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The ATO (the Australian Taxation Office) recently announced and published significant PROJECT DO IT information on the tax amnesty for foreign assets held in own or trust / entity name.

As of 1 March 2014, South Africans can now emigrate or exit their SA private company to be owned directly below an Australian trust or even better below an Australian Hold Co, either owned by an Australian trust or in certain cases as a subsidiary of a self managed Super.

More detail can be found on the more recent blog – just follow the link

Hugo may not advise on the Australian structure yet can ensure the trust is properly dissolved (where advisable and legal). I am Hugo van Zylquite willing to run this past the various families and what is important to IRM’s is that most South Africans in Australia incorrectly reported in SA and Australia i.e. they may need to do a VDP (voluntary disclosure or amnesty like) application in South Africa before or simultaneously with the ATO’s project DO IT.

Where there is a tax refund in SA, VDP will not be applicable as VDP is only where there is a tax due on revision or update.

Feel free to contact me should have questions.

See Me On TaxConnections

Debugging theNew Zealand tax amnesty on Foreign Superannuation Funds from South Africa

Debugging the IRD tax amnesty on Foreign Superannuation Funds from South Africa.

Synopsis for quick reading

The foreign investment fund (FIF) rules which intended to tax interests in foreign investments on an annual basis, was generally ignored by most immigrants. As of 1 April 2014 FIF and other complicated rules will no longer apply to interests in foreign superannuation

  •  South African Pension Funds as well as Retirement Annuity       Funds qualify as foreign Supers

·   IRD (the NZ version of the South African SARS) rules in respect of foreign lump sums are changing on 1 April 2014

·         Due to the changes NZ Government announced an amnesty that ends on April 1st yet, they have effectively extended this deadline to include all applications (o withdraw from the Super) were filed prior to 1 April 2014 provided the encashment date / entitlement or accrual is reported no later than in the 2014-15, i.e. lump sum must be encashed by 31 March 2015.

·         If you elect the amnesty only 15% of the lump sum is taxed and for the highest earners,  the effective tax rate is 5% on the lump sum, which is far less than the SA taxes withheld at source;

·         SA taxes qualify for a tax credit in NZ – effectively the amnesty will cap your IRD tax at the taxes paid to SARS on encashment

·         You can leave the funds in ZA Rand and transfer when, and if the exchange rate improves. No need to convert and send to NZ to qualify for the amnesty

·         If you elect not to use the amnesty, you need do nothing until you cash in, as there is no longer an annual IRD tax on unrealised FIF growth

·         You need not transfer to a Kiwi Saver but if you did,  you can withdraw  the IRD taxes from the Kiwi Saver

·         SA expats living in NZ for less than 4 years can continue to enjoy the “transitional resident rules” which provides for a 4-year exemption on SA lump sum and other income from SA sources.

·         As a general guideline, you need to be in NZ more than 7 years before the 15% amnesty inclusion rate is beneficial. On 7 years the effective tax rate is less than 5% whereas in the 8the year the effective rate jumps to near 7%. But this is not the only test to be done. If SARS taxed you at an effective rate of 25% (near R1.4m RA lump sum) then amnesty is probably not worth it until you reach your 18th taxed year in NZ i.e. 22 years of stay  (NZD 155 555 x 75.17 x 33.33% tax = NZD 38 973 which equals 25.05%). The minute any one of the monetary issues change the number of years could be substantially less.  For smaller amounts the number of years reduces substantially

·      Expressed differently: the new IRD foreign lump sum regime is so favourable, no SA expat living in NZ should could use the fear for additional IRD tax an excuse to delay claiming ownership of their cash bag trapped in SA RA fund.

 In short, it is time to speak to us. Ensure you consider the true facts, make the right decision and to ensure the magical 4 year tax exemption opportunity is not missed, and if you have been in NZ for more than 48 months consider the benefits of the amnesty and send that request to encash your SA RA or pension fund,   before 1 April 2014. Still unsure how to go about? Provide us with the necessary mandate and we can kick-start the process on your behalf, alternatively for a small fee we provide you with the template letter to be sent.



February countdown…no rest for the wicked taxpayer? Lots of tax adviser work

February must be one of the busiest tax months in South Africa….and that is not because it is the shortest month! Not at all!

OK sometimes I blog tongue in cheek and I guess this one is a little tongue in cheek….hopefully my own tongue in my own cheek and no foot in any mouth will need changing!

