Nwanda Internal news (Sept)

1. Paul Bloch
It is with great regret that we need to inform you that Paul Bloch, our much loved partner, is no longer a practicing partner in Nwanda.

Earlier this year, Paul suffered a brain stem stroke after surgery to remove a benign brain tumour.  He has bravely fought to recover from this horrific incident and although he has made a remarkable recovery so far, he is not able to practice as a Chartered Accountant at this time.

We wish to stress that the current partners remain committed to Paul’s clients and assure you of a smooth transition during this trying time.

We continue to pray for Paul’s complete recovery in the hope that he will rejoin Nwanda in the future

30_pb02

2. New employees
We would like to welcome Chistopher Botha (Audit manager) whom joined our team as from 2 September 2013 from PricewaterhouseCoopers – Welkom Office.

Christopher Botha

3. Study leave
Best wishes to all our staff with their examinations in October and November!

4. Casual Day – 6 September
We had a great day and would like to thank staff whom participated in our hat competition! The best prize was awarded to Jonathan Cohen.

Jonathan Cohen & Malyssa Hattingh

5. Office closure
We wish to notify our clients that our offices will be closed from 23 December 2013 and will re-open on 6 January 2014.

6. Completion of Training Contract (Articles)
Congratulations to Jean-Pierre Oosthuizen (JP) on the successful completion of his Training Contract!

JP Oosthuizen

7. Awesome Rewards – R500!
Congratulations to the following trainee accountants whom successfully completed 5 or more subjects in the first semester this year or obtained their degree:
Jean-Pierre (completing his DEGREE), Carmen (completing her DEGREE), Rozelda, Sadiya, Rukudzo, Logan, Kedibone, Jamie-Lee and Andre!

Some pointers for planning your estate

Blog_Retirement‘Estate planning’ has been defined as the process of creating and managing a programme that is designed to:

  1. Preserve, increase and protect your assets during your lifetime;
  2. Ensuring the most effective and beneficial distribution thereof to succeeding generations.

It is a common misconception that it revolves solely around the making of a Last Will and Testament, or the structuring of affairs so as to reduce estate duty.

Each person’s estate is unique and should be structured according to his/her own unique set of circumstances, goals and objectives.

The lack of liquidity on the date of death may cause for the deceased’s family members and dependants to suffer hardship, as certain assets might be sold by the executor to generate the cash needed.

Liquidity means that there should be enough cash funds to provide for:

  1. Paying estate duty;
  2. Settling estate liabilities and administration costs;
  3. Providing for other taxation liabilities that may arise at death, such as capital gains tax.

Technically the estate is frozen until such time as the Master of the High Court has issued Letters of Executorship.

Dying without executing a valid Last Will and Testament, your estate will be dealt with as an intestate estate, and the laws relating to intestate succession will apply. The Intestate Succession Act determines that the surviving spouse will inherit the greater of R125, 000 or a child’s share. A child’s share is determined by dividing the total value of the estate by the number of the children and the surviving spouse.

If the spouses were married in community of property, one half of the estate goes to the surviving spouse as a consequence of the marriage, and the other half devolves according to the rules of intestate succession. If there is no surviving spouse or dependants, the estate is divided between the parents and /or siblings. In the absence of parents or siblings, the estate is divided between the nearest blood relatives.

An executor is entitled to the following remuneration:

  1. remuneration fixed by the deceased in the Last Will and Testament, or
  2. 3,5% of gross assets;
  3. 6% on income accrued and collected from date of death.

Executor’s remuneration is subject to VAT where the executor is registered as a vendor.

Where the value of the estate exceed R3,5 million, estate duty will become payable on the balance in excess of R3,5 million, with the exception of the property bequeathed to  a surviving spouse, which are exempt from estate duty and /or capital gains tax.

Section 3 of the Subdivision of Agricultural Land Act, prevents the subdivision of agricultural land, and such land being registered in undivided shares in more than one person’s name is subject to Ministerial approval.

A minor child is a person under the age of 18 years of age, and any funds bequeathed to a minor child will be held by the Guardian’s Fund, which falls under the administration of the Master of the High Court. These funds are not freely accessible, and are usually invested at below market interest rates. It is thus advisable to provide for minors by means of a trust.

