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

Blog images-01-04

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

Posted in Property | Tagged , , | Comments Off on SECTIONAL TITLES: WHAT IS THE ROLE OF THE BODY CORPORATE?

BUYING OUT SHAREHOLDERS

Blog images-01-02

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)

Posted in Business | Tagged , , | Comments Off on BUYING OUT SHAREHOLDERS

IS U TESTAMENT OP DATUM?

Blog images-01-01

Ons vra en beantwoord ‘n paar basiese vrae ten opsigte van die opstel van ‘n Testament.

  1. V: Wie behoort ‘n Testament te hê?

    A: Alle persone 16 jaar en ouer wat bates besit en wat bekwaam is om hul aksies te kan verstaan.
    .
  2. V: Hoekom behoort ek ‘n Testament te hê?

    A: ‘n Testament stel u in staat om erfgename volgens u keuse te benoem. Indien u sonder ‘n Testament (Intestaat) sou sterf, sal u bates volgens die Wet op Intestate Erfopvolging verdeel word. Dit mag dus die gevolg hê dat persone wie u nie as erfgename sou benoem nie, voordele by u afsterwe ontvang.
    .
  3. V: Wie mag nie teken as ‘n getuie op jou Testament nie?

    A: ‘n Begunstigde, genomineerde Eksekuteur en ‘n genomineerde Trustee en/of hulle gades.
    .
  4. V: Wie mag u Testament as getuie onderteken?

    A: Die Testament moet in die teenwoordigheid van twee getuies geteken word wat ook in die teenwoordigheid van mekaar teken. Slegs persone 14 jaar en ouer kwalifiseer om as getuies te teken.
    .
  5. V: Wie stel ek aan as Eksekuteur?

    A: ‘n Eksekuteur moet al jou bates invorder en verseker dat alle skulde vereffen is. Enigiemand kan aangestel word as Eksekuteur maar dit moet in gedagte gehou word dat om ‘n boedel te beredder is ‘n gespesialiseerde veld en om as Eksekuteur te dien is ‘n groot posisie van vertroue wat beklee word.
    .
  6. V: Wat beloop Eksekuteursvergoeding?

    A: Die maksimum vergoeding waarop ‘n Eksekuteur geregtig is word deur Wetgewing vasgestel en beloop tans 3.5% van u totale bruto boedelwaarde. Eksekuteursvergoeding behoort egter onderhandel te word met die persoon wat as Eksekuteur van u Testament benoem word.
    .
  7. V: Waar stoor ek my testament?

    A: Jou oorspronklike testament moet veilig bewaar word. Dit word aanbeveel dat die Testament in tweevoud onderteken moet word en beide kopieë afsonderlik gestoor moet word vir veilige bewaring. Een oorspronklike kopie kan by die huis gestoor word en die ander oorsrponklike duplikaat moet verkieslik by die firma gestoor word wat sal dien as Eksekuteur.
    .
  8. V: Hoe gereeld behoort ek my Testament te hersien?

    A: Dit word aanbeveel dat Testamente ten minste elke 2 jaar hersien word. Dit is egter ook belangrik om die hersiening van u Testament met gebeurtenisse soos bv. ‘n huwelik, ‘n geboorte, ‘n egskeiding of die aankoop van eiendom te oorweeg.

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)

Januarie 15, 2018

Deur Marius Vorster in Estates en Trusts – aangepas vir vertaling

Posted in Trusts | Tagged , , | Comments Off on IS U TESTAMENT OP DATUM?

FRINGE BENEFITS PROVIDED TO EMPLOYEES

Blog images-01-02

The Seventh Schedule to the Income Tax Act[1] lists various benefits that employers may grant to employees which will attract income tax for the employee,[2] and require the employer to also withhold PAYE on the amount of the benefit granted.[3] These provisions act as anti-avoidance measures to avoid employees receiving “masked” remuneration in formats other than cash in order to avoid a liability for income tax.

