KORPORATIEWE BEHEER – NAAMSVERANDERINGE

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Dit staan ʼn maatskappy of beslote korporasie vry om sy naam te verander indien verkies.  Vir maatskappye sal die naamsverandering ʼn spesiale besluit tot gevolg hê wat deur die aandeelhouers van die maatskappy goedgekeur moet word en in die geval van ʼn beslote korporasie moet die lede van die beslote korporasie die naamsverandering goedgekeur.

Voor die naam van die maatskappy of beslote korporasie verander kan word, moet voorgestelde name aan die “Companies and Intellectual Property Commission” (“CIPC”) voorgelê word vir goedkeuring. Daar kan vier opsies van moontlike name verskaf word aan CIPC in volgorde van keuse. Wanneer CIPC tevrede is met ʼn voorgestelde naam, sal hulle dit vir die gebruik van die maatskappy of beslote korporasie reserveer vir ʼn tydperk van 6 maande.  Die reservering kan ná 6 maande vir ʼn verdere tydperk van 1 maand verleng word, maar kan daarna nie verder verleng word nie en sal verval, waarna  ʼn aansoek weer ingedien sal moet word.

Die voorgestelde name van maatskappye en beslote korporasies moet aan verskeie vereistes voldoen soos uiteengesit in Artikel 11 van die Maatskappywet van 2008 (“die Wet”).  Hieronder volg ʼn lys van enkele van hierdie vereistes –

  • die naam mag woorde in enige taal insluit;
  • die naam mag nie dieselfde of verwarrend soortgelyk wees aan –
    • die naam van ʼn ander maatskappy, geregistreerde buitelandse maatskappy, beslote korporasie of koöperasie nie, tensy die maatskappy/beslote korporasie deel uitmaak van ʼn groep wat soortgelyke name gebruik;
    • ʼn naam geregistreer vir die gebruik van ʼn persoon as ʼn besigheidsnaam ingevolge die Wet op Besigheidsname, Wet no. 27 van 1960, nie;
    • ʼn geregistreerde handelsmerk wat aan ʼn ander persoon behoort, of ʼn handelsmerk ten opsigte van ʼn aansoek vir registrasie as ʼn handelsmerk in die Republiek ingedien is nie, of ʼn welbekende handelsmerk soos in Artikel 35 van die Wet op Handelsmerke, Wet no. 194 van 1993, beoog nie;
    • ʼn handelsmerk, woord of uitdrukking waarvan die gebruik ingevolge die Wet op Handelswaremerke, Wet no. 17 van 1941, beperk of beskerm word nie;
  • die naam mag nie valslik impliseer of voorgee, of sodanig wees dat dit ʼn persoon redelikerwys sal mislei om verkeerdelik te glo dat die maatskappy/beslote korporasie –
    • deel is van of geassosieer word met ʼn ander persoon of entiteit nie;
    • ʼn staatsorgaan of ʼn hof is, of deur die staat, ʼn staatsorgaan of ʼn hof bedryf, geborg, gesteun of onderskryf word nie;
    • besit, bestuur of bedryf word deur ʼn persoon of persone wat ʼn bepaalde opvoedkundige benaming het nie;
    • besit, bedryf, geborg, gesteun of onderskryf word deur, of die ondersteuning geniet van enige internasionale organisasie, buitelandse staat, staatshoof, regeringshoof, regering of administrasie van ʼn departement van so ʼn regering of administrasie nie;
  • die naam mag nie ʼn woord, uitdrukking of simbool insluit wat, in isolasie of in samehang met die res van die naam redelikerwys geag kan word as oorlogspropaganda, aanhitsing tot onmiddellike geweld of voorspraak vir haat gebaseer op ras, etnisiteit, geslag of geloof, of aanhitsing om skade te veroorsaak uit te maak nie.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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HOW THE VAT INCREASE AFFECTS YOUR BUSINESS

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Consumers and suppliers have by now had an opportunity to familiarise themselves with the increased Value-Added Tax (VAT) rate of 15% since 1 April 2018. There are however many technical considerations related to the increase that remain unclear. One such an uncertainty is with regards to deposits paid prior to the effective date of the increase, while goods and services are only rendered thereafter.

