Monthly Archives: September 2013

Casual Day 2013 – “Go Big”

Newtons celebrates casual day!

Bloem Striders 5km Night Race

Members of the staff participated in the Bloem Striders 5km Night Race. We received beautiful medals and enjoyed the fresh air and excited spirit of about 700 athletes.

Bloem Striders (1)
Doing it for Red Socks!

Bloem Striders (2)
Carla, Esmeralda, Esmé, Jarryd, Anchin, Angelique, Marguriette
Front : Thelma and Louise

Bloem Striders (3)
Thelma, Esmé, Angelique, Louise and Anchin with our Medals!

First official litter hike!

Anzé Pienaar and Thelma Crossman participated on Saturday 7 September in the first official litter hike in Bloem. Litter hike decided to clean up Happy Valley. Many volunteers arrived and black bags, gloves and prodders were sponsored. Great effort from all the Bloem people.

First official litter hike (1) First official litter hike (2)

Some pointers for planning your estate

03‘Estate planning’ has been defined as the process of creating and managing a programme that is designed to:

  1. Preserve, increase and protect your assets during your lifetime;
  2. Ensuring the most effective and beneficial distribution thereof to succeeding generations.

It is a common misconception that it revolves solely around the making of a Last Will and Testament, or the structuring of affairs so as to reduce estate duty.

Each person’s estate is unique and should be structured according to his/her own unique set of circumstances, goals and objectives.

The lack of liquidity on the date of death may cause for the deceased’s family members and dependants to suffer hardship, as certain assets might be sold by the executor to generate the cash needed.

Liquidity means that there should be enough cash funds to provide for:

  1. Paying estate duty;
  2. Settling estate liabilities and administration costs;
  3. Providing for other taxation liabilities that may arise at death, such as capital gains tax.

Technically the estate is frozen until such time as the Master of the High Court has issued Letters of Executorship,

Dying without executing a valid Last Will and Testament, your estate will be dealt with as an intestate estate, and the laws relating to intestate succession will apply. The Intestate Succession Act determines that the surviving spouse will inherit the greater of R125, 000 or a child’s share. A child’s share is determined by dividing the total value of the estate by the number of the children and the surviving spouse.

If the spouses were married in community of property, one half of the estate goes to the surviving spouse as a consequence of the marriage, and the other half devolves according to the rules of intestate succession. If there is no surviving spouse or dependants, the estate is divided between the parents and /or siblings. In the absence of parents or siblings, the estate is divided between the nearest blood relatives.

An executor is entitled to the following remuneration:

  1. remuneration fixed by the deceased in the Last Will and Testament, or
  2. 3,5% of gross assets;
  3. 6% on income accrued and collected from date of death.

Executor’s remuneration is subject to VAT where the executor is registered as a vendor.

Where the value of the estate exceed R3,5 million, estate duty will become payable on the balance in excess of R3,5 million, with the exception of the property bequeathed to  a surviving spouse, which are exempt from estate duty and /or capital gains tax.

Section 3 of the Subdivision of Agricultural Land Act, prevents the subdivision of agricultural land, and such land being registered in undivided shares in more than one person’s name is subject to Ministerial approval.

A minor child is a person under the age of 18 years of age, and any funds bequeathed to a minor child will be held by the Guardian’s Fund, which falls under the administration of the Master of the High Court. These funds are not freely accessible, and are usually invested at below market interest rates. It is thus advisable to provide for minors by means of a trust.

The Close Corporations Act provides that, subject to the association agreement, where an heir is to inherit a member’s interest (in terms of the deceased’s Will), the consent of the remaining members (if any) must be obtained. If no consent is given within 28 days after it was requested by the executor, then the executor is forced to sell the members interest.

Section 3(3)(d) of Estate Duty Act determines that where an asset is transferred to a trust during an estate planner’s lifetime, yet the estate planner, as trustee of the trust retains such power as would allow him to dispose of the trust asset(s) unilaterally for his own or his beneficiaries benefit during his lifetime, then such asset(s) may be deemed to be property of the estate planner and included in his estate for estate duty purposes.

Where the parties are married in community of property, the surviving spouse will have a claim for 50% of the value of the combined estate, thus reducing the actual value of the estate by 50%. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate). Only half of any assets can be bequeathed.

The proceeds from life insurance policies can be used to:

  1. Generate income to maintain dependants while the estate is dealt with;
  2. Pay estate expenses: funeral, income tax, estate administration, estate duty.

All proceeds of South African “domestic” policies taken out on the estate planner’s life, where there is no beneficiary nominated on the policy, will fall into his estate on his death.

Where a beneficiary is nominated on the policy, the proceeds will be deemed property for estate duty purposes, even and although they are paid directly to the beneficiary (subject to partial exemptions based on policy premiums).

Policies which are exempted from inclusion for estate duty purposes are buy and sell, key man policies, and those policies ceded to a spouse or child in terms of an antenuptial contract.

Certain assets in a deceased estate are excluded from capital gains tax:

  1. Assets for personal use (with certain exceptions);
  2. Assets that accrue to the surviving spouse;
  3. Assets bequeathed to approved public benefit organisations;
  4. The proceeds from life assurance policies; Interests in pension, provident or retirement annuity funds;
  5. The first R2 million in respect of a primary residence;
  6. The first R750,000 in respect of small business assets;
  7. Currency, excluding gold and platinum coins.

