Harbour & Associates

It’s quite shocking. The General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act was promulgated in December 2022. It required that all companies submit a Beneficial Ownership Return to CIPC. We have over 100 shelf companies and, like a good Boy Scout, I personally submitted the returns for all of them. In each case I received an email from CIPC confirming the submission. On July 1 2024, they introduced a mechanism that stops you submitting your Annual CIPC Return unless you’ve submitted your Beneficial Ownership Return and guess what? Every one of our shelf companies is being blocked, because…

It is often suggested that, in order to avoid CGT and/or Transfer Duty, it is advisable to sell only the Bare Dominium (that is, the physical property) of a fixed property into a trust structure, retaining the usufruct (right of use) in the hands of the original owner. If the owner is relatively young, the usufruct has a high value and the bare dominium has a low value, hence the apparent avoidance of tax. What are the problems with this scheme? The tax in the long run, bearing in mind the time value of money, works out about the same,…

So, you paid about R4 000 or less for a trust drafted by an attorney. Then you read my book “16 Steps to Wealth” and realised that you’d made a mistake. You should have spent about R11 000 and got yourself a Legacy Trust and one which did not have all the faults that yours contains. Can you change your Trust Deed? Yes. fortunately, the Master once again (after much flip-flopping) allows us to completely replace one Trust Deed with another. It remains the same trust, with the same name and registration number. And the cost? Well, we feel for…

I could never understand why a company has to have both a Public Officer and a Representative Taxpayer. The Tax Administration Act eventually provided the answer, but I had to read it a few times before I could figure it out. Representative Taxpayer s153 states that the Representative Taxpayer is responsible for ensuring that the company pays its tax liabilities. s155 says that if s(he) diverts money which could have been used to pay those liabilities, out of the company, then s(he) can be personally liable for the taxes. So, as long as you don’t do that, you cannot be…

We have always favoured defining the beneficiaries of a trust as the client, spouse and relations within the first degree of consanguinity and the descendents of any beneficiary. This has the advantage of being both dynamic (if more children are born) and avoiding having to provide details of all the beneficiaries and their guardians if minors. However, we are finding that many people don’t understand consanguinity, so we decided to change our trust template to replace it with the spouse, parents, siblings and children of …. While doing this, Helen, being her usual thorough self, Googled the definition of 1st…

I had a meeting with a guy who had this great scheme to save tax. He’s an investor in residential property and was going to register various properties in his own name, his wife’s name and his childrens’ names so that each of them was in a business doing less than R1m turnover. Then he was going to register each of the businesses as a micro enterprise and pay turnover tax. Tax on R999 999 turnover = R14 120 Brilliant! It doesn’t work because of the anti-avoidance rule in the 6th Schedule of the Income Tax Act. This says that…

Let’s say that your VAT registered company bought an office block as an income earning going concern from a VAT vendor. The deal complied with s11(1)(e) of the Value Added Tax Act and was zero rated. Your company then converted the offices into residential units. What are the VAT implications of this? My understanding is that when the conversion has been completed and the residential units become available for letting, the original unpaid Input VAT should be added to the Output VAT and paid over to SARS. If only part of the commercial property, say, 60%, being less than 95%,…

Hopefully, you are in the habit of donating R100 000 every tax year to your trust or your trust owned company. But should you continue until you retire, or die? Let’s first look at the reason for making the donations. In the early days of building the property portfolio, the company will need seed capital for bond deposits and, possibly, for shortfall on bond repayments or expenses. Since you’re the one with the money, you would then have to lend it to the company and that triggers s7C interest, which may be a nuisance. By donating regularly on loan account…

Yup, we have just moved for the seventh time in seven years. Crazy? Some may think so, but when we look back over those years, and reflect on the kaleidoscope of experiences that we’ve enjoyed, we feel blessed that we had the courage to become nomads. Just think, if we hadn’t sold our house, we would still be doing the same old things with the same people, looking at the same garden birds and growing the same flowers (all of which we were very happy with) as we were seven years back. Now, we will never buy another home, unless,…

According to the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 2022, the Directors of every company are required to submit a return of the Beneficial Owners (usually the shareholders) of their company to CIPC. Then they only have to submit another if, and when, the beneficial ownership changes. At this stage, I am not convinced that CIPC will only impose this obligation once or will require a new Beneficial Ownership along with the submission of every annual return. We’ll have to wait and see whether or not they get it right. In the meantime, however, they have…

You are thinking of going into business. You haven’t really made up your mind but you figure you may as well register a company in the meantime. Bad decision! We register hundreds of companies, and it is truly sad to learn later just how many of them never even started trading. The usual message is “Hi Derek, you may remember that you registered a company for me back in 2018. It’s never traded, so I didn’t submit tax returns or any of that stuff. Now SARS has hit the company with Administrative Penalties totalling R35 500! I’m not sleeping at…

We have just made our 7th move in the 7 years since we sold our house and became nomads. What are the advantages of renting rather than buying your home? Buying Home owning is expensive. You pay Transfer Duty, conveyancer’s fees, rates, levies, insurance, interest, repairs, maintenance. You buy with your heart and not your head, so you probably do not get the best deal, which makes the bond repayments higher than they should be. You are stuck there and can’t just up and move away when things go wrong or you feel like a change. You end up doing…

