding taxes on non-residents disposing of immovable property situated in SA;
  5. The “duty free” threshold for transfer duty (tax levied on purchasers of immovable property) has been increased from R750,000 to R900,000;
  6. The corporate income tax, donations tax and estate duty rates have been left unchanged;
  7. The CGT inclusion rate (40% for individuals, 80% for companies or trusts) was left unchanged too;
  8. The above and other most significant changes can be summed up as follows:
  WAS NOW
Top marginal PIT rate 41% 45%
Dividends tax 15% 20%
Tax rate for trusts 41% 45%
Estate duty abatement R3.5 m R3.5 m
CGT annual exclusion R40,000 R40,000
Primary rebate for individuals R13,500 R13,635

The Minister also alluded to the following matters which could expect legislative intervention or refinement during the course of the year:

  1. Renewed focus on transfer pricing and cross-border tax avoidance schemes;
  2. Further refinements to anti-avoidance legislation introduced in 2016 as applies to trusts;
  3. Section 42 “asset-for-share” relief to be extended to also provide for the assumption of contingent liabilities (as opposed to only applying to the issuing of shares or the assumption of existing debt);
  4. Share issue and buy-back transactions (commonly used as part of corporate restructurings whereby CGT is avoided) are to be addressed as part of an anti-avoidance effort;
  5. The anti-avoidance provisions linked to “third-party back shares” (section 8EA) are to be relaxed;
  6. Further refinement and relaxation of the VCC regime as relates to rules restricting such investments;
  7. Measures will be introduced whereby foreign companies held by foreign trusts with SA beneficiaries will be drawn into the SA tax net under the “controlled foreign company” regime

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

BUDGET 2017: SUMMARY

A3bOn 22 February 2017, Finance Minister Pravin Gordhan delivered his 2017 budget speech. The Budget Speech mentioned that, while global growth is slightly better, geo-political and economic uncertainties have increased. Furthermore, SA’s low growth trajectory provides a major challenge for government and citizens.

Transformation was a strong theme, following on from President Jacob Zuma’s SONA. Gordhan said that SA needs to radically transform the economy so that it is more diversified, with more jobs and inclusivity in ownership and participation. We need to build the widest possible partnership to promote consensus and action on a programme for inclusive growth and transformation, according to the Minister.

However, many people’s minds were on tax since it is government’s aim to raise R28bn from higher taxes. The extra income will come from five sources:

  • R12.1bn, will accrue through “bracket creep”. Taxable income thresholds are usually adjusted to offset inflation; this year the adjustment will be minimal.
  • R4.4bn will be raised through an increase to 45% in the marginal tax rate on income above R1.5 million. This will affect about 100 000 taxpayers.
  • R6.8bn will be raised through the hike from 15% to 20% in the dividend withholding tax.
  • R3.2bn will be generated by a net 39c per litre increase in the fuel taxes.
  • R1.9bn will come from increased excise duties for alcohol and tobacco of between 6% and 10%.

Hereby the highlights of the tax related budget proposals that will affect you:

  • A new top personal income tax (PIT) rate of 45% for individuals with a taxable income above R1.5 million.
  • The tax rate on trusts (other than special trusts which are taxed at rates applicable to individuals) will increase from 41% to 45%.
  • An increase in the dividend withholding tax rate from 15% to 20%, effective 22 February 2017. Please contact us should you have dividends to declare.
  • The general fuel levy will increase by 30 cents per litre on 5 April 2017 and 9 cents per litre on the road accident fund levy. This is likely to have an inflationary effect on the economy given the knock on effect on the cost of transport which will translate into an increase in the cost of goods
    to the consumer.

Click here to download a summary of the 2017 Budget.

