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General Category => Shares => Topic started by: Orca on June 21, 2013, 06:17:33 pm

Title: Tax
Post by: Orca on June 21, 2013, 06:17:33 pm
Quote
Thread split from the investor challenge thread - Patrick

Now you pay tax on your gains as a Trader. Every cent that you gained will be added to any other income you have and be taxed accordingly.
Had you kept the stocks for 3 years, then only 25% of the gains will be added to your income and that is a BIG difference.

In this competition YOU are a fund manager and if you sell your clients stocks before the 3 year rule, they will be taxed as traders.

Moral of the story is: Pick long term stocks. Not trading stocks. This is after all an investment competition.
Title: Re: Tax.
Post by: Patrick on June 21, 2013, 08:54:12 pm
Now you pay tax on your gains as a Trader. Every cent that you gained will be added to any other income you have and be taxed accordingly.

This is the only thing that kept me from offloading all my shares last week. Are you already classed as a trader tgg or have you held your shares for long enough not to be seen as a trader?

As for the contest, next year you'd be able to decide whether you're a trader or investor.
Title: Re: Tax.
Post by: Orca on June 23, 2013, 07:56:30 pm
I have learned my lesson. If you sell, say R1M after a 50% gain and you are in the 40% tax bracket, you will pay an amount of R193 600 tax on your R500k gains after the R16k costs as it will be revenue.
Now as you probably do not have the extra cash on hand, you will withdraw the money from your cash account at your broker to pay SARS. This will leave you with R806 400 in your investment account. A loss of just under 20%.
If you expect the market will drop by more than 20%, then by all means, sell.

I will hold even though I know the VIX is high.
 
 
Title: Re: Tax.
Post by: tgg78703 on June 24, 2013, 10:37:44 pm
I have learned my lesson. If you sell, say R1M after a 50% gain and you are in the 40% tax bracket, you will pay an amount of R193 600 tax on your R500k gains after the R16k costs as it will be revenue.
Now as you probably do not have the extra cash on hand, you will withdraw the money from your cash account at your broker to pay SARS. This will leave you with R806 400 in your investment account. A loss of just under 20%.
If you expect the market will drop by more than 20%, then by all means, sell.

I will hold even though I know the VIX is high.

Your sums and my sums don,t add to the same.

If I Sold R1m after a 50 % gain, it means I invested R666 666 + 50 % R333 333 = R1m. On the R333 333 I pay tax of say 40% R133 333 leaves me with a profit of R200 000. after I withdraw to pay the taxes it leaves me with 30% profit  and a sum of R866 666 to invest again after the market has dropped. I do not expect the market to drop by 20% , but certain shares maybe. But what I normally do is buy into a different share that is oversold and has potential. So i sold bil and lon, which I expect to have a bit of a correction and bought some aeg which I expect will recover somewhat.

I also have losses and make bad choices so, profits are sett off with losses, But in my situation the taxes are different, it all goes through a business, so the R133  333 is mine as well ;)
Title: Re: Tax.
Post by: Orca on June 25, 2013, 11:26:09 am
Sorry. That 50% was supposed to be 100%. Worked on my portfolio where CML has a 70%+ portion.

Fact remains that in my example, I loose 20%. In your example, you loose 13.33%.
Title: Re: Tax.
Post by: tgg78703 on June 25, 2013, 07:44:14 pm
We don,t loose 20 or 13 %, that is our part to finance the powers that be  :'(

I am comfortable being a trader and follow the various market segments, If I was an investor, i would put my my money in a fund, either unit trust or maybe satrix ind. and just sit back and relax.