Hold your braces; hold your horses and try to enjoy my February journey.

Have sympathy for my family (read dearest spouse aka as management, as in management override) and continue to fake sympathy….or face my fee note!

To complicate matters, 2014 tax year end is on a Friday!

You try explain to management at home why we not pushing through that last entertainment bill on Friday night the 28th….as I am working until midnight and SARS will not allow spousal dinners without accompanying tax adviser, as a tax deduction!

Promise! Understood?

Really? You think I am stingy and only spend on clients and staff? Note to reader: Did I mention I took senior staff and major clients for breakfast on Valentines day last year and ended up sleeping through the Valentine movie? Oops, whale fail on the Whale Coast!

This is the toughest month we have to journey through, keep on smiling, attend a valentines day functions, lot’s of birthdays…..remember several birthdays…..yes, being in my 50′s I do, like so many friends, share a tax efficient day birthday.

See in those days, every child born before the last day of February equaled a R100 tax saving. And in those days, our parents drove Fiats and Beetles …. R50 rand filled the tank! So yes, I have lots of birthday parties to attend…and then I have family doing a birthday once every leap year only! Small mercy, no family party to suffer through on the last day, February 29th!

But I sulk not, wine and dine should have been my career! So now I made it my passion and my hobby. Ask my beer gut!

This then is the story of tax adviser and tax accountant’s journey during February of each year:

1. Planning and executing payroll and PAYE (payroll tax) recons, recover PAYE shortfalls and ensure software is SARS compliant and updated BEFORE YOU ATTEMPT THE TAX YEAR ROLL OVER. Oh, only to be update once again on the 3rd or latest the 5th of March as the new tax tables are now effective.
2. Reviewing, no double checking with each client on their income levels and capital gains tax events over the past 12 months. For expats eventually selling that family home may be CGT tax free event they think, in SA but it may trigger tax emigration as most tax treaties favour the country where your family home is. Relying on the two homes test applying the centre of vital interest no longer protects expats living in Australia. And whats worse this year, CGT on that Prop Co and property rich trusts they so dearly held on despite their being no Estate Duty in Oz or Malta.
3. Update all but all provisional tax eFile forms and contact each client to explain why he or she has to pay provisional tax 2014 and assessed 2013 in the same month. Oh, don’t be surprised to be forced to explain tax year end February 2013 being filed in January 2014 because you, mr client brought your tax papers in the day you dropped bottle of Xmas Whiskey -as I was leaving for the summer break! Happy holidays to you to mate! Oh BTW look at that small marks at bottom right of the Bells label, we have been exchanging this very same bottle for12 years now. Show some initiative and give me the good bottle of red you scored from our wine maker friend! Yes I know, I had the pleasure to tell him no VAT input in that expensive shopping spree!
4. Keep an eye on budget rumours! Yes you may recall the year the CGT rates increased over night, the dividend tax came in at 15% and not 10% as expected. Ok we had a month to prepare but certain exempt STC options fell away overnight. Will this year see announcement on trust tax rules?
5. Attend budget speech or post budget breakfast. Tax booklets need to go out and imagine the client asking something I missed during the budget speech! Ok no smoke breaks on February 27th.
6. Luckily I was wise enough to give up the accounting practice! Have mercy on my fellow accountants arranging stock takes, sending our reminders to record final car mileage or odometer readings, reset the eLogbook (yes shot the idiot who designed a logbook without an auto reset on 1 March! See we have to even think for the system analysts. Oh, did I mention the VAT filing and payment arrangements on eFile needed some attention and explaining. Really Mr Client this is the 12 year you ate paying 2013 assessment, 2014 provisional tax and January VAT201. Stop winging, allow habit or is it instinct to kick in and budget BEFORE you go skiing in Italy.
7. Oh, back to budget day! Go home update trust and company minutes, get them signed offbefore midnight 28th, update all provisional tax forms accordingly, prepare Dividend Tax returns and once again contact all clients…sorry I no longer allowed activate payment from eFile. Please log on, call me as I have lots of time, to run you through the payment creation and execution whilst you online. My 28th day would have boring without your call! No don’t worry I made a point of knowing all the banks’ internet platforms. Oh and I will gladly hold on whilst you switch between personal banking and corporate banking, telling me how you struggle to keep up with all the passwords and verification processes. Oh and thanx for sharing with me the kilos you lost because you were a tea totaler, underloaded your carbo and managed to be a social bore! My post budget breakfast was soooo expensive this year I sipped three glasses of champers before 7am and had 6 croissants to ensure value for money! Next year I going to demand cronuts at that price!
8. For the record I do not attend bank-assurance sponsored post budget breakfasts, I read enough of their marketing mailers during the year! After all they have yet to explain to us why did they not warn us the income protector policy holders that the 2014 premium increase is futile! I want cronuts as I paid my own way! Listen up SAICA and The SAIT!
9. Ok back to business, after taking 6 calls on the budget (why do you care what I think off the budget? I know this call was a cheap shot at a free update relevant to your issues!) and sending 12 twitter replies, I am ready to do my own provisional tax return, and that of my father and the spouse’s and lately all the trust babies attending varsity blissfully unaware of their studies are being afforded and paid through conduited vesting at low tax rates! Oh, and 5 calls later explaining to Jimmy that there is NO, read zilch, none, no benefit in paying a holding deposit on your new wheels. What? You already did it and you don’t like me for what I shared as postman Pat! No! No! no I don’t want to hear you used provisional tax money to pay the deposit! My fault! Really? Because I said last year use ANY money to buy your luxuries just don’t dip into the VAT you saved up? I did not say provisional tax also had had a late payment AND understatement penalty? Jimmy, it was a VAT update seminar not. Tax update and after all you sent your PA who knew nothing about VAT! Oh I lie, she knows how to file your VAT return! Clever PA!
10. As I walk into the office on the 28th, positively naggered, my star employee A… creep once more! He switches on the wide wide screen TV bought to entertain staff during Soccer World Cup 2010, and plays backlast nights recorded Summit and BDT programs on budget analysis! Please I need that like a bullet in the head! Oh my, as I hear that sweet A… Creeping voice, I realize I forgot he made his TV debut last night whilst I was updating eFile provisional taxes last night. Thank you for the reminder. Remind me not to pay you overtime nor the petrol claim for that journey to the TV studios!
11. As I am about to lock the office door, not at the end of a normal business day, but rather close to midnight the smart phone shows its failures and delivers a text message mom sent early morning on the 27th. remember to remember it’s your uncle Ted’s 75thbut as there is no 29th this year we are doing his surprise birthday party on Friday night the 28th at 6pm. Remember he gets grumpy after 8 so don’t delay his bedtime and he loves you being MC at all the family functions. You the only one not crying when you make speeches! Really mom, do you need to remind me its Friday the 28th of February and he is the best tax baby example I know!