VAT vendors often require that consumers pay a deposit to secure the future delivery of goods or services (for example, an advance payment for the manufacture of goods, bookings in advance for holidays or accommodation etc.). The deposit paid by the consumer is then off-set against the full purchase price once they eventually receive the goods or services. The question arises what VAT rate the consumer will finally be subject to, where they paid a deposit before 1 April 2018, but the actual delivery of goods or services only takes place thereafter.

The answer to this question is found in the time of supply rules contained in section 9 of the Value-Added Tax Act.[1] In terms thereof, the “time of supply” of goods and services is at the time an invoice is issued by a supplier, or the time any payment of consideration is received by the supplier, whichever is the earlier. Two important concepts stem from this rule.

Firstly, an “invoice” needs to be issued by a supplier. In terms of section 1 of the VAT Act, an “invoice” is a document notifying someone of an obligation to make payment. It is therefore not necessary that a “tax invoice” – which has very specific requirements – needs to be issued. If consumers received only a “booking confirmation”, “acknowledgment of receipt” or similar document prior to 1 April 2018 that did not demand payment (such as tax invoice or pro-forma invoice), the time of supply was not triggered, and consumers will be subject to the 15% VAT rate once the goods or services are finally delivered after 1 April 2018.

Secondly, any deposit that was paid by the consumer, would have had to be applied as “consideration” for the supply of the goods or services to constitute “payment”. In this regard, consumers are largely dependent on how VAT vendors account for deposits in their financial systems. If deposits are accounted for separately (which is often the case with refundable deposits or where there are conditions attached to the supply) and only recognised as a supply when goods or services are received by the consumer, the deposit (although a transfer of money has occurred), would not constitute “payment”. For example, the time of supply may only be triggered once a guest has completed their stay at a guest house after 1 April 2018, resulting in VAT being levied at 15%.

The take away from the time of supply rules is therefore that payment of a deposit prior to 1 April 2018 does not necessarily result in a supply at 14% VAT and the rate to be applied is dependent on the specific facts of each case. Both consumers and VAT vendors should also take note that there are a number of rate specific rules that apply during the transition phase, and are encouraged to seek advice from a tax professional when they are in doubt about the rate to be applied.

[1] 89 of 1991 (the “VAT-Act”)

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)

 

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OMHEINING VAN VERLIESE (ARTIKEL 20A) VIR NATUURLIKE PERSONE

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Artikel 20A het met ingang van 1 Maart 2004 in werking getree. Hierdie artikel handel oor die omheiningsbepalings wat verhoed dat natuurlike persone hul belasbare inkomste verminder deur verliese uit sekondêre handel te gebruik.

Artikel 20A vervang altans nie artikels 11(a) en 23(g) nie. Alle uitgawes wat nie volgens artikel 11(a) kwalifiseer nie of wat as ’n aftrekking ingevolge artikel 23(g) geweier word, sal permanent verlore gaan. Artikel 20A is dus in teenstelling met artikel 11(a) en 23(g) aangesien uitgawes nie permanent geweier word nie, maar slegs omhein word deur dit as ’n aftrekking toe te laat teen toekomstige belasbare inkomste van die primêre bedryf.

Artikel 20A(2) stel die onderstaande vereistes waarvolgens aangeslane verliese omhein sal word:

  1. Indien ’n belastingbetaler teen die maksimum belastingkoers belas word, voor inagneming van enige aangeslane verliese en balanse van vasgestelde verliese van die vorige jare van aanslag, moet onderstaande punte 2 tot 4 oorweeg word.
  1. Artikel 20A(2) vereis dat die “3-uit-5-jaar”-toets toegepas word vir 2 kategorieë nl. wildsboerdery-aktiwiteite en die handel dryf in “verdagte aktiwiteite” –

2.1 Aangeslane verliese wat ontstaan uit wildsboerdery-aktiwiteite vir 3 van die voorafgaande 5 jare kan moontlik omhein word.

