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Messages - [email protected]

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1
Shares / Re: TAX Efficient options for cash
« on: February 08, 2020, 07:13:35 am »
Interesting thoughts.   And touching across multiple dimensions - correct answer will depend on your risk profile and personal circumstances.  Generally, I can't really criticize your approach (with out knowing your personal circumstances)

Things to consider
I'd suggest ensuring that you max out your annual tax free investment allowance (but consider future access to capital)
Investments in the fixed deposits may offer attractive interest rates, but essentially they are priced on the yield curve and your capital is locked for the duration.   (more a comment, than a criticism).  Money market may be a alternative solution.
Bear in mind that ETF's (depending on the underlying fund) may also pay interest income.   Consider carefully in conjunction with your investment risk profile.  The risk profile of the funds, is also needs to be considered carefully
Investments in shares/ETF's, may trigger a 20% dividend withholding tax (but are exempt in your hands) - this may need to be considered in your individual tax circumstances (i.e. if you're retired and have minimal income - it actually may actually benefit you to invest all your income in interest bearing investments).




2
Shares / Re: SARS - foreign dividends conversion rate
« on: July 26, 2019, 11:57:02 pm »
SARS rates can be found here.   https://www.sars.gov.za/Legal/Legal-Publications/Pages/Average-Exchange-Rates.aspx

A couple of notes on translation of foreign income
1.  A taxpayer can elect to utilize either the Spot rate or the average rate
2.  One is not obliged to use the SARS rates (as published above), but can use other rates.  Note though the onus of proof alway's lies with the taxpayer, so you'd need to be able to substantiate the rate being used. When not using the spot rate, I have alway's used the SARS rates (for simplicity and ease of justifying).  Note that if you use daily rates, please keep the proof and source so you can justify it with SARS etc.
3.  You need to be consistent in use of rates in each year of assessment. (But can utilize a different method in a subsequent year).



3
Shares / Re: Foreign Dividends Tax on Crypto Fund Divi (TUSD)
« on: May 29, 2019, 12:19:53 pm »

I'm a newbie when it comes to taxes, but I've never looked into getting tax advice if there's the possibility of figuring it out myself.


I value people attempting to do there own tax planning - but I encourage you to seek professional assistance with a tax consultant to fully understand your individual circumstances and plan accordingly (especially if we are referring to material investments.)  In the long run, you'll probably benefit, both personally and financially.


The foreign dividend tax I can figure out. suppose I can make a best effort assessment, convert the dividend tax portion of TUSD crypto to ZAR, declare accordingly for effective 20% tax.


A risk is that SARS effectively operate on a self assessment basis.   They WILL assess as you submit - and should you subsequently be subject to an audit/review, and should they disagree with your interpretation (i.e. you declaring it as a dividend when they reckon its trading income), then you may be subject to penalties and interest.  (confirms opinion to chat to a relevant professional).

Post a link of the fund referred to - and let me have a quick (informal) view on the nature of the income.


But I really banked on my historical ZAR->BTC purchases to classify for CGT when I sell BTC->ZAR 3 years after purchase.


Fair concern.  But should you intention be to never dispose of your BTC, you clearly don't have profit making intention.  (hint hint).  If, for example your intent was to bequeath  it to your children/wife/father, and amended your will to reflect this intent, well I'd argue that any unplanned for disposals are of a capital nature and taxed accordingly......... 


Actually, I day-traded much BTC and now probably have only 20% of the BTC left that I originally bought, lol, but fiat value is higher.


Well...  thats definitely a revenue intention (day trading).........   another piece of advice - alway's separate your "day trading activities" (revenue) against investment activities (capital gains tax)




4
Shares / Re: Foreign Dividends Tax on Crypto Fund Divi (TUSD)
« on: May 28, 2019, 10:51:41 am »

Especially when they have phrases like "No deductions are allowed for expenditure incurred to produce foreign dividends."?


Almost forgot - above phrase would only apply if the foreign earnings are dividends as defined.  To the extent that the income is not dividends, but (say) trading income, then any expenditure (within certain limitations) incurred in the production of that trading income, is deductible for tax purposes.