Thanx for small mercies, tomorrow is Saturday the 1st of March, 20 days to a long weekend.

I will sleep in till 10am and then the better half will take me to Hermanuspietersfontein (HPF) Food Market, feed me bottles of Bloos until I show some sign of a personality.

Not for long though, Bloos has that effect on me….makes me sleepy…..

It Monday 3 March, the nightmare is over…time to issue the fee notes! What bliss it is to be a tax adviser! We the only profession issuing lots of fee notes on the first day of the year!

Unlike Doctors who don’t know when their rich patients will return, tax advisors do know… The Doctors will bring their “tax doos” filled with loose papers, in on or around Easter, just as I will be off to KKNK to spend Februaries turnover in the Klippies Tent! Deal with it A… Creeper! the Boss needs to catch up on his breath, management’s Valentine and your new status as celebrity tax boffin….

The joys of helping people with tax problems, is the knowledge they will return next year or perhaps in two years, allowing me to double bill playing catch up or doctor-fix-it the cheapie around the corner did not open his doors after summer break. Wonder why? Did you read the papers? SARS closed him down for banking your VAT cheque.

Welcome back its nearly a new tax year! A new billing cycle…but most important, a new challenge a new tank full of adrenalin!

Who said it was boring and easy to be an accountant!

USA bank account? Be afraid, be very afraid

See Me On TaxConnections

For many years, whenever offshore tax avoidance issues are discussed, many South Africans suggested that having a bank account in Delaware or with any USA bank was rather safe from prying eyes. The USA was not tainted as a tax haven despite the Delaware arrangements.
A recent USA court ruling, slapping a USA bank on the fingers for trying to escape the IRS reporting requirements, makes for interesting reading.
This is the IRS way of thanking SARS for entering into signing the FATCA agreement negotiations.
BIG DADDY IS WATCHING – not even your Google account was safe from IRS/USA government. What made you think your USA bank account was safe?
Department of Justice Seal - Department of Justice Action Center
Department of Justice
Office of Public Affairs
Monday, January 13, 2014
Court Rejects Banking Associations’ Challenge to
Regulations Addressing Offshore Tax Avoidance

