Other Legal Snippets

The Taxation Laws Amendment Bill was recently promulgated:

Loans to Trusts

Any loan, advance or credit made by a “connected” person to a trust will be deemed to have accrued interest at the official rate (currently 8% pa).  If interest is less than the official rate the difference will be treated as a donation made to the trust.    This change is introduced with effect from 1 March 2017 and applies to existing loans.  Some exemptions, including in respect of Special Trusts, apply.

Retirement Annuities and emigration

In the event of emigration, as recognised by the SA Reserve Bank, the person who was a resident of South Africa may take a full lump sum from his or her retirement annuity – but subject to tax.

This also applies also to non-residents on the expiration of their Visas

Income Protection Policies – benefits tax free

This is confirmation of a change introduced in March 2015.   Whilst benefits are tax free, premiums are not tax deductible.  It should be noted that the level of cover should be aligned to a person’s after tax income and not his or her full remuneration. Because benefits are tax free, companies will only pay the equivalent of up to 100% of an individual’s after tax remuneration.  In the light of this change care must be taken not to over insure.

Expect to pay more on Capital Gains Tax

As defined by the SARS handbook, Capital gains refers to any proceeds received after the  disposal of an asset on or after 1 October 2001.

This includes any proceeds received after the sale of an asset, donation of an asset, death, cessation of residence, and the loss or destruction of an asset.

This will continue to form part of the current Income Tax which, as a result, could see a slight rise. These are the changes to the capital gains taxes for 2017.

Watch out for ‘Stealthy Taxation’

The question of whether all national taxes should be adjusted to prevent “inflation erosion” was addressed in the Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Act.

Unlike the personal income tax tables – which are adjusted each year – the tax brackets for other tax tables (like the retirement fund lump) were last adjusted in 2014. The Act dismisses this, stating that certain tax thresholds are set at a specific level for administrative reasons and do not require regular adjustments.

This has come under scrutiny by analysts, who consider not adjusting these values to be “increasing taxation through stealth”.

Disclose your overseas assets

The Rates and Monetary Amounts and Amendment of Revenue Laws Amendment Act has provided a six month “grace period” to allow South African citizens to disclose previously undisclosed overseas assets.

This special voluntary disclosure programme has been running from 1 October 2016 and will cease on  31 March 2017 with a waiver of all penalties (including criminal charges), provided the application is successful.

Loss of privacy

A new international Common Reporting Standard (CRS) will allow governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis from September 2017.

Companies are already contacting clients in order to comply with this provision.