BREAKING News


SARS
TRUSTS
s7C effective March 2017 a new section 7C has been added which makes provision for interest free or low-interest loans  hat are made directly or indirectly by a natural person or a company at the instance of the natural person connected to such company to a trust. A number of conditions apply, as well as certain exclusions.

In essence, the difference between the amount incurred by the trust as interest and the amount that would have been incurred by that trust at the official rate of interest as defined in section 1(1) of the Income Tax Act, No 58 of 1962 (as amended) (“the Act”) will be treated as having been donated by the natural person to the trust and will therefore be subject to donation tax in terms of section 54 of the Act. The natural person may use the annual donations tax exemption of R100 000 (or the remaining portion if applicable) against this deemed donation.

I
nterest-free or low interest loans to a trust by a connected natural person or a company connected to that natural person give rise to a deemed donation. The donation is the difference between the interest rate charged and the official interest rate applied to the loan amount.

This deemed donation applies to new and existing loans however excludes:
Loans to certain vesting trusts
Loans to certain special trusts
Loans to approved public benefit organisations
Loans funding the primary residence of that person or their spouse
Loans to small business funding entities
Loans where transfer pricing rules apply
Loans provided in terms of a Sharia compliant financing arrangement
Loans subject to Dividends Tax
Unpaid beneficiary distributions provided certain conditions are met.

The interest foregone is treated as an ongoing annual donation by the natural person as at the end of the tax year. Donations Tax will be payable on 31 March each year, and the annual Donations Tax exemption of R100 000 may be claimed.

Where a loan is reduced or waived no deduction, loss, allowance or capital loss may be claimed in respect of that disposal. Further anti-avoidance rules are being considered and the ambit of this is expected to now included company on company loans where a trust is found in the structure.

Note: The Budget 2018 implies a company on company loan could also fall within the ambit of s7C if a trust is found in the structure, previously this related only to trust based loans! We are monitoring the situation.


SME 3rd party disclosure
New regulations require defined businesses to submit bi-annual IT3s returns containing the names, identity numbers, addresses and any interest, rental or investment income received or managed on behalf of the taxpayer! Welcome to the police state!, were SARS are clearly above any law or constitutional right!

SARS confidentiality gone to far
S30 of Tax Amendment Bill proposed changes to the definition of confidential, to include info relating to the examination or audit of taxpayers affairs, disclosure of which could jeopardise the effectiveness of the audit! The result being SARS would not have to provide taxpayers with any reasons for their audit determination! A police state in the making?

BEWARE OF 'SARS' SCAMS 
Alleging inflated liabilities or that refunds are due and then fisching for banking information





When you click on the word "Here" you are directed to a fake website resembling that of SARS, which is labelled "Tax Refund Portal". You are then asked to click on the name of your bank and enter details of your banking account. UNDER NO CIRCUMSTANCES DO THIS!

The South African Revenue Service is aware of this phishing attack, and further details are available on their legitimate website. You can also do a Google search by entering something like
"SARS Tax Refund Scam 2009" and checking the box marked "Search South African Websites". SARS has indicated that they would never notify taxpayers per e-mail of any refunds due to them, nor would they ever request any personal details by e-mail.

 
BUSINESS FAILURES
Reasons why small businesses fail:
· 12% - Poor bookkeeping and records
· 34% - Poor management of financial activities
(Source: Nedbank)

Most important things for small business to do for sustainability:
· 93% - good cash flow
· 93% - good administrative/financial systems
 


The above two factors were the highest ranked amongst all factors. Some of the other factors included were good staff, loyal customers and new customers.
(Source: SME Survey 2009)