But the share market is my hobby, like riding bike is to some people
Title: Re: Tax.
Post by: Bundu on July 01, 2013, 10:48:39 am
I quote from the email sent by Patrick:

"Monthly tip courtesy of Orca:
Tax can eat up a huge part of your gains if you sell your shares (for a profit) within three years of purchase. The reason for this is that if you hold you shares for longer than three years and then sell, you'd only pay capital gains tax, which has a maximum percentage of 10%. "


AFAIK the 10% has been at 13.3% for the past two years.....
Title: Re: Tax.
Post by: Patrick on July 01, 2013, 10:54:25 am
Ah that number was my addition. I was under the impression that it was 25% of the capital gain would be added to your income. Meaning a max of 10%. Do you have a sars link?
Title: Re: Tax.
Post by: Bundu on July 01, 2013, 01:38:51 pm
Ah that number was my addition. I was under the impression that it was 25% of the capital gain would be added to your income. Meaning a max of 10%. Do you have a sars link?

http://pghaccountants.co.za/tax-budget-speech-summary-20122013/
and
http://www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page34677?oid=65832&sn=Detail
Title: Re: Tax.
Post by: Bundu on July 01, 2013, 02:20:54 pm
Thanks for letting me know. That sucks on so many levels  :wall:

well, basically it means that where you previously got 75% of your growth tax free, you now only get 66.7% of your growth tax free when keeping your shares > 3 years
Title: Re: Tax.
Post by: Moonraker on July 01, 2013, 03:50:18 pm
Thanks for letting me know. That sucks on so many levels  :wall:

well, basically it means that where you previously got 75% of your growth tax free, you now only get 66.7% of your growth tax free when keeping your shares > 3 years
The inclusion rate is 33.3%
Eg. Let's say after deducting the R 30.000.- annual exclusion applicable to capital gains (and losses),
you have R1000.- gain.
Then apply the 33.3% inclusion rate = R 333.-
That amount must be added to your taxable income.
If your marginal tax rate is 40% then your effective tax on the gain is 13.32%
If your marginal rate is 30% then your effective tax on the gain is 9,99%
Title: Re: Tax.
Post by: Orca on July 01, 2013, 05:49:56 pm
And if SARS sees you as a trader, then the R1000 gain will be added to your income with NO exclusion. If your marginal tax rate is 40% then your effective tax on the gain is 40%. Not so Moon?
Title: Re: Tax.
Post by: Moonraker on July 01, 2013, 06:46:27 pm
And if SARS sees you as a trader, then the R1000 gain will be added to your income with NO exclusion. If your marginal tax rate is 40% then your effective tax on the gain is 40%. Not so Moon?
Yes Orca, if you are a trader. If not then it is 13.32% if your marginal tax rate is 40%.
Title: Tax
Post by: Orca on July 01, 2013, 07:06:19 pm
Help Moon. Just got this email from SARS.

Dear Taxpayer

Taxpayers earning less than R250 000 a year may not have to submit a tax return this year

1 July marks the beginning of Tax Season. As from this date taxpayers can submit their Income Tax Return (ITR12) to the South African Revenue Service (SARS). The good news this Tax Season is that the annual income threshold for submitting a tax return has been raised from R120 000 to R250 000.

This means that any taxpayer earning R250 000 or less during a tax year (1 March to the end February the next year) may not need to submit an income tax return as long as they also meet the requirements listed below.
   ·    You earn a salary from only one employer (i.e. you get only one IRP5 or IT3A certificate)
   ·    You don’t have any other form of income (e.g. interest or rental income)
   ·    You don’t want to claim any tax deductions (e.g. medical expenses, retirement annuity contributions or business travel expenses).

And according to our records from last year you may be one of those taxpayers who no longer needs to submit a tax return to SARS! So if nothing has changed in your tax affairs since last year – and your income for the year is still under R250 000 – you don’t need to complete and submit a return this year.
Title: Re: Tax
Post by: Patrick on July 01, 2013, 07:08:44 pm
I got the same email, how about we move tax to it's own thread.
Title: Re: Tax
Post by: Bundu on July 01, 2013, 07:17:29 pm
that email is genuine Orca

If it affected me, I would however still calculate my own tax and if SARS owes me, I would still submit a return
Title: Re: Tax.
Post by: Bundu on July 01, 2013, 07:25:55 pm
We don,t loose 20 or 13 %, that is our part to finance the powers that be  :'(

I am comfortable being a trader and follow the various market segments, If I was an investor, i would put my my money in a fund, either unit trust or maybe satrix ind. and just sit back and relax.

