EMA Newsletter June 2010

CIPRO OPERATIONAL ISSUES


For those of you who don’t know, CIPRO is the old Registrar of Companies. In the last few months it has become increasingly difficult to deal with them for various reasons. Firstly they take forever to response to certain requests such as name reservations and registering of companies and close corporations. We often also experience that CIPRO rejects certain name reservations for the most unexplained reasons. Furthermore their website is extremely slow and somehow constantly loses the information loaded.

For most new businesses this is the first step in starting the formalisation of the new entity. Should this process take too long it has a huge negative impact, not only for that particular business but also for the economy. We have seen that certain projects have been put on hold or delayed because of their inability to deliver. Phoning their offices is even worse and the staff are not trained to deal with relevant questions and queries.

To make matters worse CIPRO has recently been dogged by fraud allegations. Something which was never imagined in an operation of this nature. Unfortunately it is a worry to us as practitioners who are trying to deliver a professional service. It is always difficult to commit in promising your clients quality service when you are depended on other institutions even if it’s only partly related to your service given.
CIPRO has indicated that they have identified the problem areas and are in the process of addressing these matters.  We urge our clients to be patient we regards to name reservations, new company registrations or amendments and the submission of the annual returns.

Let’s hope that soon this battle would be won.


THE BUSINESS OF SARS

SARS has managed to not only improve it’s cashflow but also managed to earn more money for doing nothing in return. How?

Firstly, SARS has increased the PAYE payable on travelling allowances by taxing the tax payer, who receives a travel allowance, on 80% of the allowance as appose to 60% in the past. This tax is effectively at the marginal tax rate of a tax payer. In other words even if the tax payer can justify all his travel for which he receives an allowance SARS will have the use of the money for a period of approximately one year. This improves their cash flow tremendously. Already many tax payers are receiving huge refunds as they could justify most of their travel allowances in the past, now they are taxed even more during the year just to receive bigger tax refunds.

Secondly, although SARS are paying interest to tax payers who have overpaid their taxes during the year, the rate is much less than the interest they levy on shortfalls. Interest paid by SARS on PAYE is also less than what is raised on income tax. Either way SARS wants its money and the will get it one way or another. Ensure that you keep accurate record of your travelling and have this information at hand when your return is submitted. In most cases SARS will request the logbooks.

EMA Newsletter January 2010

FURTHER RELAXATION OF EXCHANGE CONTROLS

Emigration Allowance

• The foreign capital allowance per emigrating family unit has been increased from R4 million to R8 million. 
• Foreign capital allowance available to a single person has been increased from R2 million to R4 million.

Single Discretionary Allowance

• The previous limit of R500 000 has been increased to R750 000. 

Customer Foreign Currency Accounts (C>F>C accounts) and foreign bank accounts

• The 180 day rule has been abolished.
• Entities are permitted to retain funds in their C.F.C accounts without the obligation to covert the funds into Rands.
• SA companies are permitted to open and control foreign bank accounts for the accrual of funds in respect of transmissions permissible.

Advance Payments and/or Cash with Order Requests

• The R250 000 limit on advance payments has been abolished.
• Foreign exchange in respect of advance payments and/or cash with order requests to pay for permissible imports other than capital goods, can be effected against the presentation of an invoice stating that the payment must be made in advance. 

Imposition of administrative penalty

• SARS has introduced a system of strict new administrative penalties against non-compliant taxpayers as from 23 November 2009.
• Taxpayers had until 20 November 2009 to submit any outstanding returns in order to avoid being penalised under the new regime.
• The new penalties will be phased-in over a period of time:
• SARS will first impose the new penalties against repeat offenders (taxpayers who have failed to submit returns for multiple years).
• The new penalty system provides for recurring monthly penalties for each month that an income tax return remains outstanding.
• Penalty amounts are now, for the first time, determined according to the taxpayer’s taxable income (see table below).
• Taxpayers with multiple outstanding returns will receive a penalty assessment notice of the imposition of a penalty in respect of each outstanding return.
• Failure to submit these outstanding returns within 30 days will result in the implication of a second penalty, increasing by the same amount.
• Taxpayers, who have outstanding returns for prior years, must submit returns for these years on the current (2009) ITR12 income tax form, and not on the original return.
• Provisional taxpayers who are in good standing with SARS (i.e. they have no outstanding returns except the current 2009 return), and who make use of e-Filing, have until 28 February 2010 to submit their returns.

