Monthly Archives: January 2016

Transactions required to be reported to SARS in terms of the Tax Administration Act

Tax1_bCertain transactions are required to be reported to the South African Revenue Service (‘SARS’) as and when entered into (section 37 of the Tax Administration Act, 28 of 2011 (‘the Admin Act’)). These are referred to as ‘reportable arrangements’, and qualify as such when an ‘arrangement’ (defined as including any transaction, agreement, scheme or understanding) either meets one of the criteria set out in section 35(1)(a) to (e), or if specifically listed in a public notice issued by the Commissioner for SARS. This article is concerned only with the former.

Failure to report a ‘reportable arrangement’ will result in a monthly penalty being levied against non-compliant taxpayers ranging from between R50,000 to R300,000 per month (section 212), for up to 12 months. The purpose for requiring taxpayers to report certain transactions is obvious: to allow SARS to monitor transactions on an ongoing basis which it considers to exhibit potential traits of tax avoidance.

Section 35(1) determines that arrangements which exhibit any one of the below criteria qualify as a reportable arrangement. These are arrangements which:

(a) contain provisions in terms of which the calculation of interest, finance costs, fees or any other charges is wholly or partly dependent on the tax treatment of that arrangement;

(b) have any of the characteristics contemplated in section 80C(2)(b) of the Income Tax Act, 58 of 1962, or substantially similar characteristics (which include round trip financing, involving an accommodating or tax indifferent party in the arrangement or if the arrangement contains elements which offset or cancel each other);

(c) give rise to an amount that is or will be disclosed by any participant as:

  1. a deduction for purposes of the Income Tax Act but not as an expense for accounting purposes; or
  2.  revenue for accounting purposes, but not as gross income for purposes of the Income Tax Act;

(d) do not result in a reasonable expectation of an accounting pre-tax profit for any participant; or

(e) result in a reasonable expectation of an accounting pre-tax profit for any participant, but which is less than the value of the tax benefit to that participant if both are discounted to present value at the end of the first year of assessment when the tax benefit is created.

Irrespective of the above, even if an arrangement would qualify as a reportable arrangement in terms of the above, section 36 of the Admin Act lists various criteria which, if met, would render an arrangement an ‘excluded arrangement’ whereby such transactions need not be reported to SARS. Moreover, in terms of the public notice issued by the Commissioner on 16 March 2015 in Government Gazette no. 38569 as Notice 212, a transaction would not be reportable in terms of the above criteria only if the tax benefit arising from the arrangement for all persons involved would not exceed R5 million.

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)

Transactions required to be reported to SARS in terms of government notice

Tax 2_bSection 37 of the Tax Administration Act, 28 of 2011 (‘the Admin Act’) requires taxpayers to report a transaction which would qualify as a ‘reportable arrangement’. Failure to do so will result in a monthly penalty being levied against non-compliant taxpayers ranging from between R50,000 to R300,000 per month (section 212), for up to 12 months. The purpose for requiring taxpayers to report certain transactions is obvious: to allow the South African Revenue Service (‘SARS’) to monitor transactions on an ongoing basis which it considers to exhibit potential traits of tax avoidance.

An ‘arrangement’ (defined as including any transaction, agreement, scheme or understanding) is considered to be a ‘reportable arrangement’ if either it meets one of the criteria set out in section 35(1)(a) to (e), or if it is specifically listed in a public notice issued by the Commissioner for SARS.

This article is concerned with only the latter, and such a public notice was issued by the Commissioner on 16 March 2015 in Government Gazette no. 38569 as Notice 212. It lists the following transactions, summarised below, that may constitute ‘reportable arrangements’ as listed in said Notice:

  • Certain hybrid equity instruments (typically convertible or redeemable preference shares) which are redeemable/convertible within 10 years of being issued;
  • Certain hybrid debt instruments (for example convertible debentures or subordinated loans), other than listed instruments. In the case of convertible debentures, these are only potentially reportable if conversion may take place within 10 years of the notes being issued;
  • Share buy-backs by companies amounting to more than R10 million, if accompanied by that company issuing new shares within a one year period from the buy-back having taken place;
  • Any contributions or payments made by South African tax residents to a non-resident trust in which the South African tax residents have, or will acquire, a beneficial interest which is reasonably expected to exceed R10 million;
  • Where one or more persons acquire a controlling interest in a company which has, or can be reasonably expected to have, an assessed tax loss exceeding R50 million;
  • An arrangement whereby a South African taxpayer pays an amount in excess of R5 million to a non-resident person which qualifies as an insurer in that country.