But the share market is my hobby, like riding bike is to some people

the other point one can make, is that if you are against the trader option, you only have "new Money" available for opportunities that might crop up

.... and some of us have trading AND bikes as our hobbies ;) 8)
Title: Re: Tax
Post by: Orca on July 01, 2013, 07:43:51 pm
That email stated that if I earn less than R250k then I need not submit a return. The threshold is R63556.00 !!!
I don't understand and I'm only on my 2'nd beer.
Title: Re: Tax
Post by: Bundu on July 01, 2013, 07:49:12 pm
don't confuse not having to pay tax and not having to submit a return
it simply means that SARS feels your employer has probably deducted enough tax already and they would rather focus on the higher earners
Title: Re: Tax
Post by: Moonraker on July 01, 2013, 08:27:04 pm
That email stated that if I earn less than R250k then I need not submit a return. The threshold is R63556.00 !!!
I don't understand and I'm only on my 2'nd beer.
No such luck Orca,
Quote
Piet Nel, project director for tax at the South African Institute of Chartered Accountants (Saica), explains that these requirements include that an individual may only earn salary income from one employer. In principle they would only have one IRP5 (a tax certificate from his or her employer), he says.

Additionally, the person may not earn other taxable interest or rental income and is also not entitled to any tax allowances for medical contributions, retirement annuities or business travel expenses.

The government Gazette confirmed that individuals who do earn interest, but would be exempt from paying tax on it because the tax is less than the annual interest tax exemptions (R22 800 for individuals under 65 and R33 000 for persons 65 years and older), would not need to submit a return based on this income alone, he says.

(Gird your loins and grease your skids, tax season is upon us)   :wall:
Title: Re: Tax
Post by: jaDEB on July 02, 2013, 08:49:35 am
I was audited last year, expect it again this year.  :wall:  :wtf: ???

Title: Re: Tax
Post by: gcr on July 02, 2013, 09:38:43 am
You need to be careful regarding the above - this ruling relates to employees and only one employer. If you are a provisional tax payer (if you receive a pension then you are automatically a provisional taxpayer) then this ruling doesn't apply. I have been trying to get Manual/Gordhan to change the way pensions are treated - invariably one normally receives a pension from one pension fund so why the difference in treatment of the employee/pensioner. SARS I am afraid are quite useless and extremely unfair in the way pensioners are treated - if you have some wealth they tax you more viciously than any other tax paying segment. If one looks at the range of taxes you pay it is quite daunting and does nothing encourage people to save in any shape or form, and don't be late or neglect to include any portion of your wealth as the penalties are quite steep.
Title: Re: Tax
Post by: Orca on July 02, 2013, 02:38:03 pm
Another tax question.
If you have your account managed by a brokerage firm in their Managed Portfolio Account such as Imara SP Reid has, and they often swop stocks then you are considered a trader. Losses and gains must be added to your other income.

If you have Unit Trusts that you keep for 10 years and although the stocks within the UT's are also sold and replaced from time to time, you will not be liable for tax until you sell the UT.
Am I correct?
Title: Re: Tax
Post by: gcr on July 02, 2013, 04:20:54 pm
Another tax question.
If you have your account managed by a brokerage firm in their Managed Portfolio Account such as Imara SP Reid has, and they often swop stocks then you are considered a trader. Losses and gains must be added to your other income.

If you have Unit Trusts that you keep for 10 years and although the stocks within the UT's are also sold and replaced from time to time, you will not be liable for tax until you sell the UT.
Am I correct?
I spoke to Simon Brown regarding SARS treatment of an individual who has an investment account with a broker and a trading account with the same broker, he assures me that SARS will treat the activity and the intent on these two accounts separately - so in one sense you are treated as an investor and separately on the trading account you will be assessed as a trader. I did not have long enough to raise all the question I still have but he did say that my broker should be well versed in these matters as they are in fact offering these options to other clients. On the other point, when you complete your e filing SARS return you only need to give base costs and proceeds - there is no room for listing how you arrived at these figures, and the system determines the amount you will be assessed for CGT - however if you have an accumulated loss then this is deducted before CGT is calculated. One of the problems I have is that many of the calculations are hidden to the taxpayer so you never know whether you are being ripped off or not. I have just sold some U/T's because they are not performing and these I have held since the '90's and now in terms of CGT SARS will score exceptionally on an item which wasn't even subject to CGT in the '90's - what they should do is allow you to use the price of the U/T at time of introduction of CGT - but this is unlikely to happen when dealing with an overzealous collector of taxes     
Title: Re: Tax
Post by: jaDEB on July 02, 2013, 04:48:41 pm
Another tax question.
If you have your account managed by a brokerage firm in their Managed Portfolio Account such as Imara SP Reid has, and they often swop stocks then you are considered a trader. Losses and gains must be added to your other income.