Today the District Court in the District of Columbia dismissed a challenge filed by the Florida Bankers Association and Texas Bankers Association challenging 2012 amendments to the Department of the Treasury’s interest-reporting regulations.  The regulations require U.S. banks to report to the Internal Revenue Service (IRS) information about accounts earning more than $10 of interest beginning in 2013 that are held by non-resident aliens of all countries with which the United States has a tax treaty or other information exchange agreement [Blogger adds: South Africa is included in this list!].  These new reporting requirements help the United States’ ability to comply with requests from its treaty and exchange partners and implement the Foreign Account Tax Compliance Act.

“This ruling advances the Department of Justice’s and Internal Revenue Service’s continuing efforts to pursue taxpayers trying to evade taxes through offshore accounts,” said Assistant Attorney General Kathryn Keneally of the Tax Division.  “The court’s opinion today represents an important step in our commitment to work with our treaty partners to eliminate cross-border tax evasion.” 

The court upheld the regulations’ 2012 amendments, finding that the IRS “reasonably concluded that the regulations will improve U.S. tax compliance, deter foreign and domestic tax evasion, impose a minimal reporting burden on banks, and not cause any rational actor – other than a tax evader – to withdraw his funds from U.S. accounts.”

The court’s decision affirms the IRS’ ongoing efforts to close the tax gap through cooperative measures with foreign governments, including the  2012 amendments. 

14-042                            Tax Division


Cross Border Tax and Exchange Control Advisor

Need some guidance on planning your emigration?

you friendly emigration advisor

 H U G O  V A N  Z Y L

CA(SA) M.Com (Tax)  Master Tax Practitioner (SA) TEP


Tax Connected 
Hermanus South Africa

SA Pension due to non-resident: An interesting ruling, which may be technically correct but in many ways inadequate

On October 3rd, 2013 the South African Revenue Services (www.sars.gov.za) issued BPR 156 (binding private ruling) which ensure some clarity on the taxation of many expats’ pension funds stuck in South Africa.

An interesting ruling, which may be technically correct but in many ways inadequate, writer felt one first read. Perhaps incorrectly? Let’s consider the outcome and value of the ruling.

Like most SARS rulings, it brings clarity but adds several “however” warnings. Before we address them, allow me to summarise the ruling, with an extract:



1. Summary

This ruling deals with the question whether and to what extent a pension annuity and a retirement fund lump sum benefit, received by or accrued to a person who is not tax  South Africa from a pension fund registered in South Africa, will be taxable in South Africa.

2. Relevant tax laws

This is a binding private ruling issued in accordance with section 78(1) and published in accordance with section 87(2) of the Tax Administration Act No. 28 of 2011.

In this ruling all references to sections are to sections of the Act applicable as at 13 August 2010 and unless the context indicates otherwise, any word or expression in this ruling bears the meaning ascribed to it in the Act.

This is a ruling on the interpretation and application of the provisions of section 1(1), definition of “gross income” paragraphs (a) and (e).

3. Parties to the proposed transaction

The Applicant: An individual who is not a “resident” as defined in section 1(1)

The Pension Fund: A pension fund registered in South Africa and approved in terms of the Act

4. Description of the proposed transaction

The Applicant was employed by a company which is a resident of South Africa and forms part of a group of companies. In 1999 his employment with the company was terminated. He left South Africa to join another company, within the same group of companies, situated outside South Africa and became ordinarily resident in that other country. He subsequently moved to two further countries. While working in South Africa he contributed to the Pension Fund, and continued to contribute, although he stopped being a resident of South Africa.

5. Conditions and assumptions

This ruling is subject to the following additional condition and assumption:

The Applicant is not a resident of South Africa on the date that the pension annuity and retirement fund lump sum benefit from the pension fund accrues.

6. Ruling

The ruling made in connection with the proposed transaction is as follows:

The portion of the pension annuity and retirement fund lump sum benefit received or accrued from a South African source, that is, which relates to services rendered in South Africa, will be included in the Applicant’s gross income in South Africa.

7. Period for which this letter is valid

This binding private ruling is valid for a period of 5 years from 13 August 2010.

