February 2012
Retirement Annuity Season
It’s that time of the year again when investors generally “top up” their retirement annuities. Retirement Annuity premiums are tax deductible within certain limits so it make sense to invest into a retirement annuity before 28th February to reduce one’s income tax before the financial year end.
Retirement Annuities have proven to be beneficial savings instruments for millions of people, because they encourage disciplined savings with tax incentives. The importance of saving for your retirement is well known; the difficulty lies with the decision of what vehicle is best suited for this.
Modern retirement annuities provide access to an extensive range of local and global unit trusts which means that investors can structure their retirement portfolios to meet their own individual needs. At the same time investors benefit from the performances of the underlying unit trust portfolios.
Please give us a call when it is convenient so that we can discuss “topping up” your Retirement Annuities.
Foreign Exchange Control Amendments
On 23rd December 2011 there was a very welcome amendment to the exchange control regulations (Circular Number 25/2011.) South African resident individuals, over the age of 18 years old, are now able to use their R1 million Single Discretionary Allowance for foreign investment purposes without having to obtain a SARS Tax Clearance Certificate. This is great news as in addition to the R4 million foreign investment limit investors may now invest R1 million offshore per person per calendar year.
It certainly simplifies the investment process and alleviates the delays experienced in obtaining tax clearance certificates!
Dividend Withholding Tax
The Minister of Finance has announced that Dividend Withholding Tax (DWT) will replace Secondary Tax on Companies (STC) from 1 April 2012.
Under the current STC system, a company declaring a dividend is responsible for paying tax on dividends to SARS before distributing them to investors. Companies listed on the Johannesburg Stock Exchange are required to pay STC at a rate of 10%.
Once DWT comes into effect, STC will be phased out and replaced with DWT. This will result in the tax on dividends being shifted from companies to the individual investor.
Under DWT, investors will be responsible for paying tax to SARS. Investors will now be required to pay 10% DWT on dividend distributions.
Example:
If an investor is entitled to a dividend payment from a unit trust of R100, the unit trust company will deduct 10% (R10) as the DWT and pay the remaining R90 to the investor. The dividend that the investor receives will be exempt from any further taxation.