If you have Unit Trusts that you keep for 10 years and although the stocks within the UT's are also sold and replaced from time to time, you will not be liable for tax until you sell the UT.
Am I correct?
I spoke to Simon Brown regarding SARS treatment of an individual who has an investment account with a broker and a trading account with the same broker, he assures me that SARS will treat the activity and the intent on these two accounts separately - so in one sense you are treated as an investor and separately on the trading account you will be assessed as a trader. I did not have long enough to raise all the question I still have but he did say that my broker should be well versed in these matters as they are in fact offering these options to other clients. On the other point, when you complete your e filing SARS return you only need to give base costs and proceeds - there is no room for listing how you arrived at these figures, and the system determines the amount you will be assessed for CGT - however if you have an accumulated loss then this is deducted before CGT is calculated. One of the problems I have is that many of the calculations are hidden to the taxpayer so you never know whether you are being ripped off or not. I have just sold some U/T's because they are not performing and these I have held since the '90's and now in terms of CGT SARS will score exceptionally on an item which wasn't even subject to CGT in the '90's - what they should do is allow you to use the price of the U/T at time of introduction of CGT - but this is unlikely to happen when dealing with an overzealous collector of taxes     

there is no room for listing how you arrived at these figures, and the system determines the amount you will be assessed for CGT -

Is correct, but you need to keep record. I was audited last year and had to submit my records.
Title: Re: Tax
Post by: Moonraker on July 02, 2013, 04:50:27 pm

what they should do is allow you to use the price of the U/T at time of introduction of CGT - but this is unlikely to happen when dealing with an overzealous collector of taxes     
But they do !
3. How were unit trust investments valued on 1 October 2001?
The market values of units in domestic unit trusts on 1 October 2001 are available on this website and were also published in Government Gazette23037 of 25 January 2002. These values were based on the average of the closing prices at which units could be sold to the management companies (usually the "sell" price quoted in most newspapers) for the last five trading days before valuation date. This valuation excludes initial costs.

http://www.sars.gov.za/TaxTypes/CGT/Pages/CGT-Value-of-Assets-on-1-October-2001-(Unit-trust-prices).aspx
Title: Re: Tax
Post by: Orca on July 02, 2013, 05:07:49 pm
I have read that you will pay the tax rate at the time you sold and not at today's rate.
Title: Re: Tax
Post by: Moonraker on July 02, 2013, 05:29:20 pm

If you have Unit Trusts that you keep for 10 years and although the stocks within the UT's are also sold and replaced from time to time, you will not be liable for tax until you sell the UT.
Am I correct?
Yes, the collective schemes act means that the UT's don't pay CGT, but as a holder you need to pay CGT when you sell units applying weighted average cost.
Title: Re: Tax
Post by: Patrick on July 02, 2013, 06:15:50 pm
Yes, the collective schemes act means that the UT's don't pay CGT, but as a holder you need to pay CGT when you sell units applying weighted average cost.

Any idea if you'd get taxed as a trader for selling unit trusts before the 3 year period is up? My UT has recently upped the fees and I'd be much happier putting those funds into ETFs.
Title: Re: Tax
Post by: Moonraker on July 02, 2013, 06:52:55 pm
Yes, the collective schemes investment act means that the UT's don't pay CGT, but as a holder you need to pay CGT when you sell units applying weighted average cost.