2.2 Artikel 20A(2)(b) verskaf ’n lys van “verdagte aktiwiteite” en indien aangeslane verliese gegenereer word uit een van die onderstaande aktiwiteite vir ten minste 3 van die voorafgaande 5 jare sal sodanige verliese moontlik omhein word:

  • enige sportaktiwiteite beoefen deur die belastingbetaler;
  • enige handel in versamelstukke;
  • die verhuur van residensiële eiendom, tensy ten minste 80% van die akkommodasie gebruik word deur die persone wat nie verwant is aan die belastingbetaler nie, vir ten minste helfte van die jaar van aanslag;
  • die verhuur van voertuie, vliegtuie of bote soos gedefinieer in die Agtste Bylae, tensy ten minste 80% van die voertuie, vliegtuie of bote gebruik word deur nie verwante persone, vir ten minste helfte van die jaar van aanslag nie;
  • diere skou beoefen deur die belastingbetaler;
  • boedery of stoetery, tensy die belastingbetaler hierdie aktiwiteite beoefen op ’n voltydse basis;
  • enige vorm van beeldende of uitvoerende kunste beoefen deur die belastingbetaler; en
  • enige vorm van dobbelary of weddery beoefen deur die belastingbetaler.
  1. Bogenoemde bepalings is nie van toepassing in die geval waar ’n verlies gely word vir die jaar van aanslag, uit ’n bedryf wat ’n redelike kans het om ’n belasbare inkomste (uitgesluit kapitaalwins) te genereer binne ’n redelike periode en ook voldoen aan sekere kriteria soos gelys onder artikel 20A(3) nie.
  1. Alhoewel omheining vrygespring kan word onder punt 3 kan verliese steeds omhein word as daar vir ten minste 6 van die voorafgaande 10 jare verliese gely word. Die onus is dan op die belastingbetaler om die SAID te oortuig dat besigheid bedryf word met ’n redelike vooruitsig om belasbare inkomste te genereer binne ’n redelike tydberk.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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TAX SEASON 2018 FOR INDIVIDUALS

The 2018 Tax Season for Individuals opens on 1 July 2018 for e-Filers

What are the deadlines?

The deadline for non-provisional taxpayers has been brought forward to allow more time for finalising audits before the year ends:

Type of Taxpayer Deadline
Non-provisional 31 October 2018
Provisional 31 January 2019

Checklist for all information required in order for us to complete your tax return:

  1. IRP5 certificates

IRP5 and IT3 certificates reflecting salary, annuities, pension and other income received.

  1. IT3(a)(b)&(c) certificates

Proof of Interest/dividends/capital gains/loss received – local and foreign

  1. Bequests and donations received
  1. Capital gain or loss

The following information is required:

  • Was the asset your residential property?
  • Return on the sale of the asset.
  • Base cost of the asset, i.e. the purchase price if purchased after 1 October 2001, or a capital gain valuation of the asset.
  1. Other income/expenses

(Rental of property/partnership income/other).

  1. Medical fund contributions
  • Medical fund contribution certificate.
  • Proof of payment of claims not covered by your medical fund and paid by yourself.
  1. Annuity fund contributions certificates
  1. Travel allowance

If you wish to claim expenses against your travel allowance, the logbook for the tax year is required, together with the following information concerning the vehicle for which you received the travel allowance:

  • Make and model
  • Year of manufacture
  • Purchase price
  • Purchase date
  • Registration number
  • Kilometre reading on 1 March 2017
  • Kilometre reading on 28 February 2018
  1. Donations – Proof of donations made to public benefit organisations.
  1. Other information

Details of any other action or event that may influence your tax liability.