The Close Corporations Act provides that, subject to the association agreement, where an heir is to inherit a member’s interest (in terms of the deceased’s Will), the consent of the remaining members (if any) must be obtained. If no consent is given within 28 days after it was requested by the executor, then the executor is forced to sell the members interest.

Section 3(3)(d) of Estate Duty Act determines that where an asset is transferred to a trust during an estate planner’s lifetime, yet the estate planner, as trustee of the trust retains such power as would allow him to dispose of the trust asset(s) unilaterally for his own or his beneficiaries benefit during his lifetime, then such asset(s) may be deemed to be property of the estate planner and included in his estate for estate duty purposes.

Where the parties are married in community of property, the surviving spouse will have a claim for 50% of the value of the combined estate, thus reducing the actual value of the estate by 50%. The estate is divided after all the debts have been settled in a deceased estate (not including burial costs and estate duty, as these are the sole obligations of the deceased and not the joint estate). Only half of any assets can be bequeathed.

The proceeds from life insurance policies can be used to:

  1. Generate income to maintain dependants while the estate is dealt with;
  2. Pay estate expenses: funeral, income tax, estate administration, estate duty.

All proceeds of South African “domestic” policies taken out on the estate planner’s life, where there is no beneficiary nominated on the policy, will fall into his estate on his death.

Where a beneficiary is nominated on the policy, the proceeds will be deemed property for estate duty purposes, even and although they are paid directly to the beneficiary (subject to partial exemptions based on policy premiums).

Policies which are exempted from inclusion for estate duty purposes are buy and sell, key man policies, and those policies ceded to a spouse or child in terms of an antenuptial contract.

Certain assets in a deceased estate are excluded from capital gains tax.

  1. Assets for personal use (with certain exceptions);
  2. Assets that accrue to the surviving spouse;
  3. Assets bequeathed to approved public benefit organisations;
  4. The proceeds from life assurance policies; Interests in pension, provident or retirement annuity funds;
  5. The first R2 million in respect of a primary residence;
  6. The first R750,000 in respect of small business assets.

Currency, excluding gold and platinum coins.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Co-ownership of land

Blog_PropertyA co-owner who holds a share in land does not hold title to a defined piece of land even if by arrangement with his co-owners they might have agreed to give him occupation of a specific portion of land.  The title he has is to an undivided share only, in the whole of the land, held in joint ownership.  The portion he occupies is owned jointly by him and his co-owners in the whole thereof. If he should build a house on the portion he occupies, the house will be owned jointly.

When X, Y and Z are co-owners of a farm, they are not each entitled to a physical part of the farm but each of them has an undivided share in the whole of the farm. The shares will not always be equal. One person can have half a share while the other two can each have a twenty five percent share.

However, co-ownership unfortunately leads to disputes between the owners.

Co-operation between the co-owners

It is advisable that co-owners enter into an agreement which regulates the relationship between them. Unfortunately this agreement will have no bearing against third parties.

The consent of all the co-owners is required when administrative decisions have to be made. No owner is entitled to change or improve the property without the consent of the other owners. All the owners have to agree to the use of the property, e.g. they have to agree to the chopping down of trees, the erection of a storage facility/building, or to let cattle graze in the field.

If co-owners are not consulted they may request an interdict from the court. The court may even order that buildings that have been erected, be removed. However, in instances where the aim is to preserve the property, it is not always necessary to obtain the consent of the co-owners.

The profits and losses

All the co-owners must contribute proportionally to necessary and also useful expenses for the preservation of the property. Such expenses include taxes and expenses to maintain the property in good condition, but do not include luxury expenses. Losses and charges must be shared by the co-owners, except those attributable to negligence of one of the owners.

As with expenses, fruits and profits must be divided amongst the co-owners according to each owner’s shareholding.

Alienation of a share

A co-owner may alienate his share or even bequeath it to his heirs, without the consent of the other owners, even against their will. A co-owner’s share may also be attached by the sheriff.

Use of the property

Each co-owner may use the property in accordance with his undivided share. He must however use it with due regard to the rights of the other co-owners. Each co-owner, his employees and guests are entitled to free entry to any part of the property, except if the co-owners have agreed that a portion of the property is reserved for the exclusive use of one co-owner.