The obvious purpose for allowing the Commissioner to publish a list of arrangements such as the above is to grant SARS the ability to identify transactions and/or structures which are often used by taxpayers in tax avoidance schemes. The ability to publish a list, such as the above, allows SARS to adopt a flexible approach in identifying and monitoring tax schemes and to retain the capability to publish even further transactions that are required to be reported without having to undergo the lengthy legislative process to have these transactions listed in the Admin Act itself.

Other than containing a list of transactions that would per se qualify as reportable arrangements, the Notice also determines that for purposes of those arrangements mentioned in section 35(1)(a) to (e) referred to earlier (as opposed to those listed in the Notice itself), a transaction would not be reportable if the tax benefit arising from the arrangement for all persons involved would not exceed R5 million. This R5 million threshold does however not apply to the list of transactions referred to above and listed in the Notice itself.

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)

Women have the right sentiment for investing

Woman_bSome recent studies seem to suggest that woman have the right skills and attitude to be great in taking on matters regarding their financial planning and investments. However, other studies seem to suggest that they lack the requisite confidence to do so. The evidence seems to suggest that woman should take the lead within their families in this department.

According to a report released recently by SigFig, a US based company assisting direct investors with their portfolios, female investors enjoyed returns of 12% higher than their male counterparts over the year the report covers. Assuming this performance trend continued over a thirty-year period, a woman with R100 000 (we’ll use rands, even though the report uses dollars) invested would earn R58 000 more than a man. Men were also revealed to be 25% more likely to lose money in the market than women. Why is that?

It would seem that men ‘churn’ (sell off and buy something else) their portfolios 50% more often than women. Churning is particularly detrimental to investment returns. For example, in 2014 frequent traders (or investors with an annual investment portfolio turnover of 100% and above) experienced average net returns of only 0.1% compared to the 4.7% enjoyed by other investors.

Overconfidence and cautiousness?

A likely reason behind the lower returns earned by men and their tendency to churn their portfolios is overconfidence. According to the study, men are typically one and a half times more confident than women that they will better the market in 2015.

All things considered, the proverbial playing field evens out later on in life. This is evident in how a typical 25-year-old woman invests in a similar way to a typical 35-year-old man, while a 55-year-old man invests in a similar way to your average 65-year-old woman.

Despite being more successful investors than men on aggregate, women tend to be less empowered when it comes to their finances. A Fidelity Investments Money Fit Woman Study indicates that 8 in 10 women refrain from discussing finances with people they are close to. Interestingly, while 82% of women feel confident when it comes to managing a monthly budget, this is not the case when it comes to long-term financial planning. So whereas women are confident they can balance a checkbook or manage the family budget without help, they are less confident regarding planning for their financial needs during retirement or selecting the right financial investments.

Indeed, a lack of confidence is a leading cause of financial illiteracy among women, despite it being a top concern of theirs. For example, while 77% of women cited feeling comfortable talking to a doctor on their own about medical issues, just 47% said they would talk with a financial professional on their own. However, 70% of women currently not working with a financial professional would be motivated to do so in the future.

Money and marriage?

All too often, one spouse will take care of the finances. And all too often, it is men who take the proverbial wheel in steering the course of their family’s financial future. According to Fidelity’s study, just 41% of partners make joint retirement investment decisions and only 17% of the respondents were “completely confident” that their spouse was able to take responsibility for the family’s retirement finances.

Couples should really decide together on their family’s needs and goals in both the short and long term. Together they need to agree on and take ownership of their financial plan if, ultimately, it is to work for them both. Eventually, when you are forced to live with the consequences of all the small financial decisions you made earlier on in life, this can lead to regret.

Women need to take advantage of their inherently more astute investment instincts and ensure that they are fully informed regarding their financial affairs, so as to take control of their tomorrow. It is only when you know what your tomorrow holds that you can truly welcome it.

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)

Congratulations

Jo-Mari Kruger has been appointed as a Manager at Newtons – Congratulations!

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Congratulations to Meggynne and Zander Burger on their wedding on the 4th December 2015.