The Seventh Schedule identifies a number of such taxable fringe benefits, and further quantifies the cash flow equivalent of that benefit for purposes of inclusion ultimately in the employee’s taxable income. These taxable benefits provided by employers to employees include:[4]

  1. The acquisition by the employee of assets from the employer at less than its value;
  2. The right to use an asset for free or without the employee paying adequate consideration for the use thereof;
  3. Free meals, refreshments or vouchers to that effect;
  4. Free or cheap residential accommodation;
  5. Free or cheap services provided or sourced by the employer for the benefit of the employee;
  6. Where the employer provides an interest-free or low-interest loan to an employee;
  7. Where the employer pays all of, or a portion of, the employee’s debt owed to another person, with no recourse to the employee;
  8. The employer settles any direct or indirect medical costs incurred by the employee and to the benefit of the employee him/herself, as well as any other dependents;
  9. Contributions made by the employer to any insurance policy which will benefit the employee; and
  10. Contributions by the employer to any retirement type fund on behalf of the employee.

Fringe benefits further also extend to where the above benefits are granted to family members of the employee, or any other person where those benefits are extended by virtue of an arrangement between the employer and the employee and which is granted as a result of the existence of the employment relationship.[5]

Given the very wide definition afforded to the word “employee” for purposes of the fringe benefit regime,[6] we often find that clients are surprised at the very wide potential application of the above benefits, be it to the employee directly or not. Given that the PAYE regime, affected by the above mentioned, carries a potential penalty of imprisonment for up to twelve months in instances of wilful contravention or contravention without just cause,[7] it is of the utmost importance that employers too are completely up to date with and aware of the obligations that they may have towards SARS and arising from fringe benefits provided to employees.

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)

[1] 58 of 1962.

[2] See paragraph (i) of the specific inclusions in the “gross income” definition in section 1 of the Income Tax Act.

[3] Paragraph 2 of the Fourth Schedule to the Income Tax Act.

[4] Paragraph 2 of the Seventh Schedule to the Income Tax Act.

[5] Paragraph 16 of the Seventh Schedule to the Income Tax Act.

[6] Paragraph 1 of the Fourth Schedule read with paragraph 1 of the Seventh Schedule to the Income Tax Act.

[7] Paragraph 30(1) of the Fourth Schedule to the Income Tax Act.

Posted in Employer | Tagged , , | Comments Off on FRINGE BENEFITS PROVIDED TO EMPLOYEES

CRYPTOCURRENCY

Blog images-01-03

Cryptocurrency and blockchain has been the hot topic in the media the past year. It is a concept that few truly understand, and could change the future for everyone in a major way.

But what is cryptocurrency and blockchain?

Per the online dictionary:

A cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

The most popular currently in the market is Bitcoin; others include Eutherian and Litecoin.  There are various platforms on which to trade in cryptocurrency, for example Luno. Luno functions like the JSE, where willing buyers and willing sellers transact in shares / cryptocurrencies.

Blockchain is a digital ledger in which transactions made in Bitcoin or another cryptocurrency are recorded chronologically and publicly.

An example to demontrate how blockchain works:

Pete wants to buy Bitcoin from Mary.  They both use Luno as platform to trade on.

By joining Luno, Pete and Mary effectively each receives a copy of the big overall “ledger” that shows where each unit of Bitcoin is at that point in time and where each unit of Bitcoin has been.

Each transaction is represented as a block.  Each time a transaction is authorised, a block is then added to the other blocks already in place creating a chain, hence the term “blockchain technology”.

The chain is then compared between all the copies of the “ledgers” that are spread out over the world to validate them. You can actually add Bitcoin to your own account without actually purchasing any, but as soon as your ledger compares to the others around you, it will see the unauthorised transactions and reject your version.

Bitcoin is severly encrypted, therefore to be able to finalise a transaction, there are people in the market who solve very complex mathematical problems using a significant amount of expensive computing power to authorise the transaction. These people are called “miners”.  They receive one Bitcoin for every transaction they finalise.

As soon as the transaction between Pete and Mary is authorised by the miner, the “ledger” is updated by adding another block to the chain.

The question that then arises is why would hackers not just hack and authorise transactions for themselves? This is where the magic of blockchain technology comes in – the computing power required to solve the complex problem is so expensive, that is more costly to hack than to rather just act as miners themselves and earn Bitcoin. Therefore, no one needs to trust each other and the technology allows the users to trust the system.

It is this level of technology that will regulate the future, effectively eliminating the need for lawyers and banks. The concept is throwing governments across the globe into a state of panic as there is currently no proper regulation inbedded in current tax laws.