Partition

Co-owners may decide to partition the property, usually if they cannot agree on the utilisation of the property. The property will then be divided physically in accordance with the value of the property and each owner’s share in it. When it is uneconomic, which is usually the case with a farm, the property can be awarded to one co-owner, but he must then compensate the other co-owners.

The court may also order that the property be sold by public auction and the proceeds divided amongst the co-owners. There is strict statutory control over the subdivision of land and also the actual physical division and use of land, so that partition may not always be possible.

Co-ownership is an excellent vehicle to becoming an owner of a property that one otherwise might not be able to afford. However, be aware of the pitfalls, choose your co-owners wisely, and draw up an agreement to regulate payment of the bond and rates, the day-to-day expenses and house rules.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Zero-rated VAT: Exports and services to foreigners

Blog_VatIt is often confusing to determine when to charge Value Added Tax (VAT) on goods or services at a zero rate (0%) instead of the standard rate of 14%. Below are some basic examples to illustrate the charging of the correct rate by South African VAT vendors. These are general examples and it is prudent to contact your tax practitioner if there is any uncertainty in this regard.

1.       Direct Export of Goods – 0%

A direct export is the delivery of moveable goods to a recipient at an address outside of the Republic of South Africa (RSA), by a South African VAT vendor. The vendor must therefore physically deliver the goods to the recipient at the address outside the RSA, or arrange for the delivery of the goods on behalf of the vendor by a cartage contractor (who must be a resident of the RSA as well as a registered VAT vendor). VAT at 0% may then be charged on these sales.

Strict documentation requirements are set by the South African Revenue Service (SARS) for the charging of  0% VAT, and the exports must take place through any of the 43 designated ports.

 2.       Indirect Export of Goods – 14%

An indirect export occurs when the South African VAT vendor sells moveable goods to a foreign recipient and the recipient removes or arranges for the removal of the goods from the RSA to the foreign address. In such a case, the vendor will charge VAT at the standard rate of 14%.

However, the foreign recipient may be able to claim a VAT refund from the VAT Refund Administrator (Pty) Ltd at the exit of the goods from the RSA from any of the 43 designated commercial ports. The foreign recipient must be a qualifying purchaser (as defined) and the goods must be exported within 90 days from the date of the tax invoice. Strict documentation requirements must be complied with in order to claim the VAT refund.

The only exception to this is if the supply is made in terms of Part Two of the VAT Export Scheme. In this case, VAT may be charged at 0%.

3.       Local Services to Foreigners – 0%

Services delivered locally to non-residents by a South African VAT vendor will generally be subject to VAT at 0%. It is important to remember that the non-resident recipient of these services must not be physically present in the RSA at the time of the delivery of the service.

The exceptions to this (and therefore subject to 14% VAT) will be where the services are supplied:

  1. in respect of fixed property in the RSA;
  2. in respect of moveable property in the RSA, unless the property is destined for export or forms part of a supply to a registered vendor; or
  3. to a recipient who is in the RSA when the services are rendered (unless it relates to a restraint of trade).

4.       Services Delivered outside the RSA – 0%

Services that are physically delivered outside the RSA will be subject to VAT at 0%.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Broad-Based Black Economic Empowerment

Blog_BEEBBBEE is fast becoming a certainty in the business environment in South Africa, and it is imperative that businesses incorporate this in their operational and strategic planning.

An effective and successful implementation of a BBBEE strategy may have a significant impact on other aspects of the business, such as operations, tax planning and long-term business strategy. Proper consultation with skilled advisors is vital to avoid costly mistakes and ensure the achievement of the long-term goals of the business.

The calculation of an entity’s BBBEE scorecard is regulated by the Broad-Based Black Economic Empowerment Act No. 53 of 2003, together with the Codes of Good Practice (the Codes). Furthermore, certain sectors of the economy have their own charter in terms of which the scorecard of business in that sector will be calculated, rather than the generic codes. In most cases, only an accredited verification agent may conduct the verification process and issue the resulting BBBEE certificate. Verification agents are currently accredited by either IRBA or SANAS.

