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July 2016

INTRODUCTION

When drafting of this issue commenced, the results for 99 councils were outstanding and the ANC’s support had diminished by just over eight percent nationally. The bulk of the lost votes had gone to the DA and the EFF had garnered 7.4% of the votes. It will be interesting to see what impact, if any, this will have on our economy and whether a favourable change will take place at the upper levels of the ruling party. Very little variation to exchange rate had occurred by close of business on municipal Election Day.

DEADLINES

Annual Duty – one calendar month to the day after the incorporation date

Promotion of Access to Information Act manual – 31 December 2021 extended yet again!

Special Voluntary Disclosure Programme – 1 October 2016 to 31 March 2017

2016 Tax returns

Manual and postal submissions – 23 September 2016

Submissions by non-provisional taxpayers at a SARS office – 25 November 2016

Efiling by non-provisional taxpayers – 25 November 2016

Provisional taxpayers by Efiling – 31 January 2017

Tax returns

Tax clients should note that unless we receive all the relevant data and documentation at least fourteen days before the applicable submission deadline we cannot be held responsible for any punitive action taken against them by SARS.

Excel Tips

Users of Excel may experience a degree of frustration at their ability to see all or most of the worksheets in the tab above the Status Bar. This is caused by the space used by the horizontal scroll bar. The problem may be resolved by changing the size of the horizontal scroll bar. To do this, place the cursor over the two vertical lines to the left of the horizontal scroll bar’s left arrow. Two vertical lines with an arrow on the left and right of the vertical lines will appear. Click and hold down the mouse button whilst moving the mouse in the desired direction to either increase (left) or decrease (right) the horizontal scroll bar.

TAXATION

In recent years, the government policy regarding retirement funds has focused on ensuring that these funds are preserved for their intended purpose, i.e., to provide funds to finance the members' retirement years and thus avoid the retiree’s dependence on the state.

The Draft Taxation Laws Amendment Bill contains provisions that are designed to continue this process and are designed to prevent certain individuals from withdrawing their retirement annuity funds prematurely. Previously, South Africans who have worked abroad for a number of year were considered to be non-resident without the necessity of formally emigrating. This enabled them to withdraw their retirement funds.

The intention of the Bill is to permit such withdrawal only where the member formally emigrates and only after such emigration is approved by the South African Reserve Bank. This amendment will come into effect retrospectively from March 2016.

BUSINESS

Business Structures

There are a number of legal structures available to an individual contemplating going into business. Each has its unique advantages and disadvantages. The following is brief overview of these structures:

Sole proprietorship

This relates to a business that is owned and operated by one individual in his/her personal capacity. It is the riskier type of entity in that, in the event that the business is unable to meet its debts, creditors are able to attach the personal assets of the owner. In addition, there can be no continuity. In other words, when the owner dies so does the business. It cannot be bequeathed in a will. The assets of business will have to be sold by the executor; either piecemeal or as an entirety.

Partnerships

Membership is limited to twenty and the partnership will dissolve upon the death or insolvency of one of them. As with the sole proprietorship, a partner’s personal assets may be attached upon the insolvency of the partnership. The partners are jointly and severally liable for the partnership’s debts. This means that a creditor may seek to recover outstanding amounts from any or all of the partners collectively.

Private Companies

There is no maximum number of people who can be shareholders in a private company. As a company is a legal entity, it is taxed in its own name and in accordance with different rates and conditions to an individual. It will continue to exist after the death of one or all of its shareholders. Further, bequeathing shares can ensure continued family participation. This entity offers a far more flexible tax regime than that available to individuals. The disparity between tax rates applicable to individuals and companies may be used to structure financial matters in a way that minimizes the exposure to taxation.

Business Trusts

The assets of a business trust vests in the trustees in their fiduciary capacity. Tax rates applicable to trust are those in the top bracket for individuals. Due to the ongoing review of the taxation and use of trusts by the Davis Committee, it is difficult to predict how financial matters may be structured through trusts to minimize exposure to capital gains tax donations tax, income tax and estate duty. In addition, most of the law relating to these entities is to be found in court judgments and not in legislation.

Labour matters

An issue that may regularly tax an employer when considering the appropriate action to take against an employee is whether the employee’s transgression occurred as a result of incapacity or misconduct. Dismissal resulting from a misdiagnosis of the cause of the transgression may lead to dire consequences including re-instatement and/or damages.

The Labour Relations Act (LRA) states that valid reasons for dismissal are those connected to:

·          The employee’s conduct

·          His/her capacity

·          The employer’s operational requirement. These are not due to any act or omission on the part of the employee but to the needs of the business.

Schedule 9 of the LRA provides guidelines to be followed before dismissing an employee for misconduct, ill health, poor performance and incompatibility.

Therefore, it is important to distinguish between incapacity and misconduct. Misconduct will arise where the employee is able to comply with an employer’s rule but does not do so and is thus at fault. Intent or neglect must be present in the failure to comply. Examples of misconduct are:

·          Theft

·          Refusal to obey a reasonable instruction

·          Assault

These are classified as intentional misconduct and would justify dismissal. Unintentional misconduct usually arises as a result of failing to take reasonable precautions, forgetfulness or carelessness.

On the other hand, incapacity arises where the employee is willing to follow the instructions given but is unable to do so because of lack of skill, training or ability.

It can be seen that distinguishing between incapacity or misconduct can be onerous. Therefore, it is advisable to carry out an extensive review of the circumstances of a case before disciplinary action is taken.

ECONOMY

It is interesting to read the diverse opinions of some economic commentators. Whilst one major assurance house spokesman stated that the election results will have little, if any, impact on investors another commentator is of the opinion that the results could well influence Luthuli House to rethink its economic policies thereby influencing future decisions by investors.

Either way, the election results will be monitored keenly by credit agencies and have some bearing upon South Africa's ratings when they are re-assessed in December. One writer states that the ANC is likely to move its policies more to the left in order to moderate the shift to the EFF. This could mean the introduction of a wealth tax, increasing welfare benefits and setting a national minimum wage. This would be contrary to the DA's intent to make it easier to do business by changes to labour laws to facilitate more economically feasible employment administration.

Since the elections, the rand has strengthened by 50 cents against the pound and by a smaller margin against the dollar. However, it is unlikely that the South African political climate is responsible for all but a small fraction of these changes.

Therefore, it seems that opinion of the assurance house spokesman was right on the button.

TAILPIECE

“A fool and his money are soon elected.  - Will Rogers