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)

 

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PROPERLY EXECUTING A WILL IS EXTREMELY IMPORTANT

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I gave instructions to my attorney to prepare a last will and testament for me as my will no longer reflected my wishes. At my request, my attorney emailed the will to me with clear instructions as to how I should go about signing it. I asked my neighbours to act and sign as witnesses. My neighbours signed the will on all the pages and left before I signed. I then signed the will on all the pages. I am now worried about the validity of my will as the email from my attorney states that I have to sign the will in the presence of two witnesses. Is my will valid?

The formalities for the valid execution of a will are set out in the Wills Act. Section 2 of the Wills Act, Act 7 of 1953, reads: “No will executed… shall be valid unless the will is signed at the end thereof by the testator… and such signature is made by the testator… in the presence of two or more competent witnesses present at the same time and such witnesses attest and sign the will in the presence of the testator and of each other…”. Therefore, in order for a will to be valid, it has to be signed in the presence of two independent witnesses, both witnesses being present when the will is signed by the testator. The two witnesses signed your will in the presence of each other, but not in your presence.

A similar set of facts presented itself in a court case recently heard by the Gauteng Local Division of the High Court. In this matter, the two daughters of the deceased, who lost out on their inheritance in terms of the will of their father, claimed that it was never their father’s intention for his much younger lover to inherit his total estate. The testator was 85 years old at the time of his death and he had been living with a woman 38 years his junior for 8 years.

The deceased executed two wills during his lifetime. One on 6 November 2011 (“the 2011 will”) and another on 7 January 2014 (“the 2014 will”). The 2014 will was signed shortly before his death leaving the bulk of his estate to his much younger lover. The daughters of the deceased claimed the 2014 will was invalid as there were “suspicious” circumstances. They claimed their father either did not sign the 2014 will himself or, if he did, that he lacked the mental capacity to execute a valid will by reason of dementia. The daughters of the deceased were not successful in proving that the deceased’s signature was a forgery despite the fact that three handwriting experts testified.

Another witness called to testify was a witness to the 2014 will. Her testimony focused on the circumstances surrounding the signing of the 2014 will. She signed the will as a witness. She testified that she and her husband met the deceased in the street. As they were acquainted they naturally engaged in social conversation. She and her husband were informed that the deceased was on his way to the police station to sign a will. She and her husband were asked if they would accompany the deceased in order to sign the will as witnesses. They were assured that the process would not take long so they agreed to assist.

She and her husband signed the will and immediately left. They were the first to sign the will. At the time they signed the will the deceased had not signed the will. They left before witnessing the deceased signing the will.  Hence, the 2014 will was not signed by the deceased in their presence even though it reflects their respective signatures as witnesses.

The evidence assessed collectively established that the deceased signed the 2011 will and also that he signed the 2014 will. However, the 2014 will was signed by the deceased after the two witnesses to the will had already left and therefore was signed in their absence.

The court referred to Section 2 of the Wills Act in terms whereof no will is valid unless the signature made by the testator is made “in the presence of two or more competent witnesses present at the same time”. The court confirmed that this requirement is mandatory and, if not met, the will is not valid for want of compliance with a statutorily required formality.

The court therefore found the 2014 will to be invalid and, as there was no evidence that there was any irregularity in the execution of the 2011 will, the 2011 will was declared the will of the deceased.

This judgement of the High Court once again emphasizes the importance of complying with the Wills Act. Your will is invalid, and it is advisable for you to print the will again and to sign it in the presence of two competent witnesses or, even better, for you to make an appointment with your attorney in order to sign the will at his office.

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)

References:

  • Twine and Another v Naidoo and Another [2017] ZAGPJHC 288; [2018] 1 All SA 297 (GJ)
  • Wills Act, Act 7 of 1953
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TAX DEDUCTIONS AGAINST SALARY EARNINGS

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Our clients who earn only a salary will know that very few tax deductions are available against salary income for income tax purposes and whereby they may reduce the taxable income derived ultimately from such remunerations. Section 23(m) of the Income Tax Act[1] provides that none of the deductions ordinarily available to taxpayers in terms of section 11 are allowed against salary income, other than for a limited few. We set out these deductions which are available below:

  1. Contributions made by taxpayers to a pension fund, provident fund or retirement annuity fund may be deducted against salary income in accordance with the provisions of section 11F;
  2. To the extent that an individual incurs legal fees, wear and tear-related costs or bad or doubtful debts as part of his/her employment, such expenditure will be deductible.[2] (Although it is possible that a wear and tear-related allowance may be available against a laptop or textbooks acquired as example, it is in our experience practically highly unlikely for legal fees, bad debts and doubtful debts to arise from an employment trade);
  3. Where amounts received, either as a restraint of trade payment or as ordinary remuneration for employment services rendered, are refunded by the employee, those amounts refunded may be legitimately claimed as an income tax deduction;[3] and
  4. Expenses incurred towards rent of, cost of repairs[4] of or expenses in connection with any dwelling, house or domestic premises, those costs may be claimed as deductions, to the extent that it is incurred as part of the individual’s employment and on condition that it does not offend the provisions of section 23(b) which deal with “home office” expenses.

Other than for the above, very few other deductions are available for individual taxpayers earning only a salary. Outside the ambit of section 11, the only other deductions which we typically encounter are medical aid contributions incurred, amounts claimed against travel allowances received or donations made to qualifying public benefit organisations. Of late, investments in section 12J “venture capital companies” may also be claimed as income tax deductions against salary income.

The above limitations only apply to salaried income received from employment though. Where an individual is also engaged in another trade (such as the renting out of an apartment), the above limitations do not apply to that separate trade. In such case, section 23(m) will not make the deductions in section 11 unavailable, although this is only as relates to the separate (rental) trade.

[1] No. 58 of 1962.

[2] Sections 11(a), (c), (i) and (j) respectively.

[3] Sections 11(nA) and (nB) respectively.

[4] In terms of section 11(d).

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)

 

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ADDISIONELE MEDIESE KORTING VIR ’N INDIVIDU:
WANNEER KAN EK MEDIESE UITGAWES UIT DIE SAK BETAAL AS ’N EIS INDIEN?

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Addisioneel tot die Artikel 6A mediese belastingkrediet is daar ook krediet beskikbaar vir individue (belastingpligtiges) wat mediese uitgawes self uit die sak uit betaal in terme van Artikel 6B van die Inkomstebelastingwet.

Die addisionele mediese uitgawes belastingkrediet kan deur die belastingpligtige geëis word vir  kwalifiserende mediese uitgawes aangengaan vir homself asook sy afhanklikes.

Volgens Artikel 6B(1) sluit “afhanklike” die volgende in:

  • Gade of lewensmaat van die belastingpligtige;
  • Belastingpligtige se kind, asook kind van gade;
  • Enige ander lid van die belastingpligtige se familie waarvoor die belastingpligtige aanspreeklik is vir die ondersteuning of familieversorging; en
  • Enige ander persoon waar die mediese skema se reëls ’n afhanklike erken.

Kwalifiserende mediese uitgawes sluit in:

  • Dokters, tandartse, fisioterapeute, oogkundiges en verkseie ander mediese praktisyn;
  • Geregistreede hospitale, of tuisverpleging deur ’n gekwalifiseerde verpleegkundige;
  • Voorgekrewe medisyne (“Oor-die-toonbank-medisyne” kwalifseer slegs indien dit deur ’n geregistreerde mediese praktisyn voorgeskryf is.);
  • Bogenoemde uitgawes aangegaan in die buiteland; en
  • Uitgawes soos voorgeskryf deur die Kommissaris noodsaaklikerwys aangegaan en betaal met betrekking tot liggaamlike gestremdheid of ongeskiktheid.

Vir die uitgawes om te kwalifiseer vir die addissionele mediese uitgawes belastingkrediet moes dit werkilk deur die belastingpligtige in die jaar van aanslag betaal word en nie verhaalbaar gewees het deur ’n mediese fonds of ’n gapingsdekkingplan nie.

Die addisionele mediese uitgawes belastingkrediet word op spesifieke formules bereken soos uiteengesit in Artikel 6B. Belastingpligtiges 65 jaar en ouer, asook belastingpligtiges met ’n gestremdeheid, of gade, of kind met gestremdheid kan die meeste voordeel uit Artikel 6B benut.