Like Da Vinci’s inventions, the technology is a little ahead of its time and the rest of the world needs some time catching up. It is therefore critical to keep an eye on further developments as this will impact the way business is done in future.

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)

 

Posted in Finance | Tagged , , | Comments Off on CRYPTOCURRENCY

HOW TO PREPARE AND SUBMIT YOUR VAT201 FROM 1 APRIL 2018

Blog images-01-04

The Minister of Finance announced a VAT rate increase from 14% to 15% effective 1 April 2018 in the 2018 Budget Speech.

To assist you in preparing your VAT return (VAT201) submission, the South African Revenue Service (SARS) would like to bring the following to your attention:

The new tax fraction applicable from 1 April 2018

The new tax fraction to calculate the amount of VAT is as follows:

Capture

For example, if the VAT-inclusive price (final consideration) is R1 150, the VAT amount is calculated as follows:

R1 150 × 15/115 = R150 VAT

Effect on VAT Vendors

Vendors should determine when supplies of goods and services are deemed to have taken place and also consider the special rules that apply when there is a change in the VAT rate to ensure that the correct rate of VAT is applied in respect of the supply, the acquisition and importation of goods and services. A comprehensive set of Frequently Asked Questions (FAQs) is available on the SARS website or you can click here to open the document.

How to prepare and submit your VAT201

Vendors whose tax periods span the old VAT rate of 14% and the new VAT rate of 15% (effective from 1 April 2018) will be required to declare these transactions on a single VAT201 return. The most impacted would be the Category B vendors whose tax periods are periods of two months ending on the last day of April 2018. Also impacted are the Category D vendors whose tax periods are periods of six months ending on the last day of August 2018. Category E vendors whose tax periods are periods of twelve months ending on the last day of the year of assessment will also be impacted.

Vendors who have tax periods that span the 14% and 15% VAT rate (Category B, D and E vendors) as well as future tax periods where the rate of 14% is applicable to certain supplies will be required to disclose their transactions as follows:

Output Tax

  • for all standard rated supplies where VAT at 15% has been levied, please use the standard rated fields on the VAT201 that you would normally use to declare the output tax.
  • for all standard rated supplies where VAT at 14% has been levied, please use Field 12 – “Other and Imported Services” on the VAT201, to declare the output tax.

Input tax

  • for all capital and other goods and/or services supplied to you and charged with VAT at a rate of 15%, please use fields 14 and 15 on the VAT201;
  • for all capital and other goods and/or services supplied to you and charged with VAT at a rate of 14%, please use Field 18 – “Other” on the VAT201, to deduct the VAT; and
  • for all imports, irrespective of whether the VAT was charged at 14% or 15%, please use Field 14A and 15A on the VAT201 to deduct the VAT.

Please note:

  • If you are using eFiling for the submission of your VAT201 and have saved a VAT201 for tax periods commencing on or after March 2018, the saved VAT201 will be removed so that the updated VAT201 with the correct rate of tax can be requested.
  • The updated VAT201 will be made available soon. Please monitor the website for updates regarding the VAT201.

For more information please visit the Value Added Tax page on the SARS website www.sars.gov.za where you will find guides to help you complete and submit your VAT return, or contact the SARS Contact Centre on 0800 00 7277. You can also send an email to VATRateEnquiries@sars.gov.za with your enquiries.

ISSUED BY THE SOUTH AFRICAN REVENUE SERVICE

March 2018

Posted in VAT | Tagged , , | Comments Off on HOW TO PREPARE AND SUBMIT YOUR VAT201 FROM 1 APRIL 2018

DIE RISIKO’S OM SONDER ‘N TESTAMENT TE STERWE TE KOM

Blog images-01-02

Die gevare en risiko’s en die gevolglike probleme wat ontstaan indien u sonder ‘n geldige Testament, m.a.w. Intestaat, te sterwe kom, is beslis nie beperk tot die voorbeelde wat hier gelys word nie, maar hierdie is van die algemeenste situasies waarmee ons gereeld gekonfronteer word:

  1. Sonder ‘n testament het u nie ‘n eksekuteur nie. Daarom moet iemand aangestel word of daar moet met ‘n firma onderhandel word om as administrateur van u boedel op te tree. Dit beteken potensiële vertragings, moontlike addissionele kostes en frustrasies wat andersins verhoed kon word.
  2. Daar is geen geleentheid om voogde te kies vir enige minderjarige kinders (kinders jonger as 18jaar) nie. Dit kan tot konflik tussen familielede lei en kan emosionele onstabiliteit by die minderjarige kinders skep. Enige ouer weet hoe belangrik dit is om seker te maak dat u kinders in die hande is van iemand wat u vertrou en wat u keuse is.
  3. U kinders of ander erfgename mag nie die bedrag of voordele ontvang wat u sou wou hê hulle moet ontvang nie en daar is geen geleentheid om ‘n trust te skep om die erfenisse van minderjarige erfgename te bewaar en te bestuur nie. Dit beteken dat hulle erfenisse in die Meester se Voogdyfonds sal vestig en wanneer hulle die ouderdom van meerderjarigheid bereik, sal sodanige voordele aan hulle betaalbaar wees.
  4. Laasgenoemde skep dus uiteraard ook ‘n situasie waar ‘n persoon wat sopas die ouderdom van meerderjarigheid bereik het, in besit en beheer geplaas word van bates of kontant wat hy/sy heel waarskynlik nie oordeelkundig sal kan bestuur en bestee nie.
  5. ‘n Gesinsbesigheid of erfgenaam mag nie in u gesin bly nie, en dit mag nodig wees om die bates te likwideer. As daar iets van betekenisvolle waarde soos ‘n besigheid is, is dit tog belangrik om vooruit te beplan om potensiële konflikte te vermy.
  6. Uiteindelik, sonder ‘n testament, kan u nie begunstigdes uitsluit of insluit nie. U is onderworpe aan die Wet op Intestate Erfopvolging en die verdeling van u boedelbates gaan waarskynlik nie volgens u behoeftes plaasvind nie.

Dit blyk dus duidelik dat hierdie potensiële probleme vermy kan word indien u vooruit beplan.

‘n Testament is waarskynlik een van die belangrikste dokumente wat u gedurende u leeftyd sal teken, maar dikwels word die waarde van ‘n deeglik deurdagte testament onderskat en uiteindelik is dit u geliefdes en naasbestaandes wat die gevolge moet dra.

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)

February 8, 2018 By Marius Vorster

http://www.fhbc.co.za/2018/02/08/die-risikos-om-sonder-n-testament-te-sterwe-te-kom/

Posted in Trusts | Tagged , , | Comments Off on DIE RISIKO’S OM SONDER ‘N TESTAMENT TE STERWE TE KOM

HOW WILL THE 2018/2019 AFFECT YOU, THE INDIVIDUAL?

Blog images-01-03

The 2018 Budget was sure to be a delicate balancing act between the much needed tax hikes (whatever the reasons that got us onto this precarious economic precipice, the fact is that the situation is what it is) and adequate incentive to stimulate economic growth and, more importantly, improve employment and job creation. It seems that the Budget which the fiscus has produced is fit for purpose and on point. Although it is a tough budget for South Africans to swallow, it is not unduly draconian to the extent that it will create despondency and disillusionment. The message is unequivocally clear, we all need to pull together to remedy our economy.

“Unfortunately for individuals, the burden falls largely on them to recoup Budget deficits and foot the tax bill,” says Deanna Prosalendis, a member of the SAICAEmployees Tax Sub-Committee and Group Tax Specialist at Wilderness Safaris. “Even more unfortunate is the fact that, despite government’s efforts to soften the blow for the poor, a tough Budget such as this will inevitably affect the more impoverished South Africans far more than it will the wealthier citizens.

The VAT rate increase to 15% is certainly the most controversial of the tax hikes and will contribute the lion’s share of the tax shortfall as it is estimated to generate an additional R22 billion. VAT is viewed as a regressive tax in that it affects poverty-stricken and poorer households far more than it does the middle and upper classes, despite the zero rating of certain basic food stuffs. The fiscus has attempted to offset this VAT hike for the poor by increasing social grants, but it is safe to say that the 1 percentage point increase will be felt keenly, particularly amongst the lower income groups. This was a controversial decision, especially as COSATU and the South African Communist Party were vehemently opposed to any change in the VAT system.