Any idea if you'd get taxed as a trader for selling unit trusts before the 3 year period is up? My UT has recently upped the fees and I'd be much happier putting those funds into ETFs.
Oh oh, a difficult one. I have never been a UT investor, but would venture to say, seeing that all the trading is done by the UT management companies, one would not get taxed as a trader.
Anyone ?
Title: Re: Tax
Post by: jaDEB on July 02, 2013, 06:53:48 pm
Just finished mine, pressed File ..  :TU:   ??? ??? ???
Title: Re: Tax
Post by: Bundu on July 02, 2013, 07:02:17 pm
Yes, the collective schemes investment act means that the UT's don't pay CGT, but as a holder you need to pay CGT when you sell units applying weighted average cost.

Any idea if you'd get taxed as a trader for selling unit trusts before the 3 year period is up? My UT has recently upped the fees and I'd be much happier putting those funds into ETFs.
Oh oh, a difficult one. I have never been a UT investor, but would venture to say, seeing that all the trading is done by the UT management companies, one would not get taxed as a trader.
Anyone ?

I would think, that as you have a valid reason for selling, i.e. not taking profit, you could get by not being classed as a trader
Title: Re: Tax
Post by: Orca on July 05, 2013, 07:57:58 pm
I was a total noob with tax and investing/trading. I was under the impression that if you realize a gain and you keep it on the JSE, it is NOT "money in the pocket" as I did not withdraw it. So no tax.
How wrong I was. Stoopid me.
Now I have to reconcile tax back to 2007. Doing a "Voluntary Disclosure" will not help as they would say that they would have picked up the error anyway at some stage. This means that I have to pay interest and fines plus the 40%.
Where is van Stadens bridge?

Title: Re: Tax
Post by: Bundu on July 05, 2013, 08:06:41 pm
not sure I'm following you.... AFAIK, with shares, if you are a private entity, you are only liable for tax on any gains once you sell
Title: Re: Tax
Post by: Orca on July 06, 2013, 07:26:09 pm
not sure I'm following you.... AFAIK, with shares, if you are a private entity, you are only liable for tax on any gains once you sell

That's just what I did. Sold and bought back in at every "bad news" to protect my money.  :wall:
Title: Re: Tax
Post by: Orca on July 07, 2013, 07:16:15 pm
Just got all my ducks in a row this weekend. Printed out what I could but will give my accountant my Login details if she needs more info.
Looks bad atm as I really churned my account for 4 years. Mixed trading with investing on the same account.
We live and learn.
Title: Re: Tax
Post by: Patrick on July 08, 2013, 11:00:15 am
Just got all my ducks in a row this weekend. Printed out what I could but will give my accountant my Login details if she needs more info.
Looks bad atm as I really churned my account for 4 years. Mixed trading with investing on the same account.
We live and learn.

Glad you're sharing so the rest of us can learn before we make the same mistake. My new rule of thumb is not to buy anything I'm not willing to hold for three years. And at the moment that means I'll only buy ETFs.
Title: Re: Tax
Post by: Orca on July 10, 2013, 10:51:55 am
tgg said that he uses half of his portfolio to "play around with". That means he does not hold for the 3 year period so his whole portfolio will be seen by SARS to be trading stocks. His gains will then be added to his income or his losses will be deducted from his income.

Had he sold after 3 years, his gains will be separate from his income. He will pay CGT after the R30k exclusion on his total gain.
If he had a loss after the 3 year period, then this loss will carry over and offset from any future gains.

I don't understand how jaDEB got away with paying CGT as I know that he trades his stocks. He did it on efiling and the calculation was automated so perhaps it will be picked up at a later stage. (not sure jaDEB so don't worry).
Title: Re: Tax
Post by: jaDEB on July 10, 2013, 11:24:11 am
No Orca I is cool, no jail time for me. Had a loss last year, and this year my profit was less than R10,000. So yes, when I move in with you big boys, I will pay my dues (tax). Will then just work out my Share tax portion and sell shares to pay it.