5
Shares / Re: Foreign Dividends Tax on Crypto Fund Divi (TUSD)
« on: May 28, 2019, 10:48:35 am »

So if I buy goods direct with BTC, then SARS will tax the ZAR gain on that BTC as income?
But, if I have no ZAR, and can only sell BTC to obtain the ZAR for SARS' tax, will this BTC->ZAR also be taxed as income?

To rephrase, I'm getting a non-fiat dividend, how does SARS expect me to get the ZAR to pay their taxes (without incurring further taxes)?
Especially when they have phrases like "No deductions are allowed for expenditure incurred to produce foreign dividends."?

Can I send SARS the tax-portion directly in BTC? Or if I received a sack of mielies as payment, can I send SARS a mielie?

You'd have a similar problem with any "traditional" offshore collective scheme with dividends re-invested.   A portion of your holdings would have to be disposed in order to pay for any taxation (ignoring, if any, foreign dividend withholding tax).  This disposal itself would trigger CGT.....

But in all seriousness - Crypto is a new, complex and evolving area of taxation (worldwide) with many peculiarities.   E.g. imagine a day trader continuously trading in alt coins.  Each individual acquisition or disposal (in this case would undoubtable be revenue) of an Alt coin, would result in taxable profit (or loss) that needs to be translated to ZAR.   Most exchanges don't provide the information to easily facilitate this calculation....... (although there are workarounds).

Another example, try claim a loss (either revenue or capital)  for Crypto trading (or investing) activities with SARS........  Let me know how it goes .  :D. (and yes, I do envisage some interesting cases and principles emerging in the next year or so)

6
Shares / Re: Foreign Dividends Tax on Crypto Fund Divi (TUSD)
« on: May 27, 2019, 10:43:16 pm »
XXX - surely the time of holding Bitcoins - i.e. time erosion between buy and sell dates determine whether it is CGT or income. I too believe there are going to be some extraordinary test cases in the not too distant future

Hedge against inflation was the classic "Kruger Rand" investment defense in the day......  And it typically didn't work, due to the fact the only way to realize a return was to sell the investment, which indicates a profit making intention......

There has however been numerous cases where a taxpayer has successfully had a sale of Kruger Rands as a capital item, typically as a result of the taxpayer having no intention to dispose of the Kruger Rands (i.e. had a intention to bequeath it to his children).

E.g. In CIR vs Nel, the taxpayer successfully won the case as a result of him selling his Kruger rands (to deal with an unexpected expense), and his original intention was found to be a long term investment acting as a hedge against inflation and where he intended to bequeath to his children.

There are other similar cases

7
Shares / Re: Foreign Dividends Tax on Crypto Fund Divi (TUSD)
« on: May 27, 2019, 10:25:29 pm »
Holding securities with a properly registered and regulated financial house regardless if they are tangible or not will be treated by SARS as capital in nature if held for over 3 years. This could be non physical exposure to Kruger Rands, gold and platinum or physical coins held.


 

Hi Orca - the 3 year deemed CGT rule in terms of section 9C of th income tax act only applies to "equity shares" as defined in the income tax act.   

"Equity share" is defined in S1 of the income tax act as “equity share” means any share in a company, excluding any share that, neither as respects dividends nor as respects returns of capital, carries any right to participate beyond a specified amount in a distribution

Note for completeness, the definition of equity share  is slightly extended in 9C itself (which would extend it to include a "participatory interest in a portfolio of a collective investment scheme"), which would include a properly registered hedge fund (whether in crypto or otherwise)

Crypto itself, as is investments in currency and Kruger Rands is not included within the definition of an equity share and is thus subject to the normal interpretation rules on capital/revenue, which includes, believe it or not, a "for keeps" test as defined in Barnato Holdings Ltd vs SIR.   

In the case of Crypto, this exclusion (from the 3 year rule) leaves you open for any proceeds to be taxed as revenue.  I do however encourage all crypto investors to read the extensive case law in Kruger rands - as this has set precedents that are helpful.