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Congratulations to Callie and Lucha Greyling on the birth of their beautiful daughter Lulie born on the 4th January 2016.

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MSI Global alliance admits four new member firms

MSI_bMSI Global Alliance, a leading international association of legal and accounting firms, is pleased to announce that it has added four new member firms to its international membership as of 1 January 2016.

MSI’s presence across Germany will be strengthened by the addition of multi-disciplinary firm Fürst & Partner GmbH with offices in Northern Bavaria (Nuremberg, Erlangen, Georgensgmünd, Rothenburg o.d.T) and Thuringia (Gera). Established in 1953, the firm’s 120 employee-strong team covers all aspects of tax consulting, financial auditing, legal advice and management consulting.

Further joining MSI is Bloomfield Law Practice, a full service law firm based in Lagos State, Nigeria. The firm, with a total of 12 staff, provides specialised legal advisory services to both local and multi-national clients across a wide range of practice areas including corporate, corporate Immigration, labour and employment law, litigation and alternative dispute resolution, real estate & construction, intellectual property, energy & natural resources, shipping & aviation and taxation.

The addition of Florida based accountancy firm Mendez Rothbard Molieri & Co further expands MSI’s footprint in the USA. The firm, with offices in Miami and Fort Lauderdale, provides tax, accounting and transaction services to large businesses and SME’s, high-net-worth individuals and entrepreneurs. The 24-employee firm has deep expertise in helping international clients structure their investments in U.S. based businesses and real estate.

Also joining MSI is Rahayu Partnership based in Kuala Lumpur, Malaysia. The law firm, with a strong background in shipping, admiralty and insurance law, provides a full spectrum of legal services including commercial dispute resolution, corporate and legal advisory, litigation, trademarks, mergers and acquisition to national and international clients.

Tim Wilson, chief executive of MSI Global Alliance, comments, “It is good to have a mix of legal, accounting and multidisciplinary firms joining MSI at the start of 2016. These new firms increase our presence in four key economic centres on four different continents and, as such, I know they will contribute greatly to MSI and gain from membership themselves. I look forward to working with them over the coming years.”

This article is a general information sheet and should not be used or relied on as legal or other 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 legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Private bodies PAIA (Promotion of Access to Information Act) manuals required by 31 December 2015

Dear Clients

Private bodies PAIA (Promotion of Access to Information Act) manuals required by 31 December 2015

The Promotion of Access to Information Act, 2000  require all juristic persons and all businesses, small to large as well as individuals and partnerships carrying on business to compile manuals on how to access their records.  These manuals must be submitted to the South African Human Rights Commission (SAHRC) and must be available at the business offices.  Material changes in the manuals must also be updated regularly.

The Act specifies what information these manuals must contain and include inter alia

  • contact details
  • information that the business keeps in compliance with other legislation
  • a description of the subjects on which the private body holds records, and the categories of records held on each subject; 

Exemption of certain private bodies no longer applicable

The Minister of Justice has exempted certain private bodies in the past from compiling these manuals.  However this exemption is no longer applicable.  Therefore all businesses should review their submitted PAIA manuals and update where necessary. Private bodies, which were exempted, must now also submit their manuals by 31 December 2015.

We strongly recommend that all entities resubmit their manuals if they submitted the previous manual prior to December 2007, even if there is no changes to the manual.

We can assist you with compiling your manuals.  Our fees will be R750 (excl. VAT) per manual where all information is readily available.  Should you have more than 2 business/entities for which manuals must be prepared, we will reduce this fee to R500 (excl. VAT) per manual.  Please contact your client manager or partner to confirm assistance.  For ease of reference, their names and e-mail addresses are listed below:

Cedric Peterson            cedric@newtons-sa.co.za

Schalk Gouws               schalk@newtons-sa.co.za

Wayne Beelders            wayne@newtons-sa.co.za

Lucha Greyling              lucha@newtons-sa.co.za

Willie van der Merwe      willie@newtons-sa.co.za

Hannetjie Els                hannetjie@newtons-sa.co.za

Nelri Els                        nelri@newtons-sa.co.za

Janeske du Toit             janeske@newtons-sa.co.za

Heleen Scorrano           heleen@newtons-sa.co.za

Kind regards

Cedric Peterson

Managing Partner

NEWTONS

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)