The personal income tax bands have only minimally been adjusted for fiscal drag or bracket creep. What this means is that, although there is no rate increase in personal tax rates, below inflation relief has been provided to individuals in the lower three tax brackets while no relief has been given to the highest four income brackets. In essence, this means that all income groups are affected by paying more tax on their income, with the higher income groups bearing the heavier burden. It is a “stealth tax” because, even though there is no actual rate increase, we are all effectively paying more tax and will have less disposable income come month end.

Estate duty tax has been increased from 20% to 25% for estates greater than R30 million in value. There is also an increase in the ad-valorem excise duty rate on luxury goods from 7% to 9%. These duties will apparently apply to goods such as cosmetics, electronics and golf balls which are perceived to be consumed by wealthier income groups. The Davis Tax Committee has been mulling over a wealth tax for some time. No such tax has been introduced thus far and there was also no increase in the capital gains tax inclusion rate or the dividends tax rate, so the increase in estate duty and the ad-valorem excise duties appear to be government’s way to tax wealthier citizens for the time being.

The abolition of the medical credits was also foreseen as part of the Budget speculation. Notwithstanding this, the medical credits were not removed but will only increase from R303 to R310 per month for the first two beneficiaries (2.3%), and from R204 to R209 per month (2.5%) for the remaining beneficiaries. The fiscus has indicated that below inflation increases in the medical credits over the next three fiscal periods will help fund the rollout of the National Health Insurance.

Fuel levies and the road accident levy will also be increased, affecting both drivers of vehicles and commuters (bus and taxi users) alike. The usual suspects – sin taxes on alcohol and smokers – were increased as well. In addition, the sugar tax mooted in the last Budget as well as carbon tax, which has long been on the cards, will be implemented and the plastic bag levy has been increased. All of these smaller adjustments will affect all South Africans.

Will the Budget be sufficient to ward off a Moody’s downgrade? Who knows? The Rand did strengthen after the Budget Speech and markets seemed to be appeased, but this Budget will certainly put strain on all South African citizens – taxpaying citizens as well as those who fall below the tax threshold will be affected nonetheless,” concluded Prosalendis.

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)

https://www.saica.co.za/Portals/0/Technical/taxation/documents/How%20will%20the%202018%20budget%20affect%20you%20the%20individual_Deanna%20Prosalendis.pdf 

 

Posted in Tax | Tagged , , | Comments Off on HOW WILL THE 2018/2019 AFFECT YOU, THE INDIVIDUAL?

VAT INCREASE TO KICK IN ON APRIL 1

Blog images-01-04

During his maiden budget speech, (former) Finance Minister Malusi Gigaba made the expected announcement that the value-added tax (VAT) rate will increase to 15% from April 1.

This is the first increase in the VAT rate since April 1993 and the second since its introduction in 1991.

Government is battling an expected revenue deficit of R48.2bn and with the added burden of funding free higher education for students from lower income categories, an increase in at least one of the major taxes was inevitable.

The choice of VAT was justified as an “efficient, certain source of revenue” with “the least detrimental effects on economic growth and employment”. The rate increase is expected to raise additional tax revenue of R22.9bn.

The rate adjustment will result in a 0.88% rise in the price of standard-rated goods and services to the end-consumer.

According to Gigaba, the regressive nature of a VAT rate increase is ameliorated by the zero-rating on basic foodstuffs. An increase in social grants is also expected to mitigate the effect of the rate increase on poor people.

The expected removal of the zero-rating on fuel levy goods was not proposed, but the fuel levy will increase by 52c/l in the form of a 22c/l increase in the general fuel levy and a 30c/l increase in the Road Accident Fund levy. Another justification for the VAT rate increase is SA’s low VAT rate compared with those of other jurisdictions. While this comparison is useful, one must bear in mind that there are variations between the types of goods and services subject to VAT from country to country.

The revised rate of 15% takes effect on April 1, which gives VAT vendors (and particularly accounting and point-of-sale software developers) just under six weeks to ensure that the new rate is implemented.

To ensure the application of the correct rate, VAT vendors are advised to be cognisant of the time of supply rules contained in section 9 of the Value-added Tax Act (89 of 1991). The general rule is that the supply is deemed to take place at the earlier of the time an invoice is issued by a supplier or the time that payment of consideration is received by the supplier.