Should you wish to read up on this further, I fully encourage you to source and read the "SARS comprehensive guide to Capital Gains Tax".   It is 931 pages long (20 odd of which discuss the capital vs revenue tests - other than the 3 year rule), and in my opinion is still the best guide available for the interpretation of South African Capital Gains tax.

8
Shares / Re: Foreign Dividends Tax on Crypto Fund Divi (TUSD)
« on: May 27, 2019, 12:54:31 pm »

2) If all divi TUSD is converted to BTC, and only tax portion of BTC is converted to ZAR, and the remaining BTC is later sold for ZAR, would that constitute a CGT event?

3) And what if the divi was paid in BTC, and non-tax portion later converted to ZAR, would that incur further taxes?

4) Another question is how to declare Foreign Dividends received, given the conversion/tx fees to get the Foreign Dividends Tax amount to ZAR?

5) Also, at what point would the Revenue Service audit the original source of the funds invested in this foreign security?

What irks me is that if the Crypto Hedge Fund turns out to be a scam, then the Revenue Service got its share of profits without rendering any service or infrastructure to protect or facilitate the investment. Taking the capital loss for the tax year does not compensate nearly enough.

Couple of points.
2/3  SARS is of the opinion that each disposal of crypto (whether sold for ZAR or any other asset such as another crypto currency) constitutes a disposal for CGT purposes at the time of disposal.   (and not when its finally converted to ZAR).  I agree with this opinion.
4.  I'm unfamiliar of the nature of the TUSD/Crypto Hedge fund.  So I'll prefer not to give an opinion on this, other than note that foreign dividends would normally result in the dividend being taxed at a. maximum effective rate of 20% in South Africa.  Whether the fund would meet this definition is debatable (alternative is to be taxed at normal rates).  Either way, the "dividend" should be translated at either the spot rate or the average rate for the year and included in your taxable income in the appropriate manner.

5.  Interesting question.   SARS effectively operates on a self assessment basis.  I.e. what you submit is what you get assessed (automatically) for.   There risk engine would normally dictate whether you get flagged for an audit or not.   E.g. abnormal expense claims, large refunds, unmatched IRP5 income or any other risk indicators might flag you for an audit.     The risk in the hypothetical scenario that you depict would typically be flagged due to an inexplicable increase in your assets/capital base, which if you're submitting a balance sheet (not all taxpayers are required to submit a balance sheet), might trigger the risk assessment on submission of the return.  Alternatively, if you had to buy a property cash, this might flag something at that point in time (also note that SARS use of data is improving, and will continue to improve, as the amount of data it can collect and process improves).   

Putting aside the moral side of things.   Residence based taxation is a worldwide principle adopted in multiple countries, with the view that a residence are taxed (within limitations) on there world wide income - irrespective of whether the taxing country provides the "infrastructure" etc.   

As a aside - I do think Crypto is going to provide some interesting case studies in the years to follow - as for example, you and many others have assumed that any gain's from crypto are capital gains......  this is not necessarily the case - as its arguable that if the only way you can realize the investment in crypto  is via selling at a later stage you clearly have a profit making intention and thus the gain would be revenue and not capital.  (Kruger rands have a interesting case law in this regard).


9
Shares / Re: My retirement blog.
« on: May 15, 2019, 11:55:25 am »

Any idea if Portugal applies the same exit tax regime as South Africa? In that breaking tax residency requires you to pay CGT on everything as if you'd sold?

Asking for a friend who may want to take advantage of the 10 year non-habitual tax break in Portugal and still escape the CGT  :whistle:
[/quote]

My understanding is that Portugal does not have a "exit" tax for individuals..... There is a risk however that in certain circumstances and that should you relocate to certain countries (I have seen it referred to as "blacklisted" countries, and is actually rather lengthly, include the likes of Cayman Island, Hong Kong, Monaco etc) , Portugal may still regard you as a Portuguese tax resident for tax purposes.     How this interacts with the 10 year NHR visa, I'm not sure.