 

DIVIDENDS TAX COMPLIANCE

a2bOur clients will know that the dividends tax replaced the old Secondary Tax on Companies (“STC”) effectively 1 April 2012 already. Briefly, the STC was a tax on companies and calculated as a factor of dividends declared by that company. The regime was somewhat out of touch with international trends though (which also gave rise to certain anomalies when South Africa negotiated double tax agreements with other countries): the international norm is rather what we have in South Africa today too, being a tax on shareholders (as opposed to the dividend declaring company) and which tax is withheld from payment of dividends to the shareholders. The dividends tax is levied at 15%. By way of an example therefore, if a person (not exempt from the dividends tax) were to receive R100 in dividends from a South African company, that company will only pay R85 to the shareholder, and R15 would be withheld and paid to SARS on the shareholder’s behalf.

Although in our experience most of our clients exhibit an understanding of how the dividends tax regime operates, many of our corporate clients appear to be unaware of their filing obligations which go hand-in-hand with both dividend declarations as well as dividends received. Companies are required to file a dividend tax return when declaring a dividend (section 64K(1A)), but persons are also required to file a return if they receive a dividend exempt from the dividends tax. Since generally all South African tax resident companies are exempt from the dividends tax, this will effectively translate into South African tax resident companies having to file dividends tax returns for all South African dividends which they receive too.

The necessary dividends tax returns (the SARS DTR01 and DTR02 forms) are required to be filed by the end of the month following the month during which the relevant dividend was paid/received. The dividends tax payment (where relevant) should accompany said return.

Therefore, even if a company only pays and receives dividends none of which are subject to the dividends tax the exempt taxpayer is still obliged to file the requisite returns. The returns are also not the only compliance requirement to be observed: where a shareholder relies on a double tax agreement in terms of which a reduced dividends tax rate is to be applied (as opposed to the statutorily imposed 15% applicable domestically), or that person is exempt from the dividends tax altogether, that shareholder must inform the company of this status by way of a declaration made, together with an undertaking that the shareholder will inform the company should the status of the aforementioned change in future. In the absence of such a declaration, the company must still withhold dividends tax even if the shareholder is objectively speaking exempt from the dividends tax.

As one will no doubt realise, non-observation of the relevant dividends tax compliance requirements – even if they do appear to be somewhat trivial and admittedly not practically heavily policed by SARS – one ignores these requirements at one’s own peril. In this instance non-compliance may have a significant impact if a taxpayer is upon investigation found to be wanting in this regard.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

ASSET-FOR-SHARE TRANSACTIONS: TAX FREE RESTRUCTURE

a1bThe Income Tax Act, 58 of 1962, contains several so-called ‘group relief’ provisions in terms whereof corporate restructures can take place on a tax neutral basis. One of these is if a transaction comprises an ‘asset-for-share transaction’, or put simply: where a company purchases an asset in exchange for which that company agrees to issue shares to the seller.
.

The term ‘group relief’ is somewhat of a misnomer in that not all of the group relief provisions necessarily involve groups of companies. The ‘asset-for-share transaction’ is one such an example where company groups are not necessarily involved. In fact, the concession (in section 42 of the Income Tax Act) is quite often used by individuals who are seeking to incorporate their businesses whereby they would transfer said business into a company in exchange for the latter issuing them with ordinary shares in that company. Such a transaction would not give rise to any immediate income tax costs, nor to any ancillary taxes such as VAT, Securities Transfer Tax, Transfer Duty, etc. (on condition that the relevant required formalities are observed).

The effect of an ‘asset-for-share transaction’ is effectively that the cost of the assets transferred are ‘inherited’ by the company. For example, assume Mr A has an asset with a base cost of R10 which is worth R100 today. He is able to transfer that asset to the company in exchange for shares without incurring any tax liability, but the company will be deemed to have acquired that asset at R10, and likewise Mr A his shares at the same price. The effect therefore is that when one day Mr A should sell his shares, or the company the asset, the capital gain on the original R10 cost would still be realised and consequently taxed at that stage. The tax implications linked to the asset is therefore not avoided altogether, but merely postponed.

A few requirements to qualify for a section 42 transaction includes:

  • The person to whom the shares are issued (i.e. the person selling the asset) must hold a ‘qualifying interest’ in the company subsequent to the transaction being concluded (being most often at least a 10% interest held in the company);
  • The company and the person disposing of the asset must typically hold the asset with the same intent. In other words, if the company will hold the asset as trading stock, then so too must the person disposing thereof have held the asset as such; and
  • The asset must be worth more than its base cost at time of the transaction being concluded.

