Walkers Attorneys

Exchange Control memo:

2012-01-18T13:54:00.003+02:00

During October 2011 the Finance Minister announced that resident individuals will be able to take up to R5 million (i.e. an additional R1m) a year offshore as their “foreign investment allowance”. Nothing further was heard in regard to this announcement until the Exchange Control manual was amended last week to reflect that the single “discretionary allowance” of R1 million could also be taken out as part of the foreign investment allowance but subject to the normal requirements and in particular that a tax clearance first be obtained.

As the discretionary allowance covers a person’s offshore travelling costs, one cannot invest the additional R1 million offshore and at the same time spend up to that amount again on travelling costs. The limit is R1 million for both. It is a minor but welcome adjustment but in my view the continuation of any exchange control restrictions other than in the form of prudential regulation is off-putting to foreign investors!

Andrew Duncan

www.walkers.co.za

School Attendance

2012-01-10T16:10:00.002+02:00

With the new school year starting, all parents should keep in mind that by law, all children of compulsory school age (five to 15), must receive a suitable full-time education. As a parent, you have a legal responsibility to make sure that this happens.

Once your child is registered at a school, you are legally responsible for making sure they attend regularly. If your child fails to do so, you as a parent risk being prosecuted.

The South African Schools Act, 1996, provides that every parent of every child for whom they are responsible must ensure that the child is registered at a school, attends the school and stays in school until the age of 15 years or the ninth grade, whichever occurs first. Should you as a parent fail to comply with this law, you could face a fine or imprisonment for a period not exceeding six months.

Looking at the school leaving compulsory age in other countries, it varied between 15 years – 17 years in Australia, 16 years to 18 years in United States and Canada, but in Germany it was 18 years of age and they all had a literacy rate of 99% (2003). South Africa has a literacy rate of 86.4% (2003), showing that staying in school an extra year or two makes a difference.

A telling statistic however is that 99% of children complete primary school education but only 57.2% enrol in high schools in South Africa.

Obviously something more than legislation is needed.

Rossette Haynes
10 January 2012 http://www.walkers.co.za/

Closing The Net

2011-11-29T09:36:00.000+02:00

Treasury announced with evident satisfaction last month that South Africa had joined 12 other countries in signing a Convention on Mutual Administrative Assistance in Tax Matters at the G20 Summit in Cannes, France. The Convention, said the Minister, seeks to promote international co-operation between revenue administrations “in the assessment and collection of taxes” and in “combating tax avoidance and evasion”.

What is actually going on is that trillions of dollars are being hidden away in offshore financial centres, and the major economies are not getting the benefit of tax.

Initially, the campaign against offshore centres was partly based on money-laundering being a tool of terrorism. However, the sophistication has now worn through and the true gist of what is intended emerges in the announcement:

“… the G20 has placed specific emphasis on the importance for better international co-operation amongst revenue authorities as cross border tax avoidance and evasion have become easier with the liberalization of financial markets. The international response to the global financial crisis that began in 2008 and the sharp decline in revenue in many countries, including South Africa, has been to secure the integrity of financial systems through common, high standards…”

That is my underlining on the giveaway phrase “sharp decline in revenue”. Put simply, the announcement is saying: we need to collect more tax!

The convention was signed with Argentina, Australia, Brazil, Canada, China, Germany, India, Indonesia, Japan, the Russian Federation, Saudi Arabia and Turkey. It is clearly part of a determined strategy, with the VDP Programme that ended in October, to track down the family silver.

Andrew Duncan

Breathe Easy If You Are 65 Or Over

2011-11-29T09:26:00.000+02:00

As from 1st March 2012, the tax credit available to Medical Aid Members under 65 will be drastically reduced to a deduction of R216 per month from normal tax or double that for an individual and a dependant and thereafter plus R144 per month per additional dependant.

Presently the deduction is R1 440 per month from taxable income for a Member and one per dependant and R440 for additional dependants.

Other medical costs can only be deducted from taxable income to the extent they exceed 7.5% of the tax payer’s taxable income. But, for those of us who are 65 or older, there are no deduction limits on actual medical expenditure which offers some consolation to the bumpy journey of old age!