Blog Archives - Harbour & Associates

Let’s suppose that your parents are both 65 years old. They own shares in a (Pty) Ltd company which you run worth R5m. Cost zero their home worth R5m. Cost R3m a company which owns unbonded investment properties worth R10m. Cost R7m Should they form a trust? Let’s assume that the trading company value will increase by 5% a year on average. nominal property values will increase at, say, 9% per year on average. inflation averages 7% Now let’s suppose that at least one of them lives to be 85 years old. What will be the nominal values of their…

It is interesting that, although it is the buyer who pays the conveyancing fees, it is the seller who is entitled to choose the conveyancer. Now, let’s say that you are a property investor and you have a good relationship with a particular conveyancer. As an experienced investor you don’t care whether your offer is accepted ot not, because you can always make an offer on another property. Now you are in a strong bargaining position. Simply change the OTP to state that you are entitled to appoint a conveyancer of your choice. There is no way that this little…

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A couple who booked a meeting with me were not sleeping at night because they had been doing more than R1m a year turnover from their two multi-unit AirBnB premises and they weren’t VAT registered. What does the law say about this? As soon as you exceed R1m a year VATable turnover, you must register as a VAT vendor. If you don’t, SARS may deem you to have done so and demand the VAT portion of all your invoices, even if you didn’t add VAT. This is what they were panicking about. The good news for them was, in my…

This question is only relevant when the liability date could fall either into the previous tax year or the new tax year of the seller. Let’s say that the seller’s tax year ends on 28 February. The Offer to Purchase was signed by both parties on 15 January 2023. The supensive clauses were satisfied on 5 February 2023. The transfer was registered at the Deeds Office on 25 March 2023. From a CGT point of view, when were the proceeds of the sale received by or accrued to the seller? (see 3(a) Eighth Schedule, Income Tax Act) My view, as…

Generally, when you appoint an Independent Professional Trustee, you can dump them anytime you want, because the Trust Deed says that the majority of trustees can remove a trustee (except that they cannot remove you). However, what if there are only 2 trustees, you and the professional? Again, this should not be a problem as long as the trust deed allows you to appoint additional trustees. You will simply appoint a new professional and the two of you will remove the first. Of course, the simplest way is to ask the professional to resign, which any self respecting professional would…

There are so many things that can go wrong with a trust deed that I devoted a whole chapter to this in my book “16 Steps to Wealth” Here are a few of them – The founder makes a donation of R100 to form the trust, but that means the Trustees are obliged, in terms of the Trust Propert Control Act, to open a bank account and deposit the R100. Because this hardly ever happens, then, in my view, the trust was never…

I have been having trouble trying to open Shutterstock.com. My IT lady spent a lot of time trying to sort it out and eventually gave up, so I Googled the problem, specifically referring to Shutterstock. It turned out that mine was not the only instance. In fact I got to a Shutterstock message stating that if I had a 406 error when connecting to them, I should phone their help line. They’re in the USA, but I phoned them anyway. A recorded voice directed me to enter “2” and one of our friendly consultants will gladly help you. Then Hey!…

The General Laws (Anti Money Laundering and Combating Terrorism Financing) Amendment Act was a futile attempt to avoid our being grey listed. It became law in December 2022 and requires that all companies submit their Beneficial Ownership return to CIPC, and to re-submit whenever this information changes. CIPC have almost got it together and we’ve been able to submit the return for all our (over 100) shelf companies. That was pretty easy, because I’m the only shareholder, so they were all the same. Companies owned by shareholders who are natural persons are, actually, relatively easy once you have cracked the…

Evidently about mid 2022 SARS posted a letter onto it’s website advising anybody that was lucky enough to stumble on it that it had set up a new platform for import and export licenses. It advised traders that they must migrate to the new platform (they called it “onboarding”) Of course, nobody saw the letter. Now we just got bombarded by SARS with SMSs advising us that our (clients’) licenses are about to be suspended, because they did not onboard to RLA. Thank you SARS. Brilliant communication. It took us the usual forever to navigate our way through the process,…

I have yet to form a trust of which at least one of the trustees is also beneficiary, so the answer is an unequivocal “Yes”. “But hang on”, you say, “I snipped this from the CIPC website when I was trying (yes, I’ve also tried) to submit my trust’s Beneficial Ownership return” – So now CIPC is changing the law relating to trusts. Absolute nonsense! But said with such authority, one wonders who in their right mind at CIPC could come up with that one.