Issued by:

Legal and Policy Division: Advance Tax Rulings


Having read the above and before we drown in the bubbly, the however issues remain:

  1. See the reference to August 2010. The law changed in 2011, leaving the current position as uncertain.

Prior to December 2011, the South African Income Tax Act (SAITA) applied source rules to apportion pension or retirement fund benefits following on from employment.

The above BPR is incomplete in that it completely fails to refer to the then section 9(1) (g) (ii) which determined that a portion of a pension granted to an individual would be deemed to be from a source within South Africa.

Being non-resident (which is a pre-requisite of this ruling) you are taxed on SA sourced income only and income not from a deemed or actual SA source, will not fall into gross income and can thus not be taxed by SARS.

The current (February 2014 tax rules) apportionment rules applicable from 1 January 2012 changed the source rules applicable to retirement fund payments significantly. One  must be careful in assuming that the above ruling is still applicable. The reference to 5 years from 2010 is therefore rather confusing and perhaps a little misleading. It should have stated, in respect of lump sums and pension annuities before 1 January 2012 (which is February 2012 tax year in SA).

Due to the new rules in SAITA section 9(2) (i), the apportionment of these benefits changed and one would think that the 2012 and thereafter monthly pension (of someone having retired in August 2010) will be taxed in terms of the new rules. The BPR is silent on this topic, leading one to believe the reference to validity of 5 years is confusing and creates uncertainty.

What then is the current rules? The pension which is received for services which were rendered partly outside South Africa, will be apportioned. The proportional pension to be included in taxable income must be calculated in proportion to the time spent rendering services in South Africa. For example if 10 out of 30 years’ of services were rendered in South Africa, one third of the pension will be taxable in SA.

In terms of SAITA section 10(1)(gC) the  portion of the pension which is sourced outside South Africa and is received as consideration for past employment outside South Africa will be exempt from South African tax.

Previously (in 2010) if said person did not work in SA in the last 10 years prior to retirement and was non-resident, there was often no deemed SA source income. Equally, residents could claim tax exemption for the years outside SA should they have worked outside SA for at least 2 of the last 10 years of employment.

The big difference is thus that anyone having worked in SA, contributed to a pension fund and now receive either a lump sum or pension annuity from a retirement fund (which includes a living annuity funded from a pension preservation fund) could be subject to SA taxation based on years in SA vs. years contributed.

Could be, not will be, as the double tax treaties overrule this section and the Australian tax treaty allows only Australia to tax private pension funds paid to expats South Africans now tax resident in Australia.

  1. The second however is the incorrect tax assessments issued since before September 2010? SARS follows a 3 year prescription period often denying late objections where the assessment was issued 3 or more years ago. The ruling was issued early October 2013, giving SARS the right to deny objections for assessments issued before October 2010? Many expat  individuals will then have to accept their February 2010 assessment was issued incorrectly and only February 2011 and thereafter tax years can be re-opened provided you one can convince SARS of the merits. Not having claimed the exemption could jeopardize your chances somewhat.
  1. The third and last however is the procedural changes was not addressed. The tax directive sent in by the retirement fund may thus include only the deemed gross income, on the SA employment years. Where the employee is receiving the lump sum from the employer managed pension fund, it will be for the employer to confirm the years in or outside SA. For retirement funds not employer managed (i.e. Preservation Funds, living annuity fund managers and umbrella funds) there may be a risk in that they are not certain of the years in or outside SA. The further condition is that on receipt of the funds, the taxpayer must be tax non-resident. This is not a topic to be adjudicated by fund managers it is a process determined, in terms of tax treaties, by competent authorities.

If one assume the same SARS team having issued an emigration tax guide under the heading “EXTERNAL GUIDE – Venture Capital Companies” many future disputes can be foreseen.

An interesting ruling, which may be technically correct but in many ways inadequate!

When will SARS issue the ruling or a guideline on the current tax law, effective as of 1 January 2012 remains to be a question.

2009 Tax law Amendments – published for comment

Hermanus 3 October 2013

Issued to stimulate debate, not to give tax advice. Subject to normal disclaimers of this forum and writer’s normal terms and conditions of engagement.

Did you forget your stash in SA or just your wallet?

Did you forget your stash in SA or just your wallet?

When you last did you try and check the balance of cash available in SA?

See the Cashkows.com blog or their webpage on https://www.cashkows.com/enquiry_secure.asp

When you call or speak to Pieter Muller, feel free to tell him where you found the great bit of information as they really appreciate the feedback on their blogs.

Hugo van Zyl

Hermanus 11th March 2013

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