zombie, Author at Harbour & Associates

Trusts are taxed at 45%, but that rarely matters because they should not earn taxable income, and, if they do, it should bypass the trust completely. Here’s how. Provided taxable income received by or accrued to a trust is distributed to a beneficiary prior to the trust’s tax year end (28 February), then it may flow through a pipe, or conduit, directly to the beneficiary without touching the trust at all. The nature of the income is unchanged. That is, a dividend remains a dividend, interest remains…

Twenty four years down the track and you still have to know whether you’re black or not! And looking in the mirror won’t help. How utterly ridiculous. Yup. That’s the price we pay for BEE. I figured I would give you the information that you need to determine whether you are black or not black as defined by the B-BBEE Codes. Firstly, you need to be black, Indian, Chinese, or coloured. I suppose you can figure that out thanks to the legacy of apartheid, which the current government still relies on. Next, you have to determine whether you were a…

We have been looking at rentals for penthouses and have found that the returns on high end residential property are terrible. The first thing we noticed was that a penthouse that was for sale for R15m was available, fully furnished, for rent at R55 000 pm. That’s a gross return of only 4.4% before levies etc. It had originally been on the market for R22m! Then there was another one for sale at R12m and available for rental at R45 000 pr month, beautifully furnished. Gross return 4.5%. Now, it is possible that the owners bought at a significantly lower…

Yes, there are circumstances which require that your company prepares Annual Financial Statements, so let’s take a look at the what, when and why. The banks require them if they’re going to lend money to the company. Any other lender will require them. They may be required for a large tender. So, if they are required, what form should they take and who will prepare them? Financial statements should always be prepared to International Financial Reporting Standards, otherwise you may as well not bother. Who should prepare your yearly financial statements? Any competent accountant who has the appropriate…

“I’ve made millions on my BitCoin investment!” “Really? Have you sold yet?” In the lead up to 1929, property prices in the States were skyrocketing. It didn’t matter what you bought, you could sell it next week and make a killing. Swamp land in Florida was changing hands at huge profits. Then Bam! The bottom fell out of the market. Wall Street crashed. “Investors” lost fortunes overnight. Here’s the graph – In the lead up to 2000, so called dot com shares were skyrocketing. It didn’t matter what you bought, you could sell it next week and…

There is false news circulating suggesting that white women will benefit from the BEE codes later this year. These articles, which you will find via Google, are written by people who want to write, but can’t even read! Either that, or they don’t know what to read. There’s an amendment to the Employment Equity Act which is currently in Bill form that includes white women as previously disadvantaged. Not to be confused with the B-BBEE Codes, which do not include, and will not include, white women. I also recently heard that the Codes will in future only include black people…

When I learned that my grandson and his sister planned careers in robotics and the arts respectively, I realised that the arts was about the safest of the lot. I guess robotics and AI are pretty safe careers as it will presumably be some time before robots can design better robots, but surely some of the arts will never be displaced. I can’t, for example, imagine humans watching a play written or acted by robots, but which of the arts could they conceivably take over? Surely not dance, for the same reason as acting. How about replacing an orchestra? Why…

Does it make sense to donate assets to your trust structure? Oddly enough, despite Donations Tax, it sometimes does. There are two ways to move owned assets into a trust structure. Let’s look at the most common method – 1) Sell the asset on loan account. Because the trust and its company are connected persons to the seller, the transaction will be deemed to be at market value for all tax purposes. Let’s say that the asset cost R4m and the deemed market value is R6m. The seller will pay Capital Gains Tax and, if the asset is fixed property,…

Most of you use a car on company business. Should you own it or should your company or trust? There are two ways that you can be taxed depending upon whether you (or a trust of which you are a beneficiary) owns the car. If the employer company owns the car, then you will pay PAYE plus VAT on the private use of the car. The amount payable is determined by your tax bracket, whether you or the company pays the fuel and maintenance cost, how much business travel was done compared to private…

It’s quick to form a company these days – about a week. But there are still some benefits to buying an existing shelf company rather than registering a new company. Benefits of buying an existing shelf company: 1. Time constraints due to tenders You might need a company NOW. This would typically be when you want to submit a quotation or tender and the customer will only buy from a registered company. 2. Specific company needs You may need a company with a particular registration such as VAT, Importer/Exporter and cannot wait while the registration goes…

We’ve decided to sell our house and rent an apartment instead. Now why would we do that? Basically, because we wanted to change our lifestyle to one that allows more freedom and less responsibilies. But in the process, (and this only came after we sold) I calculated whether we had made a gain or loss while holding the house. We bought it for R1,8m in 2004 and sold it in 2018 for R2,8m. Profit or loss? At an average of 6% inflation, the value of money halves every 72/6 years (the Rule of 72), that is…