Well done SARS! They finally woke up. I’ve written on several occasions about taxes that SARS can’t hope to collect. Amongst them are – Transfer Duty on the sale of shares in a Residential Property Company. Securities Transfer Tax on the sale of shares in a company. CGT on the sale of shares in a company. Why was this? Because the only place where the shareholding of a company was recorded was on the share register on somebody’s computer. Now, however, there’s an addition to the Company Tax Return form IT14 which requires that the share register be disclosed. This…

Yes. The rules are the same as for any other person, partnership or company. That is. Compulsory if VATable turnover exceeds R1m Voluntary if Vatable turnover or purchases average at least R4 200 per month Here’s what the VAT Act has to say about it. s51. Bodies of persons, corporate or unincorporate (other than companies).—(1) Subject to the provisions of section 46, where any body of persons, whether corporate or unincorporate (other than a company), carries on or is to carry on any enterprise— (a) such body shall be deemed to carry on…

Let’s say your trust owns an asset such as fixed property. s42 allows you to interpose a company between the trust and the asset without Transfer Duty and without CGT. But let’s say you had that structure and, for some reason, wanted to remove the company so that the trust owned the asset directly. Is there a provision similar to s42 that allows this without taxes? The answer is no. In fact a lot of people held fixed property in a company which they owned personally. This was because they could sell the shares in the company and Transfer Duty…

It’s not unusual to have a trust or two lying around doing nothing. Especially if you were persuaded to buy three trusts when you really only needed one. So, I occasionally get asked to quote to de-register a trust. Here’s my advice. Distribute all remaining trust assets (if any) to beneficiaries and keep evidence of having done so. Submit your Beneficial Owner return to the Master. We’re still not confident about how to do this, but it will soon become routine. Then, forget the trust and ignore SARS. What will happen? The trust will gather dust in some Master’s office.

Sure, we only charge R475 to form a company, and R175 of that goes to CIPC in fees. Maybe that’s why so many people don’t think twice about registering a company. What they don’t consider is that if they do not use the company, then these are the costs – Two nil provisional tax returns each year at about R650 each Nil Annual Tax Return at about R700 Or R200 every month per return SARS Administrative Penalty for non-submission CIPC Annual return about R1 000 Once off declaration of beneficial owners about R1 000 And then the whammy – Cost…

Let’s take a simple scenario that I come across almost daily. You own a R1,5m property and would prefer it to be owned by the company that your trust owns. It cost you R1m. We look at the cost of the transfer and it adds up CGT about R82 000 Transfer Duty R12 000 Conveyancer’s fees about R27 000 That’s a whopping R121 000 You have the money available, but is it worth it? (a) You don’t do it and you die in, say, 40 years’ time. Assume inflation averages 7,2% and there’s no change in the tax laws. Value…

If you are looking for an investment property, my answer is a definite no. The reason is, that you make your profit when you buy, so, if you don’t buy well, you don’t make a profit and your dreams of building a significant property portfolio will die. So, how can I say that an off plan purchase is not a good buy? Simply because it is at market value and a good buy is always below market value. The better you buy, the more successful you will be, so, get into the habit of putting in stupid offers and not…

I can understand why this causes confusion. So let’s go through the entire story. All South African residents are taxed on their worldwide earnings. This is know as the residence based tax. Non-residents are taxed on earnings which come from a South African source. This is known as the source based tax. So, to test whether or not you are a resident of South Africa, there’s a step by step process. – Are you ordinarily resident in South Africa? Is this essentially your home? Various tests will be applied. Typically, it is your home if it is the place to…

I’m ready to give up! This is what the Lwazi Bot on SARS website says – “According to the law, a Company must submit tax returns annually and declare that the company is dormant, failure to do so may result in Administrative Penalties.” And they certainly are hitting dormant companies with a R250 penalty every month for every outstanding tax return. Here’s what their final demand says – Dear Taxpayer Trading Name: T TRADING PTY LTD FINAL DEMAND TO SUBMIT…

Blog

Is there any benefit for older people to form a trust?

Can I, as the buyer of fixed property, appoint the Conveyancer?

If you can’t write articles for your blog, try getting ChatGPT to write them for you

If I earn over R1m a year from AirBnB, must I register for VAT?

On what date does the seller become liable for CGT on the sale of fixed property.

Am I stuck with my professional trustee?

What can go wrong with a trust deed

Speaking to a Call Centre Bot

Beneficial Ownership of Companies

All Import Export licenses suspended

Can a trustee also be a beneficiary?

A profound change to Company Tax returns

Can a JV register for VAT?

Can I do the opposite of a s42 asset for share swap?

Should I wind up an old trust?

The cost of closing a company

A new take on loans to trusts

Should I buy off plan?

Tax residence – the full picture

SARS Administrative penalties on dormant companies

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