As u enige individu-verwante vrae het, staan ons vriendelike en bekwame span gereed om u te help. Moenie huiwer om ons te kontak nie.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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WANNEER KAN EK MEDIESE UITGAWES UIT DIE SAK BETAAL AS ’N EIS INDIEN?

BELASTINGSKULD EN AFBETALINGSOOREENKOMSTE

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Om by iemand in die rooi te wees is vir meeste ’n onaangename ervaring, veral as die skuldeiser die Suid-Afrikaanse Inkomstediens (die SAID) is.

Omstandighede lei egter soms na gevalle waar ’n belastingpligtige agter raak met bedrae wat aan die SAID verskuldig is. Ons ondervind egter dat die SAID se skuldinvorderaars (intern en nuut-aangestelde eksterne agente) al hoe meer aktief uitstaande skuld invorder – grootliks weens die tekorte soos wyd gepubliseer wat tesourie ervaar.

Belastingwetgewing maak voorsiening vir belastingpligtiges om alternatiewe reëlings met die SAID te tref om belastingbetalings uit te stel, af te betaal en selfs in sekere gevalle af te skryf.

Dit is egter belangrik om die SAID vroegtydig en pro-aktief te nader om sulke reëlings te tref.

Meestal is die SAID geneë om afbetalingsterme aan te gaan met belastingpligtiges. Dit stel die belastingbetaler in staat om hul skuld in paaiemente af te betaal. Alle tipe belastingbetalings kan daarvoor aansoek doen, maar dit is ’n vereiste om te kan toon dat die belastingpligtige werklik in ’n posisie is om nie dadelik hul belastings te kan betaal nie.

Die SAID vereis gedetailleerde inligting ten opsigte van die belastingpligtige se finansiële posisie alvorens enige afbetalingsooreenkoms toegestaan sal word al dan nie. Oorweging word geskenk aan die betalingsgeskiedenis van die belastingpligtige, vorige oortredings van die belastingwet asook geldige redes waarom die belastingpligtige nie hul skuld ten volle kan betaal nie.

Belastingpligtiges moet egter in gedagte hou dat die SAID nie deur die ooreenkoms gebind sal wees indien die belastingpligtige nie aan die voorwaardes en terugbetalingsterme van die ooreenkoms gehoorsaam is nie.

In die geval waar die uitstaande aanspreeklikheid minder as R 50 000 is sal die SAID gewoonlik ’n 3-6 maande afbetalingsooreenkoms sonder te veel moeite toestaan. Die aansoek moet redes insluit waarom die skuld nie onmiddellik terugbetaal kan word nie.

In gevalle waar die skuld R 50 000 oorskry moet ’n aantal dokumente en inligting die aansoek vergesel.  Dit sluit in, maar is nie beperk nie, tot:

  • Laaste 6 maande se bankstate;
  • Finansiële state vir die mees onlangse finansiële jaar;
  • Nuutste beskikbare bestuurstate;
  • Kontantvloei-vooruitskatting vir die volgende 12 maande;
  • Motiveringsbrief vir die afbetalingsooreenkoms; en
  • Toepaslike aansoekvorms.

Ons nooi u uit om met ons belastingafdeling in verbinding te tree sou u enige verdere navrae met betrekking tot die afbetaling van u skuld hê.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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SECTIONAL TITLES: WHAT IS THE ROLE OF THE BODY CORPORATE?

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When it comes to sectional title schemes, there is still widespread misunderstanding of even the basics, starting with the body corporate and how it is established, as well as what its functions and powers are. This misunderstanding often gives rise to many problems and disputes in sectional title schemes which could quite easily have been avoided.

What is a sectional title?

A Sectional Title Development Scheme, usually referred to as a “scheme”, provides for separate ownership of a property, by individuals. These schemes fall under the control of the Sectional Titles Act, which came into effect on 1 June 1988.

