Harbour & Associates

I guess you are aware that, in law, the Post Office is the only organisation that is allowed to deliver parcels weighing less than 1kg? There’s a court case running (since 2018) at the moment between Postnet, Takealot and the SAPO challenging this monopoly, but Hey, surely we want to support our SOEs? We shop online a lot and receive about two deliveries a week. Now, let’s see how the SAPO goes about these things. Helen ordered me a pair of Thi Chi shoes from Hong Kong. There arrived by air, went through customs and were collected by the SAPO…

I owe this one to Regine Masson, one of my 5 000 plus readers. She asked me the question that forms the title to this post. I answered yes, both trusts have a conduit. She then sent me a link to Cluver Markotter Attorneys. They had written an article about the Commissioner, SARS v Thistle Trust case (516/2021). Interestingly, the Tax Court in this case came to the same conclusion as me. Then the crunch. SARS went on appeal to the Supreme Court of Appeal and won. The court found that when the capital gain lands in the hands of…

Each year, you will be making a donation of R100 000 to your trust owned company. Does it have to be declared anywhere? Yes. All companies must declare all income received or accrued in their annual tax return. Here’s how: Click on Balance Sheet. Under Current assets – Trade and other receivables enter the current balance from the TB. It will include the latest donation and previous ones as well. Under Total Equity, enter the current balance from the TB. Click on Income Statement, then on Income Items. Under Other income type in the donation amount. Then click on…

As most of you know, I have hundreds of meetings a year with people from all walks of life. One thing that repeats and repeats: “I’m nearly 60 y’know! I need to slow down.” Most of them are aged between 55 to 65. And most of them look about the same age as me. I always laugh, say something like “Shame, I feel so sorry for you. Age is a terrible thing, isn’t it?” Then I tell them my age. Why do they look so old? Because they think so old! My belief is that thinking old is one of…

People used to buy shelf companies for a number of reasons: They needed a company urgently and couldn’t wait while CIPC went through the tedious registration process. It now takes about a day to register a new company at CIPC. They wanted to back-date the sale of the company (for R100) to their trust followed by backdated donations to the company. It is now compulsory to submit a Beneficial Ownership Return to CIPC and also in the company’s Annual Tax Return to SARS. This discloses who the shareholders are, so the change of shareholding can no longer be backdated. They…

I’ve talked a lot about double CGT in various articles and in my books. It generally arises when you own a company that owns growth assets. If you sell, or, on death are deemed to have sold, the shares in the company, in the first instance to your trust and in the second to your deceased estate, you will make a capital gain on the increase in value of the shares which resulted from the growth of the asset values, and you will pay CGT. Then, if the company subsequently sells the growth assets (possibly to pay your deceased estate’s…

You own the shares in a successful company, but now you want to move it into your trust. Problem! It cost you R100 (the share capital) and now it’s worth, conservatively R4m. That means a Capital Gain of R4m when you sell it to the trust and that’s about R0,7m CGT. Is there another way? Yes, there is. It can take a bit of effort, but R0,7m is a lot of CGT, so it’s worth it. Let’s say your company is called Delta One (Pty) Ltd. Form a new company called, say, Delta One Services (Pty) Ltd. The director of…

It is very important to manage any loan account that you have with your company, because this can save you paying unnecessary tax. Loans to a company by you These can arise from: Money you spent on behalf of the company before it was registered. This is something that is frequently neglected. Your assets, such as computers, printers etc. that the company now uses. You should sell them to the company and credit your loan account with the sale price. Money you lent to the company when it was short of cash. Your after tax salary, for which the company…

Wow. How important things flip flop! SARS decided in their (its?) wisdom that a pure capital gain could not pass through the conduit and be taxed in the hands of a beneficiary. They imposed penalties and interest on the ABC Trust which, they deemed should have declared the gain and paid CGT. In ABC Trust v Commissioner of the South African Revenue Services (IT 24918)(18 March 2021), however, the Tax Court overturned SARS’ decision and declared that the CGT was, in fact, payable by the beneficiary. So the answer to the title question is – Yes! For those of you…

There is often confusion about these donations, so let’s try to clarify the whole story Every natural person can make donations totalling R100 000 each tax year free of the normal 20% Donations Tax. If you have a trust then you and your spouse must remember to make these donations every year. You do not have to have the money. You say I hereby donate R100 000 to xxxxx on loan account. In other words you then owe xxxxx the R100 000. If, as should always be the case, the trust owns a company which holds the wealth, then xxxxx…

I was a dedicated smoker from the age of about 14. In my adult life, I smoked a pipe as well as cigarettes. I tried several times to quit but my willpower was just not up to it. My longest non-smoking period was a year and still I fell back into the smoking trap. When I eventually learned how to quit, it was the easiest thing in the world. Once I had stopped I never, for a moment, had an urge to light up again. First some fundamental principles – Never try to cut down. You are wasting your time.

The short answer is yes. Allowances are fully taxable. But if you are using your cellphone for company business or the company’s cellphone for your private calls, the tax implications change. There’s a Draft Interpretation Note that explains all this. Here is a summary – 1) Your company provides you with a phone/tablet/contract and allows you to use it for personal matters as well as for business. If the asset is used mainly for business, then there is no tax payable for this benefit. “Mainly” means more than 50% but this is pretty subjective, because it would include incoming as…

What is ring fencing? Under certain circumstances an assessed loss may only be deducted from future taxable profits earned as a result of the same trade. An example, which is the one I want to deal with here, is when a natural person earns a salary and also rents out property. If the property rental business makes a loss, there is a possibility that the loss cannot be deducted from the salary income for tax purposes but can only be deducted from future rental profits. So, what are those circumstances? See s20A of the Income Tax Act. Ring fencing only…

When SARS changed the 2022 annual tax return IT14 for companies, they got really clever. Not only do they want the details of the shareholders and when they acquired the shares. They also want the tax registration numbers of the shareholders. Now, since any well designed trust structure requires that the trust owns a company that owns the assets, when preparing the company tax return, the trust’s tax number is required. If you can’t fill that in, you can’t submit the company’s return. And, of course, once you’ve registered your trust as a taxpayer, you have to submit (hopefully Nil)…

Let’s say that one company has two businesses. There are two shareholders and each runs one of those businesses. The reason they chose this structure is that although different, each business generates leads for the other, so there is good synergy. Is there any benefit in keeping two sets of books, one for each company? Not in my view. The reason is that there are bound to be shared costs and if you have separate books, then you have to split those costs. This is a trap that is quite common. The difficulty is that you have to decide on…

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 legislation is open to various interpretations and…

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…

Blog

The Post Office monopoly on small parcel delivery

Can CGT flow through the conduit of two trusts?

How to declare your R100 000 donation on your company’s tax return

Don’t talk yourself old.

Why shelf companies are becoming less relevant.

The hidden double CGT effect of an s42 transaction

How can I move a business into a trust without paying Capital Gains Tax (CGT)?

Loans to and from a company

Can just a Capital Gain pass through the conduit principle and be taxed in the hands of a beneficiary?

Donations to trusts clarified

How to quit smoking – easily

Is a cellphone allowance taxed?

Are rental losses ring fenced?

Now there’s no way around it. Your trust must register as a taxpayer.

Can I run separate books for two businesses in the same company?

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.

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