Harbour & Associates

It all depends on the kind of advice you want. If you are looking for things to be scared of, then you need to Google something like “What must trustees be careful of?” You will probably find various advisors who point out all the responsibilities of trustees. If you are looking to buy a number of trusts, because your buddy did, try Googling “Why do I need three trusts?” If you are looking for legal opinion on the taxes relating to trusts, Google “How are trusts taxed?” If you are looking for free one on one advice on your specific…

A client wanted to buy a farm for R2,7m. She told me that it was a good price because the seller had dropped the asking price from R3,2m. As it was to be a business bought as a going concern, the deal would be zero rated for VAT provided it and the Offer to Purchase (OTP) complied with SARS’ requirements. She engaged me to redraft the OTP to comply. When she submitted it to the seller, his attorney, whose draft OTP I had been engaged to edit, told him he shouldn’t sign it because the purchaser (a new company) was…

Almost every day, I get a phone call from someone who wants to buy a VAT registered shelf company. It’s usually because they want to buy a going concern business (most commonly a commercial property) at zero rate from a VAT registered company. As I explained in my February article a shelf company cannot, by definition, be VAT registered, because a shelf company is one that has never traded. Taking any route to buy such a company is therefore very risky. There is, however, a solution: Register a new company. Sign the Offer to Purchase (OTP) in that company’s…

I was re-reading s42 of the Income Tax Act. That’s the one that relates to Asset for Share swaps and noticed that it only refers to a person initially owning the asset. In this instance, however, I was checking to be sure that a new s42 company could swap its shares for the assets of two companies. Each of the two companies would then be 50% shareholders in the new company and would have effectively merged, which is what the meeting was going to be all about. I had previously struggled with the term “person” because the s1 definition in…

I pity those of you who bought three trusts from a firm of “specialists”, rather than just the one that you needed. You now have three Beneficial Ownership returns to submit to the Master instead of one. You also have to be sure that you opened a bank account for each trust and deposited that initial donation of R100 into each account. And, by the way, since it is the initial donation that creates a trust, I am of the view that if you didn’t actually make that donation, then your trust does not exist, despite its being registered with…

I’ve never been keen on the idea of transfering only the bare dominium of a property to a trust structure. Sure, you may save a bucketload of Transfer Duty and CGT but, if you do the numbers, taking into account the time value of money, the total tax paid up to the death of the usufructory is about the same either way (SARS isn’t stupid). And, in the meantime, the trust owns a property that it cannot let out or sell, and it is responsible for the rates and upkeep. So what was the point of the transfer? It runs…

Eish! SARS make life so difficult. They have a lovely website on www.sars.gov.org Go there, log in, select Trust Registration. Then get down to business. They want to know: First name Surname Place of birth Country of Residence ID No. Tax no. Cell No. Email Address Physical Address for every beneficial owner. If there are only two of you, well, that won’t work because they insist on at least one Founder, one Trustee and one Beneficiary. OK, so you meticulously fill in all that, then they want similar information about you as the person requesting the registration. You fill that…

My simple answer is NO!! Why? Because if you need to ask that question, you are not ready for the obligations that come with companies. Here are some of them with approximate costs. Cost of company R600 Beneficial Ownership Return within 10 days of registration R2 000 Bookkeeping from R7 000 per year 3 tax returns a year R4 000 to R6 000 per year Beneficial Ownership and Annual returns to CIPC R4 500 per year Then you decide to shut the company down. Cost about R13 000 plus all the outstanding returns. Rather spend R460 on my book “16…

We are inundated with calls from people who have received threatening emails from SARS’s attorneys trying to bully their dormant companies into paying the Administrative Penalties of R200 per month per return outstanding that SARS has been hitting them with. These penalties easily run into 10s of thousands of Rands. What does the law say about that? Firstly, all companies are automatically registered as taxpayers by CIPC upon registration as companies. But, do they have to submit tax returns? Every year, the Commissioner for Inland Revenue has to, in terms of s66 of the Income Tax Act, publish a Notice…

I often I get asked whether to “buy” a car on a Lease or buy on Instalment Sale and then whether the firm should own the vehicle or the Director. The answer to the first does depend on the answer to the second, so let’s tackle the second one first. (How confusing is that?!) If the object is to minimise the combined tax bill of the company and the director, then it is worth while doing the numbers. But the chances are that, if the vehicle is in the middle to upper bracket and the director does a fair amount of…

Property transactions will either attract VAT or Transfer Duty but never both. Which you will pay depends on a few factors. Is the seller VAT registered? If Yes, then look at the top 4 possibities If No, look at the bottom 3. Is the property a residential dwelling or a commercial property That thins it down Is the buyer VAT registered? And that should get you the answer. What is not in the diagram is the purchase of a business as an income earning going concern. That’s charged VAT at Zero Rate.