When you buy a property that’s part of a scheme, you own the inside of the property i.e. the space contained by the inner walls, ceilings & floors of the unit. You are entitled to paint or decorate or undertake alterations as desired, providing such alterations do not infringe on municipal by-laws.

What is the body corporate?

The Body Corporate is the collective name given to all the owners of units in a scheme. Units usually refers to the townhouses or flats in a development. The body corporate comes into existence as soon as the developer of the scheme transfers a unit to a new owner. This means that all registered owners of units in a scheme are members of the Body Corporate.

  1. The Body Corporate controls and runs the Scheme.
  2. Day-to-day administration of the Scheme is vested in trustees who are appointed by the Body Corporate.
  3. Major decisions regarding the Scheme are made by the Body Corporate, usually at the annual general meeting (AGM), or at a special general meeting (SGM). At these meetings, matters, which affect the Scheme, are discussed, budgets are approved, rules can be changed and trustees are appointed. Each member of a Body Corporate is entitled to vote at these meetings, providing that the member is not in arrears with levy payments or in serious breach of the rules.

The Body Corporate exists to manage and administer the land and buildings in the scheme. This means, that the Body Corporate is required to enforce the legislation and rules in the Sectional Titles Act, the Management Rules and the Conduct Rules of the scheme. Amongst their other duties, the Trustees manage the Body Corporate’s funds, enforce the rules and resolve conflict to the best of their ability.

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)

References:

http://www.angor.co.za/news/understanding-sectional-title-terminology-body-corporate/

http://www.sectionaltitlecentre.co.za/faqs.aspx

http://www.bizcommunity.com/Article/196/568/161017.html

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BUYING OUT SHAREHOLDERS

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We are often approached by clients to advise on the most tax efficient manner in which a shareholder can sell an investment in a private company. Typically, the parties involve a majority shareholder of a company that is interested in buying out the minority shareholders in the company and which will ensure that that majority shareholder becomes the single remaining shareholder of that company.

In essence, two options are available through which a shareholder may dispose of a share in a company to achieve the above goal: it could either sell its shares to the purchasing shareholder, or it could sell the shares owned back to the company (i.e. a so-called “share buyback”). These two different options have varying tax consequences, and taxpayers should take care that these (often material) transactions are structured in the most tax appropriate manner possible.

Where a share is sold to another shareholder, the selling shareholder will simply pay a capital gains tax related cost. For companies, such capital gains tax related cost will effectively be 22.4% of the gains realised, whereas the rate for trusts is 36% (if gains are not distributed to beneficiaries), or up to 18% if the seller is an individual.

Where shares are however sold back to the company whose shares are being traded, that share buyback constitutes a dividend for tax purposes (to the extent that contributed tax capital is not used to fund that repurchase). Capital gains tax is therefore no longer relevant, but rather the dividends tax. Dividends would typically attract dividends tax (levied at 20%), rather than capital gains taxes.

It may therefore be beneficial for an existing shareholder (that is itself a company) to opt for its shares to be sold back to the company whose shares are held (and which shares are therefore effectively cancelled), rather than to sell these to the remaining shareholders and pay capital gains tax. This is because if the shares are sold to the remaining shareholders, a 22.4% capital gains tax related cost arises. However, where the shares are bought back, the “dividend” received by the company will be exempt from dividends tax and therefore no dividends tax should arise, since SA resident companies are exempt from the dividends tax altogether. A company selling its shares back to the entity in which it held the shares may therefore dispose of its investment without paying any tax whatsoever: no capital gains are realised since the shareholder receives a “dividend” for tax purposes, and the dividend itself is also exempt from dividends tax.

Share buybacks have become a hot topic recently and National Treasury has now moved to introduce certain specific anti-avoidance measures and reporting requirements that apply in certain circumstances. Still, there are perfectly legitimate ways in which to structure many corporate restructures where a buyout of shareholders takes place, and taxpayers will be well-advised to seek professional advice to ensure that such transactions are structured in as tax effective manner as possible.

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)

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