Admittedly, this may be quite complex. To make matters worse, the provisions of section 42 apply automatically if its prerequisites are met and taxpayers are required to specifically elect out of its provisions if it does not want it to apply. All the more reason why any restructure would be incomplete without a review by a tax expert first before implementation thereof.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

SARS RELEASES NEW RULING ON DOCUMENTARY REQUIREMENTS FOR VAT PURPOSES

a3_bIn February 2015 the South Atlantic Jazz Festival (Pty) Ltd successfully appealed a judgment of the Tax Court to the Full Bench of the Western Cape High Court (reported as ABC (Pty) Ltd v CSARS [2015] ZAWCHC 8). That judgment dealt with documentary proof required by the Commissioner for SARS to substantiate input tax claims submitted by taxpayers for VAT purposes, and specifically the scope of the provisions of section 16(2)(f) of the Value-Added Tax Act, 89 of 1991.

Since the judgment documentary proof linked to VAT input claims have been a focus of Government, with both the subsequent amendment of section 16(2)(f) as well as the introduction of section 16(2)(g). Especially the latter provision is important here and deals primarily with what documentary evidence will suffice as substantiating proof for VAT input claims submitted by a VAT vendor in the absence of for example an invoice received from the supplier, a bill of entry or credit note. The question in ABC above for example was whether a signed agreement could under these circumstances suffice as substantiating proof for an input tax claim submitted.

Section 16(2)(g) now reads that “… in the case where the vendor, under such circumstances prescribed by the Commissioner, is unable to obtain any document required in terms of [section 16(2)] (a), (b), (c), (d), (e) or (f), the vendor is in possession of documentary proof, containing such information as is acceptable to the Commissioner, substantiating the vendor’s entitlement to the deduction at the time a return in respect of the deduction is furnished…”

SARS has now released a binding general ruling (BGR36) on 24 October 2016 dealing with those circumstances under which the Commissioner will allow a VAT vendor to use alternative documentary proof to substantiate the vendor’s entitlement to an input tax deduction as contemplated in section 16(2)(g). In order to obtain the Commissioner’s approval to use alternative documentary proof in substantiating a deduction under section 16(2)(g), a VAT vendor must apply for a VAT ruling or VAT class ruling.

In terms of the ruling, a VAT vendor may only apply for approval under section 16(2)(g) to rely on documentary proof, other than the documents prescribed under section 16(2)(a) to (f), if the vendor –

  • has sufficient proof that it made reasonable attempts to obtain the documentary proof required by the Commissioner under section 16(2)(a) to (f);
  • was unable to obtain and maintain the documentation prescribed under section 16(2)(a) to (f) due to circumstances beyond the vendor’s control (see below); and
  • no other provision of the VAT Act allows for a deduction based on the particular document in the vendor’s possession.

BGR36 continues to list those circumstances when it would be considered to have been beyond the VAT vendor’s control to provide the otherwise required documentation:

  • When the supplier has failed to issue a tax invoice, debit note or credit note to the VAT vendor;
  • Where the supplier was contacted but failed to respond to the vendor’s request to be furnished with a complete tax invoice or correct document;
  • The supplier or vendor’s place of business has suffered damage as a result of for example a natural disaster, causing damage to its accounting records, with no possibility of the said records being retrieved or re-issued; or
    (d) The supplier has been deregistered as a vendor.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

TAX PENALTIES: UNDERSTATEMENT PENALTIES IN THE TAX ADMINISTRATION ACT

A1_BThe Tax Administration Act, 28 of 2011, introduced the notion of ‘understatement penalties’ which are levied on a percentage based method. The penalties are levied depending on which behaviour is exhibited by the taxpayer, to be classified in terms of the below table contained in section 223(1):