10
Off topic / Re: Live chat
« on: April 22, 2019, 12:28:08 pm »
Hi everyone just like some advise, I trade Us stocks only and only trade short to medium term.  How would you actually go about, declaring the profits to SARS, what form do you need to fill in, can you do it on your efilling? Do you declare it quarterly or annually? There is not allot of info on how to do this on the net and the last thing I need is to get into trouble with SARS.

Declared annually on your IT 12 income tax return via EFiling

11
Shares / Re: Offshore Structured Product
« on: April 15, 2019, 01:36:31 pm »

The Eurostoxx Capital Protector was a separate structure from Sanlam as the FTSE structure which is from Investec. The FTSE structure is not placed within a wrapper and the losses and profits are taxed in your name.

Fair enough

12
Shares / Re: Offshore Structured Product
« on: April 14, 2019, 12:52:56 pm »
Matter of interest,   I just pulled this off the RandSwiss website - presumable the same product (but I am guessing a bit)

"The Euro Stoxx Capital Protector is available within the Glacier International Global Life Plan.
Tax administration is taken care of within the policy on the investor’s behalf. All USD returns earned will be taxed as interest at maturity, using the prevailing tax rates.
The current tax rate on interest for individuals is 30%. Based
on these current rates, a cumulative return of 55% over the five- year period is equal to a return of 38.5% after tax."


Reading this (and the other product blurb's) and speculating a bit, the investment is housed in a Insurance wrapper of sorts, hence the 30% tax rate (individual policy holder fund) referred to in the quote.    Capital gains inclusion rate for a IPF is 40% x the 30% tax rate = the 12% referred to in the original post.

Sort of makes sense, but what doesn't make sense whether the growth in the "investment" is taxed (within the fund) at 30% as interest (per the product brochure) or at 12% as a capital gain (per the post above), or perhaps either depending on the nature of the growth.

In any event, if the above thinking is correct - I'd have to apply my mind to the tax consequences of you incurring a loss (should the investment tank), but I'm immediately thinking that any loss is disregarded by yourself (i.e. you can't set off the capital loss against other gains) as a result of you be the original policy holder in a long term insurance policy.

No thank you - I'll stay away.


13
Shares / Re: Offshore Structured Product
« on: April 14, 2019, 12:18:41 pm »
If thats the thinking, its extremely irresponsible on RandSwiss to advertise in the way it is.   The 12% would assume that there are no other capital gains earned (i.e. to use the full 40k exclusion) and that the taxpayer is not at the maximum marginal rate.

IndustryGuy also stated that the 12% is not dependent on your personal marginal tax rate.

Either way, I'd really like to hear from IndustryGuy on how a 12% (flat) tax rate is achieved/structured.

14
Shares / Re: Offshore Structured Product
« on: April 14, 2019, 08:37:02 am »
[
4. At the current tax schedule, you will pay a 12% capital gains tax rate on the profits. This does not depend on your personal marginal tax rate.



I would really like to understand the reasoning behind this "12% capital gains tax rate." 

thanks in advance.

15
Shares / Re: Investing in US Stocks?
« on: April 13, 2019, 11:57:55 pm »


You don’t pay tax on currency movement while you are invested so you must do all the calculations in USD such as the purchase and sale plus the profit/loss. Only then do you convert the USD to ZAR at the spot price on the day the trade is concluded.
This amount must be recorded by you for efiling later. Note that all amounts in your broker account must remain in USD for all future trades. Only once the trade is concluded do you record the profit/loss in ZAR.



Correction to above.  An individual taxpayer (for CGT purposes) has the ability to choose to translate the foreign gain at either the Spot price on the date that the share was sold or at the average exchange rate in the year that the security was disposed.  Two important take away's from above are as follows.   1.  In times of rapid currency fluctuations the taxpayer should compare the rate and apply the rate that will be most beneficial for him selves.   
2.  If you long term view is of a gradual devaluation of the Rand, the above method of calculating the capital gain on foreign securities is extremely beneficial to the taxpayer (no matter which method you use), as effectively the forex gains (from date of purchase to date of sale) is received free of capital gains.  You do not get the same benefit if you acquire South African denominated securities with offshore exposure.

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