In a nutshell, there aren’t any, despite what SARS imply when they talk to us. SARS love to make out that the Public Officer can be held liable for the tax sins of the company, but there’s nothing in the legislation to support this. What is important is that all companies must appoint a Public Officer and that failure to do so can lead to penalties of R25 per day, which can amount to quite a lot of money over, say, 365 days. I’ve never known SARS to impose this penalty, but there’s always a first time. So what is…

The idea of Tax Clearances was a master stroke by SARS. If you have traded, you can’t get one unless you’ve done your bookkeeping and your tax returns. Many creditors will not pay unless the supplier produces a tax clearance certificate. Whether or not that is just a ruse to delay payment, the effect is that we often get people coming to us for an urgent tax clearance so that they can get a payment from a debtor. That’s when they learn that we’ll first have to do their bookkeeping (usually for three or four years), then their Provisional Tax…

This week, I came across an unusual reason for forming a trust. The problem my client was faced with: My visitor was the second wife in a polygamous marriage in community of property. It appeared that the husband wanted to treat both of his wives equally during his lifetime and upon his death. Accordingly, he had purchased some residential units intended to provide his two wives with income upon his death. Even if all of the properties were equal now, they would not be equal in value at the time of his death, and thus there was the possibility that,…

We do the books for a lot of small companies and so often the boss expects the company to pay for his Big Mac. Not good. He is expected to feed himself, so the quick bites are not considered to be in the production of income and are therefore not tax deductible. From our point of view, we quote to do the company’s books, not the private account of the owner, so, if he (or she, though less commonly) eats almost daily from a filling station, Nando’s, MacDonalds or the like, we have to process the purchase to his loan…

There’s no VAT charge on letting of residential property, but be careful if you own a residential hotel, frail care facility, retirement home or similar long term accommodation So, you own a house or a residential unit and rent it out. That is not a vatable supply. If you own commercial property for rental, then that is vatable at the current rate of 15%. It gets interesting if someone stays in your guest house, B&B, hotel, retirement home, frail care home or the like. If the person stays for 28 days or less, then the full amount of charges attracts…

There’s a mystery that I just cannot get my head around. What exactly is mathematics? Some would say it is a language. Yes, I would agree with that, but there’s more to it than that. My problem stems from my passion for quantum physics and the mysteries of the universe. You may or may not know that in Einstein’s time there were two principal branches of physics, the big picture that Einstein so eloquently described (it dealt with the sky at night, gravity, time, mass and energy) and the small picture, generally known as quantum physics (which deals with elementary…

So, you’ve read Company Basics and Trust Basics. Now here are some Tax Basics for companies. 1) There are three tax returns each year. The first and second provisional returns which must be submitted in August and February of the company’s tax year if the company year end is February, then the Annual Tax Return which is also submitted in February, but a year later. 2) The first and second provisional returns are based on the last assessed income, so until the company has…

I hear it so often, especially from artisan type companies like plumbers and electricians. “I’m either rushed off my feet or standing idle and I never seem to make real money”. The answer is simple. It all boils down to fundamentals. 1) Differentiate your company. That is, make it different to the competition. Quicker service, cleaner work, well dressed personnel, clean vehicles, prompt and professional quotations. Don’t stop there, think for yourself. 2) Tip top marketing. Google Adwords is best for this sort of service. It requires an excellent website that sells the client before they even call for a…

Many people continue to believe that it is better to provide their personal services, typically consulting, through a company rather than as individuals. Not so. A Personal Service Company is one which provides services such as consulting, bookkeeping, designing etc which are actually services provided by a person rather than product supplied or non personal services, such as rental property. In order for it to be classified as a Personal Service Company a number of tests are applied. You can research more deeply if you are unsure whether these tests are satisfied in your case or not. Remuneration. Does it…

Author: zombie

How income bypasses a trust using the conduit principle

Who is Black for BEE?

Returns on up-market residential property

When do you need Annual Financial Statements?

The Bitcoin gamblers

White Women and the BEE Codes

How Artificial Intelligence impacts on career choice

Donating assets to a trust

Who or what should own your car?

Shelf companies serve a very useful purpose

To rent or buy your home?

The risks at SARS of being a Public Officer for your company

Tax clearances force companies to comply

Trusts for polygamous marriages

Your junk food is not tax deductible

VAT on Residential letting

What is mathematics?

Tax basics

Too much work and not enough profit

Tax law relating to Personal Service Provider Companies