There are, however, separate timing rules for particular transactions, such as for vending machines, instalment credit agreements and for fixed property.

Expect to see retailers offering “beat-the-VAT-rate” sales similar to what was seen with the UK’s VAT rate increase from 17.5% to 20% in 2011.

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)

22 February 2018 – 06:10 Herman van Dyk

https://www.businesslive.co.za/bd/opinion/2018-02-22-vat-increase-to-kick-in-on-april-1/

Posted in VAT | Tagged , , | Comments Off on VAT INCREASE TO KICK IN ON APRIL 1

HOW TO PRACTISE GOOD BUSINESS

Blog images-01-01

The Gupta saga and ethical indiscretions at Steinhoff, McKinsey and KPMG have most recently shone the spotlight on unethical business practises in South Africa. This is not a uniquely South African problem, the world is plagued by scandals of corruption and alleged wrongdoing in politics and business alike.

“Some of the allegations against these companies have not yet being put to trial, but the collateral damage is done. Tainted reputations have driven away important clients to the detriment of share price performances,” says Jannie Rossouw, head of Sanlam Business Market.

“Though these examples are known because they have been exposed in the public domain, forensic research shows that some small businesses are just as bad and are using smarter ways to conceal bribes to win contracts, tenders and appointments.”

Caught in a web of deceit

Rossouw says business owners, no matter how small their operations may be, need to realise that one wrongdoing can ruin it all. “You may believe that in business it’s about ‘dog-eats-dog’ or that ‘good guys always come last’, but the reality is that if your actions are not consistent with what society and individuals typically think are good values, you may slowly drive yourself out of business. Individuals and communities want to do business with ‘good’ people.”

He says if people are supporting you with their hard-earned money, they expect you to be honest, fair and to treat everyone with dignity and without prejudice. If you are charging unsuspecting customers more than you reasonably should, or if you are not honest with your business partners and suppliers about your operational and financial standing, Rossouw warns that you are likely to get caught up in your web of deceit sooner rather than later.

Similarly, evading tax or helping someone else to write non-existing business expenses, or being involved in unlawful activities, such as price fixing means that you are not operating within the parameters of the law.

“There is truth in Aldo Leopold’s statement that ‘ethical behaviour is doing the right thing when no one else is watching- even when doing the wrong thing is legal’. Sewing moral fibre into all your business decisions will help you build a good reputation and offer the peace of a clear conscience. You’ll also stand a better chance to retain good employees, giving you a competitive edge,” he says.

Good business practises

  • Negotiations: Every business owner knows that there is always room for negotiating a business deal. But some bully their smaller suppliers into reducing their mark-up to the point that the transaction is not beneficial to the other party. Ask yourself if you are looking for a win-win outcome where all parties will benefit.
  • Taxes: There is nothing wrong with looking at legitimate ways to reduce your tax bill. But as soon as you pay less tax than you are legally obliged to or avoid paying tax altogether, you are in breach of the law. Failing to declare any income, claiming deductions for expenses that you didn’t incur, creating false invoices or not registering for VAT when you exceed the exempted threshold are some of the unethical business practises that amount to tax evasion.
  • Creditor payments: You should be paying your creditors and suppliers on time and not use them as a bank. Late payments can cause your smaller creditors to collapse. A survey by accounting firm, Xero found that late payments were a source of cash flow problems for 32% of surveyed small businesses, while 16% felt that chasing invoices reduced productivity.
  • Invoicing: Do you bill for actual expenses and a reasonable mark-up or do you charge some clients more than others?
  • Government regulations: Are you operating within the ambit of all local authority regulations?
  • Software piracy: Do you have official licencing agreements in place to use proprietary software?
  • Staff: Are you paying your staff a market-related salary for their services and do you have formal employment contracts in place? Do you comply with the department of labour’s regulations requiring businesses to employ not more than 40% foreign labour? Also make sure that you comply with the minimum wage and the provisions of the Employment Equity Act.
  • Business partners and associates: The saying that if you lie with dogs you will catch flea’s sums up the importance of choosing your business partners carefully very well. If you get into business with people of compromised ethical standards, you might be setting yourself up for future challenges.

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)

Visit www.bizcommunity.com for more news:

Posted in Business | Tagged , , | Comments Off on HOW TO PRACTISE GOOD BUSINESS