But I read an article once, where they said so many people do not make profit (or less profit) cause they do not want to pay tax. The article indicated, why not clap it, make R100k, pay your tax and have R50k. Or sit and be scared, before you wipe u eyes out it went R100k u do not sell, then drops back. Thus u make no profit.

Simple terms, If I kept SGL, not selling it at a profit, I would have made a huge loss. We talking about my portfolio would be halved.
Title: Re: Tax
Post by: Moonraker on July 11, 2013, 06:53:17 pm
Once again being audited by SARS. What really pisses me off is that after uploading supporting documents, I later realised that I forgot those relating to CGT, so logged in again, but then the upload fields are greyed out i.e. not accessible.
Whoever set up the efiling system to prevent those that, due to an oversight, omitted one or other supporting document in the initial upload from later simply being able to upload the document they previously forgot to submit, IS A MORON.


EDIT. I think that if one is not a member of a medical aid scheme (like me), and claims for expenses one will always be audited. Same would probably apply if one has made a donation to a PBO (like me).
Title: Re: Tax
Post by: Moonraker on July 12, 2013, 04:16:16 pm
That's better... Sars commissioner Oupa Magashula quits (http://www.fin24.com/Economy/Sars-commissioner-Oupa-Magashule-quits-20130712)

http://www.sharechat.co.za/forum/topic/20454-our-man-at-sars/?p=207292

 :laugh:
Title: Re: Tax
Post by: jaDEB on July 15, 2013, 06:04:58 pm
http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-CGT-G02%20-%20The%20ABC%20of%20Capital%20Gains%20Tax%20for%20Individuals%20-%20External%20Guide.pdf


 ???
Title: Re: Tax
Post by: Orca on July 15, 2013, 06:19:16 pm
 :wtf: Don't understand nix. Nothing there is for traders.  :frustrated:
Title: Re: Tax
Post by: Orca on July 15, 2013, 06:37:13 pm
Off to see my tax accountant tomorrow. She says that the "Voluntary Disclosure" might not help as they would have picked it up sooner or later.
VD only helps for certain businesses that can easily hide income from SARS. Churning your JSE stocks WILL get picked up eventually.
So now it is fines, penalties and interest. Plus everything is added to my income. :wall:
Title: Re: Tax
Post by: gcr on July 15, 2013, 06:54:47 pm
Off to see my tax accountant tomorrow. She says that the "Voluntary Disclosure" might not help as they would have picked it up sooner or later.
VD only helps for certain businesses that can easily hide income from SARS. Churning your JSE stocks WILL get picked up eventually.
So now it is fines, penalties and interest. Plus everything is added to my income. :wall:
Orca - I don't know whether it will help, but, maybe you need to argue with SARS on the basis that your intent has always been to obtain growth to lessen the likelihood of you making a claim to the state for financial support and also to be self supporting. Further you have a financial responsibility to yourself to protect yourself from market crashes and what transpired in 2007/8 was the second most severe market correction since the depression of 1929/30. Simple fixed investments are for short period of time and yet there is no CGT for not holding a fixed deposit for longer than 3 years so why is SARS targeting investors in the share market with tax on turnover of shares, CGT, and withholding tax - they are being grossly avarice towards a segment of the investing public and they only share in the growth of shares and give back nothing when a tax payer incurs substantial losses. They are not dealing with investors in a very even handed manner at all
Title: Re: Tax
Post by: Moonraker on July 15, 2013, 07:01:25 pm
gcr, did you see my post re: your UT base cost grievance ?

http://www.shareforum.co.za/shares/tax/msg1251/#msg1251
Title: Re: Tax
Post by: gcr on July 16, 2013, 09:39:12 am
gcr, did you see my post re: your UT base cost grievance ?

http://www.shareforum.co.za/shares/tax/msg1251/#msg1251
Yup did thanks and have amended my figures for SARS accordingly
Title: Re: Tax
Post by: Moonraker on July 16, 2013, 01:23:19 pm
When SARS has accepted your supporting documents (after audit), you will receive a letter notification (get it in efiling under the SARS correspondence section). Mine just received looks like this ...