This article is a general information sheet and should not be used or relied on 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.

Zero-rated VAT: Exports and services to foreigners

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It is often confusing to determine when to charge Value Added Tax (VAT) on goods or services at a zero rate (0%) instead of the standard rate of 14%. Below are some basic examples to illustrate the charging of the correct rate by South African VAT vendors. These are general examples and it is prudent to contact your tax practitioner if there is any uncertainty in this regard.

1. Direct Export of Goods – 0%

A direct export is the delivery of moveable goods to a recipient at an address outside of the Republic of South Africa (RSA), by a South African VAT vendor. The vendor must therefore physically deliver the goods to the recipient at the address outside the RSA, or arrange for the delivery of the goods on behalf of the vendor by a cartage contractor (who must be a resident of the RSA as well as a registered VAT vendor). VAT at 0% may then be charged on these sales.Strict documentation requirements are set by the South African Revenue Service (SARS) for the charging of  0% VAT, and the exports must take place through any of the 43 designated ports.

2. Indirect Export of Goods – 14%

An indirect export occurs when the South African VAT vendor sells moveable goods to a foreign recipient and the recipient removes or arranges for the removal of the goods from the RSA to the foreign address. In such a case, the vendor will charge VAT at the standard rate of 14%.

However, the foreign recipient may be able to claim a VAT refund from the VAT Refund Administrator (Pty) Ltd at the exit of the goods from the RSA from any of the 43 designated commercial ports. The foreign recipient must be a qualifying purchaser (as defined) and the goods must be exported within 90 days from the date of the tax invoice. Strict documentation requirements must be complied with in order to claim the VAT refund.

The only exception to this is if the supply is made in terms of Part Two of the VAT Export Scheme. In this case, VAT may be charged at 0%.

3.  Local Services to Foreigners – 0%

Services delivered locally to non-residents by a South African VAT vendor will generally be subject to VAT at 0%. It is important to remember that the non-resident recipient of these services must not be physically present in the RSA at the time of the delivery of the service.

The exceptions to this (and therefore subject to 14% VAT) will be where the services are supplied:

  1. in respect of fixed property in the RSA;
  2. in respect of moveable property in the RSA, unless the property is destined for export or forms part of a supply to a registered vendor; or
  3. to a recipient who is in the RSA when the services are rendered (unless it relates to a restraint of trade).

4. Services Delivered outside the RSA – 0%

Services that are physically delivered outside the RSA will be subject to VAT at 0%.

This article is a general information sheet and should not be used or relied on 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.

Broad-Based Black Economic Empowerment

01
BBBEE is fast becoming a certainty in the business environment in South Africa, and it is imperative that businesses incorporate this in their operational and strategic planning. An effective and successful implementation of a BBBEE strategy may have a significant impact on other aspects of the business, such as operations, tax planning and long-term business strategy. Proper consultation with skilled advisors is vital to avoid costly mistakes and ensure the achievement of the long-term goals of the business.

The calculation of an entity’s BBBEE scorecard is regulated by the Broad-Based Black Economic Empowerment Act No. 53 of 2003, together with the Codes of Good Practice (the Codes). Furthermore, certain sectors of the economy have their own charter in terms of which the scorecard of business in that sector will be calculated, rather than the generic codes. In most cases, only an accredited verification agent may conduct the verification process and issue the resulting BBBEE certificate. Verification agents are currently accredited by either IRBA or SANAS.

In terms of the Codes, a business will fall into one of three categories, which will then determine how the BBBEE score is calculated. If a sector charter applies, these criteria might be different from those set out in the generic codes.

The first category is Exempted Micro-Enterprises (EMEs). These will be entities with an annual turnover of less than R5 million, or start-up enterprises (newly formed businesses that have been in operation for less than twelve months). These EMEs will have an automatic recognition level 4, or automatic recognition level 3 in the case where the EME has black ownership of more than 50%. A registered auditor, accounting officer or BBBEE verification agent may issue such a certificate, and the certificate is valid for a period of 12 months.

The second category is Qualifying Small Enterprises (QSEs). These are entities with an annual turnover between R5 million and R35 million. In such cases (according to the QSE Codes) the entity only has to be measured against four of the seven elements of the scorecard, which simplifies the verification process and gives the business a better chance to obtain a good score. Only an accredited verification agent may conduct the verification process and issue the BBBEE certificate to the business. The certificate is valid for a period of 12 months.

The third category is businesses with an annual turnover of more than R35 million, which will be measured according to the Generic Codes. A score will be calculated for all seven elements on the scorecard, which will then determine the BBBEE score of the entity. Only an accredited verification agent my conduct the verification process and issue the BBBEE certificate to the business. The certificate is valid for a period of 12 months.

To ensure the minimizing of costs, an effective verification process and the least amount of disruption to the operations of a business, the help of professional and skilled advisors is vital.

Newtons is an accredited verification agent. Contact Anzé Pienaar anze@newtons-sa.co.za for more information.

This article is a general information sheet and should not be used or relied on 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.