Your company has never traded, and you didn’t submit any tax returns. Then, out of the blue, you received this letter from a debt collector appointed by SARS. “Dear Taxpayer, Kindly note your account INCOME_TAX reference no …………. 8151 is in arrears of R35 500,00. Kindly settle the full amounts immediately. Please log on e-Filing to initiate a payment arrangement. Revenue Consulting on behalf of SARS. Contact us on 010 510 6932 or email your proof of payment to charlottem@revco.co.za” followed by all sorts of threatened action. What does this mean to you? I am not an attorney,…

Your company has never traded, and you didn’t submit any tax returns. SARS imposed a penalty of R250 each month for every outstanding return. Here’s the letter that you received: – Dear Taxpayer, Kindly note your account INCOME_TAX reference no 9903828151 is in arrears of R35 500,00. Kindly settle the full amounts immediately. Please log on e-Filing to initiate a payment arrangement. Revenue Consulting on behalf of SARS. Contact us on 010 510 6932 or email your proof of payment to charlottem@revco.co.za For payment kindly utilize the below mentioned SARS is a bank approved beneficiary, on your banking App…

So, your VAT registered company is planning to buy a mixed use (commercial and residential) property from another VAT registered company. This would typically be shops on the ground floor and flats on the first floor. How does the zero rating for a going concern work in this case? I had a lot of trouble answering this one, but eventually found an excellent opinion by the Tax Faculty, of which I am a member. The article was written by Cliffe Dekker Hofmeyr. s11(1)(e)(ii) Value Added Tax Act … where the enterprise or part, as the case may be, disposed of…

In this instance the seller was the sole member of a CC that owned a productive farm. He wanted to know the Transfer Duty and CGT consequences of the sale. Payment to be made annually over a few years. Whilst I would have advised the buyer to buy the business rather than the CC, there was a definite advantage to the seller in selling the membership of the CC. I first disposed of the Transfer Duty with reference to whether the CC was a Residential Property Company as defined in the Transfer Duty Act. s1 Transfer duty Act residential property…

There are two categories of tax relief and it is important to understand the distinction between them: Relief for business premises. Relief for residential premises. This is not the distinction that is defined in the Income Tax Act, but I choose it because some people think that because they’ve installed the system at their residence for the benefit of their business, they can claim the first of the above. Not so, because the s12BA of the income Tax Act states that the premises must be used mainly for business purposes in order for that section to apply. OK so what…

It was during one of my many meetings that I realised that this was a question that did not have a simple answer. A client of a Personal Services Provider has to deduct PAYE when paying the provider’s invoices, so does that mean that the PSP is an employee? If so, does that mean that, even though its turnover exceeds R1m, it is not carrying on an enterprise and therefore does not have to register for VAT? It’s a tricky question, but, fortunately, the South African Institute for Tax Practitioners (SAIT) came to my resuce with an opinion on that…

By “swallow” I’m referring to people who live in the Northern Hemisphere and travel South every year (typically to a coastal town) to enjoy our summers and avoid the worst of their winters. Now, interestingly, I asked myself the title question while talking to a South African who has lived and worked in Abu Dhabi for 17 years and heads South during the height of their summer to cool off in our winter weather! He and his wife are planning to build a “swallow’s nest” in Mossel Bay. It will not be rented out and will be used only by…

It may seem a bit crazy. Here are the numbers: New company registration fee incl VAT R610 Of that SARS gets VAT of R80. CIPC gets R50 to reserve the name. CIPC gets R125 to register the company. That leaves R355 for us. And for that we provide: Free bookkeeping for the first 6 full months. Normal cost excl. VAT R2 810 B-BBEE Affidavit/Certificate. Normal cost excl. VAT R790 Derek’s book “16 Steps to Business”. Normal cost excl. VAT R410 (R470 incl VAT) Unlimited Zoom meetings with Derek. Priceless! Total value R4 010 excl. VAT and excl. Derek’s time. Are…

Blog

CIPC completely messed up on Beneficial Ownership Returns

Usufruct and Bare Dominium

Can I change my trust deed?

What are the responsibilities of a company’s Representative Taxpayer and its Public Officer?

Beneficiaries within the 1st degree of consanguinity

Why Turnover Tax won’t work for you.

What happens to VAT if you buy a commercial property as a going concern and then convert it into residential units?

When should I stop donating R100 000 to my trust structure?

Buy or rent? Our 7th move in 7 years

How often must I submit a Beneficial Ownership return to CIPC?

Should I form a company?

Should I own or rent my home?

Threatening letters from SARS’ debt collectors

Detailed analysis of SARS’ debt collector threats

VAT and Transfer Duty on mixed use going concern properties

CGT on deferred payment for sale of shares

The tax allowances for solar systems

Does a Personal Services Provider have to charge VAT?

Is a swallow’s nest in South Africa a Primary Residence for CGT purposes?

How can we sell a company registration for R610 including VAT?

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