To check outstanding returns, call the SARS Contact Centre at 0800 00 SARS (7277).


TOP 8 BUSINESS TIPS FOR SURVIVING CHALLENGING TIMES


#1: Manage your cash flow carefully

Cash flow and financing should be on the top agenda of every management meeting.
Monitor management accounts regularly, in order to identify trends early; and regularly update your cash-flow forecasts.

#2 : Focus on your margins

Cut costs and not your prices!
Stay focused on your customers, not suppliers, as your margin source.

#3 : Don’t forget the customer

Don’t assume they’re happy just because they’re not complaining.
Maintain your personal touch when pressure to stay competitive is at an all-time high.

#4 : Working capital management is key

• Working capital = creditors; debtors; and inventory
• Analyse debtor lists and chase up overdue accounts
• Negotiate better payment terms with suppliers.
• Closely control stock levels (dead stock costs you money!)
• Review your inventory insurance, as theft often increases in a downturn.

#5 : Promote your business

Do not stop advertising and PR efforts. Cutting advertising costs may mean a loss of customers to your competition. Increasing advertising in a recession will most probably win customers away from competition.

#6 : Reward top performers

Although attractive salary increases may not be possible, offer perks that don’t cost the company a lot of money. Get rid of poor performers!

#7 : Take a critical look at your plans and operations

Find ways to cut costs, increase productivity, and improve fiscal oversight.

#8 : Watch the competition... they’re watching you!

The advantage you build up in the present, may be difficult for competitors to surmount later on.

EMA Newsletter August 2009

PROPOSED TAX RELIEF FOR DOMESTIC RESIDENCES

Previously, similar legislation was made available, which was terminated on 30 September 2002.

Should this proposal become law, those persons who are eligible and did not take advantage of the relief previously, should engage promptly this time, as this concession may not be offered a third time!

Do you have a domestic residence in a Close Corporation or a Company?

The Draft 2009 Taxation Laws Amendments contain the following proposal:

Between 01 January 2010 and 31 December 2011, one may be able to transfer your domestic residence from a Close Corporation or a Company, tax free.

• The transfer will be exempt from Capital Gains Tax, Secondary Tax on Companies and Transfer Duty.
• The transferee would enjoy the R1.5 million “primary residence exclusion” from Capital Gains Tax.
• The transfer would not encounter Estate Duty, as long as the natural persons hold all the equity.
• This option is not available to Trusts.
• The property must be transferred to the shareholder of the entity.
• The property must be the entity’s sole asset.
• The entity must be wound up after the transaction.
• It is important to note that should the property be bonded at present then the shareholder would need to either re-finance the property or settle the outstanding mortgage bond.

HOW TO PLAN YOUR ESTATE

The planning of your estate includes drawing up a will, establishing what you own and what you owe, and calculating what your estate will have to pay out before any assets can be passed on to your beneficiaries.

The 4 basic steps you should follow when you consider how your estate should be distributed:

REMEMBER! Your estate plan will have to be revised as your estate evolves or as your family’s circumstances change.

1. LIST YOUR ASSETS

If you are married in community of property, the executor of your estate will deal with your and your spouses assets. Remember however, when drawing up your will, that you can dispose of only your undivided half share of the assets.

2. WORK OUT YOUR LIABILITIES

These must be deducted from the value of your estate.
The deductions include:

Your funeral and any other death expenses.
Any debts owed.
Executor’s fees. (which can be negotiated at time of drafting your will)
Accrual claims owed to your spouse in terms of the Matrimonial Property Act.
VERY IMPORTANT: The CGT (Capital Gains Tax) your estate will have to pay.

Every year there is a certain amount of capital gains you can make without paying CGT, however in the year of your death, the exemption is
more than usual.
The annual CGT exclusion is R120 000 when you die,
and you are also allowed a R1,5 million CGT exclusion on the gains in the value of your primary residence.