Title: Re: Tax
Post by: Orca on July 21, 2013, 03:55:33 pm
Delusionsofgrandeur has a problem now. He closed his FNB account and moved overseas. Then he decided to send money on a regular basis back to SA and had a family member open an account in that family members name and Delusion has paid R200k into it. Now it gets tricky as he also wants to trade it.

Firstly, his family member will be liable for tax on any interest on the R200k for his own account.
He can trade the money if his family member hands in a Power of Attorney letter allowing Delusion to trade it.
Now once again, any gains he makes will be for his family members account tax wise.
When he decides to come back to SA and his family member transfers everything into Delusion's new account, this family member will in effect be making a donation to Delusion and Delusion will have to pay donation tax.

My reply to him would be to reopen his old account as it should still be available and FICA'd with the help of his family here. Then he will make life much easier for himself and his family member.

Am I correct?

Title: Re: Tax
Post by: Orca on July 21, 2013, 06:10:30 pm
While I'm on the subject of Donations Tax. A while back when I was more ignorant on tax matters, I thought I was clever by donating half my stocks to my wife to divide my tax burden. This can be done tax free and even my broker was about to transfer the stocks when I found out that it would not work.
According to SARS, any profits made on this donation will still be for my account. Not my wife's.
Title: Re: Tax
Post by: Orca on July 24, 2013, 07:51:51 pm
Delusion got Delusioned and ducked.
Title: Re: Tax
Post by: Orca on July 25, 2013, 11:12:18 am
Just received a quote from a tax accountant to reconcile my trading since 2009. Came to R6 000.00.
Voluntary Disclosure done but no reply from SARS yet.
Title: Re: Tax
Post by: Patrick on July 25, 2013, 01:14:55 pm
Not too bad considering how often you were selling.
Title: Re: Tax
Post by: Bundu on July 25, 2013, 01:36:05 pm
Just received a quote from a tax accountant to reconcile my trading since 2009. Came to R6 000.00.
Voluntary Disclosure done but no reply from SARS yet.

.... and surely you can deduct the R6k from your income over that period
Title: Re: Tax
Post by: Orca on July 25, 2013, 02:40:22 pm
Yes, that R6k is peanuts considering my rough estimate of the tax will be around R400k. :wall:
Title: Re: Tax
Post by: Orca on July 25, 2013, 06:47:53 pm
For those that don't have a pension fund like me and use their investments for income. It just hit me. A dodo as I am with tax.
I was under the stoopid impression that if you withdraw R30k pm then as a "trader" you must add that R30k as income. Not so.
It is the diffs between the base cost and the present price when you sell and it is a fraction of the R30k that I thought it was.
Will do some more sums this weekend using Moon's video and post back. Thanks Moon.
Title: Re: Tax
Post by: Orca on July 26, 2013, 01:23:38 pm
Very interesting. To me anyway.
Taxable income = [number of shares sold X price] minus [number of shares sold X base cost]

Withdraw R30k pm for one year = R360k
Taxable income = R93 780.00 which is under the threshold so no tax.

Had you invested R2m in a hypothetical 60% pa performer or 5%pm and withdrawn R30k pm then after one year, your portfolio would grow to R3.114m.

Title: Re: Tax
Post by: Orca on July 26, 2013, 07:32:09 pm
Eish, and that is not even taking divies into the equation. :)
Title: Re: Tax
Post by: Bundu on July 26, 2013, 07:41:38 pm
true, but by the time the dividends reach you, SARS has already taken their undeserved share of 15%
Title: Re: Tax
Post by: Nivek on July 27, 2013, 07:55:42 am
Had you invested R2m in a hypothetical 60% pa performer or 5%pm and withdrawn R30k pm then after one year, your portfolio would grow to R3.114m.