Here’s a quick guide – If you really want to get your head around it, why not book your first of many free Zoom meetings with Derek, our CEO?…

How do you feel about the new User Interface that Standard Bank are trying to shove down our throats? There’s an option to revert to the old UI, but next time you log in you’re stuck into the new one. I feel I’m getting shunted around and having to either enter my password or scan my QR code just to get in and then again to go to the old UI. Then, we have four business accounts and two personal accounts. Where are the personal accounts? Nowhere to be seen! And you want to pay a beneficiary? Sorry chum, there…

It is a common perception that if you make a capital gain when you sell an asset, you don’t have to pay CGT if you replace it with a similar asset. Is this true? We have to go to para 65 of the Eighth schedule of the Income Tax Act for the answer. It is only true provided: The disposal was by law, theft or destruction and compensation was received and the compensation equals or exceeds the base cost of the asset (i.e. there was a capital gain) and the proceeds were used within 12 months towards buying a replacement…

It’s actually not that difficult, but you will need to be able to raise bonds on property. Let’s look at how not to build wealth first. Gambling. In my view Bitcoin and other currencies are gambles. They are all figments of collective imagination and rely on their “value” by peoples’ belief in their value. Listed shares. This is another form of gambling but can be a bit more scientific. However, in order to be able to retire on dividends from listed shares, you’ll need over R20m worth and to get there you have to have R20m or be one heck…

You may find someone who registered their company for VAT, then later ceased trading and wants to sell it. The danger there is that you don’t know what skeletons may be in the cupboard and you may not find out until years later. If, on the other hand, you approach a reputable company that forms and sells shelf companies, you will be told that in order to register for VAT a company must have averaged at least R4 200 turnover during at least two months prior to registration. So, since a shelf company is one that has never traded, it…

Hidden in the SABC News interview with the CIPC Commissioner Advocate Roy Voller, was an interesting and profound change relating to reinstatement. Previously (and still, according to CIPC website) if the company was not trading when it was deregistered and did not own fixed property, it was not possible to reinstate it. That restriction has now, apparently, been removed. Whether they have simplified the whole process of restoration or not is unclear and we are still trying to find out. In any event, before you rush off to your service provider to get your company back from final deregistration, you…

Let’s say that a person owns a rental property and also a company. Can the company charge the rental as if it were the owner and be taxed on the net rental income rather than the owner being taxed? The answer lies in one of the anti-avoidance sections in the Income Tax Act. s7(7) is a difficult read because of the clutter, so I have simply deleted the words which are not relevant to this example, but have not changed any of the words. S7(7) If by reason of any donation, settlement or other disposition made by any person (hereinafter referred…

Simple answer – If you can find somebody stupid enough to buy the company, sell them your shares. Here’s why: If you sell your shares, then you will make a capital gain probably about equal to the increase in value of the property. You will pay a maximum of 18%. And that’s it! Why is the buyer stupid? Because he/she doesn’t know what skeletons may be in the cupboard. For example, the company could have signed surety on another debt. Now let’s look at the other option. The company sells the property. It makes a capital gain and pays CGT…

This was a tricky one. The couple had been donating R100k each, every year to the trust on loan account and now owed the trust R2m. Co-incidentally the commercial property was worth about R2m. Over the years they had built up significant favourable loan accounts totalling about R3m in the company. This was the structure: And this is what we wanted: We needed to do four things: Separate the property from the trading company and get it into the investment company. Shift the trading company into the trust as a subsidiary of the investment company. Shift the debt…

Blog

Who is the best trust advisor?

How do I buy property cheaply?

How do I zero rate a going concern when I don’t have a VAT registered company?

Is a company a person in tax law?

Do I need more than one trust?

What happens to a usufruct on the death of the usufructory?

How do I register my trust for tax?

Should I register a company?

What are the tax obligations of a dormant company?

Should I buy or lease my business car?

Will I pay VAT or Transfer Duty?

Should I buy property in my name, a company or a trust?

Trouble at Standard Bank

If I replace one asset with another, do I pay CGT?

How can I build wealth?

Can I buy a VAT registered shelf company?

Reinstatement of a deregistered company

Can my company earn the rental from property that I own?

Should I sell the company or should my company sell the property?

How to shift a trading company that owns its own business premises into a trust.

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