3. WORK OUT THE ESTATE DUTY YOUR ESTATE WILL HAVE TO PAY

Amounts exempt from estate duty include:

• Assets left to your spouse.
• Assets left to a PBO.
• The estate duty abatement.

The abatement is R3.5 million. If there is more than R3.5 million remaining in your estate after your liabilities and the amounts you are leaving to your spouse or a PBO have been deducted, your spouse will pay estate duty at a rate of 20% on the amount over and above R3.5 million.

4. WORK OUT THE LIQUIDITY OF YOUR ESTATE

This basically involves calculating whether your estate has enough cash to settle its liabilities and make cash bequests.

Take the following into account:

• Any outstanding debts.
• Estate duty, CGT and income tax.
• Funeral costs and death expenses.
• Executor’s fees.
• Administrative costs of winding up your estate.

EMA Newsletter June 2009

New Changes Introduced by SARS and How They Affect You & Your Business

Tightening Up on Provisional Taxpayers

SARS have introduced a new method to determine the payment of your provisional taxes. Previously, a taxpayer was expected to calculate their provisional tax payment based on their last tax assessment. However, as from 1 January 2009, SARS now wants you to calculate an accurate taxable income figure, even though the year will not be finished.

Importantly, when making this calculation, SARS will allow a 20% margin for error, but should your calculation be out by than more than 20%, a penalty of 20% on the difference will be raised together with interest.

SARS have indicated that they will be lenient with regards to the payments made for your second 2009 provisional tax; however the new rule will be applied strictly with effect the provisional tax returns for the 2010 tax year.

The Importance of Accuracy – How Your Accountant can Help

Due to this new legislation, it is now imperative to make accurate calculations and it is here that your accountants can play a vital role. By timeously forwarding all relevant information to your accountants, it allows them to extract more accurate financial information, and similarly ensure that an accurate calculation is made for the assessment. Should you not give your provisional TAX returns the attention needed; the risk for penalties can make this potentially very costly.

Submitting an accurate provisional tax return is important even though you might not be in a position to make payments. Your accountant can always arrange with SARS that you settle the amount due in 3 installments which will also eliminate the additional 20% penalty.

Administrative Penalties

SARS have also introduced administration penalties - designed to target taxpayers who are not submitting their returns. This is applicable to virtually all returns and will be levied at R250 p/month per return. A sliding scale is applied once your taxable income exceeds R250 000 per annum. The penalties are also applicable should your returns be nil or credits due by SARS. The penalties will be applicable to the following:

• Registered as taxpayer
• Informing SARS of change of address
• Submitting returns ( All )
• To submit information requested
• Appointment of public officer

In ConclusionIf you are a provisional taxpayer, it is now of significant importance to give your assessments necessary attention so as to avoid incurring potential penalties due to administrative or calculation-related errors. These can become costly for you or your business.

4 Things to know about Life Assurance

Life Assurance (LA) plays an important role in the provision of finances for families and loved ones.When it comes to claims, most LA members believe that as long as they have remained up to date with their premium contributions that there will be no problems or delays when processing their claim.However, there are many things that can affect the claims process, creating delays and complications that can frustrate beneficiaries that in most cases are depending on the claim funds.
Every year the ombudsman receives thousands of complaints in respect of assurers that refuse to pay out a claim.

4 Tips to Avoid Claims-Related Complications

Here are potential 4 important points to consider regarding your LA policy that may help you avoid claims-related complications.


1. Failure to disclose
It is important to disclose all information required, and also to ensure that this information is as accurate as possible. This is probably the primary cause for assurers not settling claims.

2. Update your details
This is not only applicable to your personal details but also your current medical condition (i.e. You may have recently contracted an illness that may affect the claims policy).


3. Not Checking the “Fine print”
Always check the exclusions mentioned in your policy documents – this is important so that you are aware what aspects are not covered by your policy.

4. Check What You Were Sold
Be sure to check your actual policy document against what was agreed with your financial adviser. There may be details that were inadvertantly overlooked by your adviser