In terms of the Codes, a business will fall into one of three categories, which will then determine how the BBBEE score is calculated. If a sector charter applies, these criteria might be different from those set out in the generic codes.

The first category is Exempted Micro-Enterprises (EMEs). These will be entities with an annual turnover of less than R5 million, or start-up enterprises (newly formed businesses that have been in operation for less than twelve months). These EMEs will have an automatic recognition level 4, or automatic recognition level 3 in the case where the EME has black ownership of more than 50%. A registered auditor, accounting officer or BBBEE verification agent may issue such a certificate, and the certificate is valid for a period of 12 months.

The second category is Qualifying Small Enterprises (QSEs). These are entities with an annual turnover between R5 million and R35 million. In such cases (according to the QSE Codes) the entity only has to be measured against four of the seven elements of the scorecard, which simplifies the verification process and gives the business a better chance to obtain a good score. Only an accredited verification agent may conduct the verification process and issue the BBBEE certificate to the business. The certificate is valid for a period of 12 months.

The third category is businesses with an annual turnover of more than R35 million, which will be measured according to the Generic Codes. A score will be calculated for all seven elements on the scorecard, which will then determine the BBBEE score of the entity. Only an accredited verification agent my conduct the verification process and issue the BBBEE certificate to the business. The certificate is valid for a period of 12 months.

To ensure the minimizing of costs, an effective verification process and the least amount of disruption to the operations of a business, the help of professional and skilled advisors is vital.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Pay your levies, or else…

Blog_LeakingDear Mr Lawyer, this is my question: I am the owner of a sectional title, and paid my levies every month as required, until the water started seeping through the ceiling of my enclosed balcony into my section when it rains. The leak was clearly emanating from a defect in the common property.

I asked the body corporate on numerous occasions to repair the defect, yet after four months and a lot of frustration the body corporate still has not done anything to honour this simple request. As a frustrated owner, I resorted to desperate measures, and employed a contractor to repair the property defect and settled the bill myself.

May I withhold my levies for a period to set off the money that is owed to me by the body corporate?

Dear Mr Owner,

Although this action may sound reasonable, the right to stop paying or to set off a debt against levies is not legally justified and owners are not, under any circumstances, entitled to simply withhold levies.

There is no provision in the Sectional Titles Act 95 of 1986 or the rules that gives an owner the right to withhold levy payments. Even if an owner incurs expense in performing an emergency repair to the common property, and believes that the body corporate owes him money, the owner may only set off the debt against the levies once it becomes liquid.

An amount can only be liquid once it has been agreed upon. An owner cannot set off the amount they believe they are entitled to deduct. The trustees, judge or arbitrator must have confirmed the amount.

If Mr Owner does withhold his levies without the amount being liquid, he is subject to the following sanctions in terms of the prescribed rules:

Firstly, the Trustees are entitled to charge interest on arrear amounts at a rate determined by them, and so the defaulting owner may receive a larger account, due to the interest on his arrears, than if he had paid his levies.

What is more, The Sectional Titles Act imposes a positive obligation on Trustees to recover levies from defaulting owners. Not only does the Act empower them to charge interest, the scheme attorneys will most likely issue summons against the defaulter for all costs that the Body Corporate may incur in recovering any arrears.

Secondly, the prescribed management rules provide that, except in the case of special and unanimous resolutions, an owner is not entitled to vote if any contributions payable by him in respect of his section have not been duly paid. Therefore, an owner who withholds his levies is unable to vote for ordinary resolutions in respect of the section that he is withholding levies on.

Mr Lawyer, how does an owner deal with a situation where he believes the body corporate is liable for payment? 

A dispute must be declared with the Body Corporate under prescribed management rule 71. Accordingly, the notice of dispute or query must be done in writing. The trustees or Body Corporate then have 14 days, from receipt, to resolve the dispute.

During this period, the parties should meet to try and resolve the dispute. If there is no resolution after the 14-day period, either party may demand that the dispute be referred to arbitration. The decision of the arbitrator shall be final and binding and may be made an order of the High Court.

Owners often fail to speak to the trustees if they have problems with paying their accounts. There are ways of arranging with the body corporate and it is always better to arrange this before the amount outstanding becomes unmanageable.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.