1 2 3 4 5 6
Item Behaviour Standard case If obstructive, or if it is a ‘repeat case’ Voluntary disclosure after notification of audit or investigation Voluntary disclosure before notification of audit or investigation
(i) ‘Substantial understatement’ 10% 20% 5% 0%
(ii) Reasonable care not taken in completing return 25% 50% 15% 0%
(iii) No reasonable grounds for ‘tax position’ taken 50% 75% 25% 0%
(iv) Gross negligence 100% 125% 50% 5%
(v) Intentional tax evasion 150% 200% 75% 10%

It is not clear how a taxpayer’s behaviour is to be classified for purposes of considering at which rate an understatement penalty is to be imposed, or if it is even possible that certain taxpayer behaviour may not even fall within the table to begin with. Suffice it to say that in terms of section 102(2) of the Tax Administration Act, the burden of proving whether the facts on which SARS based the imposition of an understatement penalty is upon SARS.

In terms of section 222, the penalty may only be levied where an ‘understatement’ is present, being any prejudice to SARS or the fiscus as a result of:

  1. A default in rendering a return;
  2. An omission from a return;
  3. An incorrect statement in a return; or
  4. Where no return was required, the failure to pay the correct amount of tax.

To calculate the penalty levied, the applicable percentage in the above table is applied to the shortfall amount, being the tax effect in question for which the taxpayer is penalised. For example, if an income tax deduction claimed by a taxpayer is disallowed by SARS which seeks to penalise the claiming of the deduction, the applicable penalty percentage is applied to the tax effect that the deduction would have had had it been allowed.

Taxpayers are enabled through section 224 to object against the imposition of an understatement penalty. What is further noteworthy is that, in the event that a penalty is levied for a ‘substantial understatement’, the penalty must be remitted by SARS if the taxpayer was in possession of a positive tax opinion from an independent registered tax practitioner supporting its tax position. It therefore makes sense, if only to mitigate against the levying of penalties, to obtain a tax opinion from a registered tax practitioner prior to entering into a transaction.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

TAX FREE INVESTMENT SAVINGS ACCOUNTS

A4_bOur clients will have noted the various advertisements on radio and in the media generally of financial service providers inviting the public to invest in their respective so-called ‘tax free savings’ investment products. These accounts are made possible by section 12T of the Income Tax Act, 58 of 1962, introduced in 2015 as an initiative by National Treasury to encourage a savings culture in the South African public through making use of these predetermined and specific income tax concessions linked to these accounts.

In essence, all amounts received from tax free savings are exempt from income tax and specifically:

  • Dividends paid to such accounts will not attract dividends tax;
  • Realisation of assets in tax free savings accounts will not give rise to capital gains or losses (and are thus effectively exempt from the capital gains tax regime); and
  • Any amounts received will be exempt from income tax.

The tax free savings regime however only applies to natural persons and deceased estates of persons who had during their lives contributed amounts towards these ‘tax free savings’ accounts. The regime is therefore not available to companies or trusts. Contributions to such accounts are limited though to R30,000 annually as well as a total of R500,000 during a person’s lifetime. Where these amounts are exceeded, the excess amount shall be deemed to be taxable income of the contributing individual, and which is prescribed to be taxed at 40%. (Interestingly, this amount appears to have been overlooked by the Legislature when it recently increased the maximum marginal income tax rates of individuals from 40% to 41%…) This is quite an onerous provision, and care should thus be taken that these amounts are not breached by individuals contributing to these tax free savings. Transfers between tax free savings accounts by an individual are however not included in the R30,000 or R500,000 limitations, as well as any income received from tax free savings capital. The limitations therefore only apply to new capital being introduced into an individual’s tax free savings viewed cumulatively.

It is questionable whether the initiative goes far enough and is as lucrative as may seem at first blush. Natural person taxpayers will be reminded that they are already afforded an annual R30,000 effective rebate from capital gains tax (the first R30,000 of capital gains/losses realised in a tax year is ignored for capital gains tax purposes), and further that an annual interest exemption of R23,800 (R34,500 in the case of individuals older than 65) applies notwithstanding the section 12T concessions.

When taking into account that financial products perceived as conservative are typically those approved by the Financial Services Board as ‘tax free investment savings accounts’, it does not naturally follow that after-tax profits from tax free savings will necessarily exceed savings in the conventional form.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)