Agreed, now can you tell me which will be next years 60% share :LHST:
Title: Re: Tax
Post by: Orca on July 27, 2013, 04:35:10 pm
Not difficult to find them. They are there but this is a tax thread. 8)
Title: Re: Tax
Post by: Orca on July 27, 2013, 08:58:28 pm
Will post my 60%+ stocks on the Long Term Portfolio thread.
Title: Re: Tax
Post by: Moonraker on July 28, 2013, 02:39:11 pm
While I'm on the subject of Donations Tax. A while back when I was more ignorant on tax matters, I thought I was clever by donating half my stocks to my wife to divide my tax burden. This can be done tax free and even my broker was about to transfer the stocks when I found out that it would not work.
According to SARS, any profits made on this donation will still be for my account. Not my wife's.
Yeah, it's a confusing matter. If you transfer assets to your spouse (shares included), you should in my opinion be subject to rollover relief. However be wary of this:
Quote
Transfers of assets between spouses for the purpose of tax avoidance may result in the capital gain or loss arising in the hands of the transferee spouse being attributed to the transferor spouse under para 68.
Check point 3 below:
Quote
[email protected]
1.What does roll-over mean and what assets disposed of are subject to roll-over relief?

Where assets are subject to roll-over it means that a CGT liability does not arise upon disposal but is rather deferred until a subsequent event to the extent that proceeds from the disposal are invested in a replacement asset. In the case of transfer of assets between spouses, the spouse disposing of the asset is treated as having disposed of the asset at an amount equal to its base cost and the spouse receiving it is treated as having acquired it at a cost of the same amount.

Assets disposed of under the following circumstances are subject to roll-over relief:

1. Involuntary disposal of certain assets under certain circumstances (Para. 65)

2. Reinvestment in replacement assets, under certain conditions (Para. 66)

3. Transfer of assets between spouses (Para. 67)

Quote
Paragraph 67(1)(a) provides that the disposing spouse must disregard any capital gain or loss when disposing of an asset to his or her spouse.
13.3.3 The transferee (acquiring) spouse
Paragraph 67(1)(b) ensures that the spouse to whom an asset is disposed of takes over all aspects of the history of the asset from that person’s spouse and where applicable, from the executor of the deceased estate of that person’s spouse,494 namely,
• the dates of acquisition and incurral of expenditure,
• the expenditure incurred,
• the currency in which the expenditure was incurred,495
• the usage, and
• any amount received or accrued in respect of the asset that would have constituted proceeds on disposal of the asset had it been disposed of to a person other than the transferee.496
494 Paragraph
Title: Re: Tax
Post by: Orca on July 28, 2013, 08:06:52 pm
Thanks Moon. Now as I am a Trader according to SARS. Only 25% of my loss will be carried over to the following year. Is this correct?
Title: Re: Tax
Post by: Orca on August 12, 2013, 07:13:38 pm
Just got back from my accountant. Seems very bad for me. Short story:

R720k in managed account in end 2007. By 2009, it had dropped to R420K then sold all.

Took over the account myself and traded it back into profit after 3 years.

During this time I never divulged my trading activities to SARS. I did not know that one had to if you don't actually transfer the money into your pocket. Stupid me.

I have now "churned" my portfolio to over R2m.

 

Now my accountant has put me in a spot. Ask SARS for a VDP (Voluntary Disclosure Progamme) and if granted, the losses will NOT carry over to the next year. Every year will start anew.

 

Do not ask for VDP and I will pay double the tax owed plus interest and penalties. :wall:

 

This is a warning to traders that don't divulge their trades. They WILL pick it up.

 

 
Title: Re: Tax
Post by: Aragorn on August 13, 2013, 08:41:44 am
Now my accountant has put me in a spot. Ask SARS for a VDP (Voluntary Disclosure Progamme) and if granted, the losses will NOT carry over to the next year. Every year will start anew.

Do not ask for VDP and I will pay double the tax owed plus interest and penalties. :wall:

 
Eish!!!!! That must put a dent into your Portugal plans?
 :(
Title: Re: Tax
Post by: Orca on August 19, 2013, 03:31:53 pm
Open stock. Yearly trades. Closing stock. Wieghting costs. What a shambles. Took me a week to attempt 1 of 7 years then gave up as did my accountant.
Had a couple of coronary events and infarctions before TheImposter on the other site came to my rescue. He is a CA and did my 2012 tax in less than 5 minutes for me.
Today I did 4 of the 7 years so only 2 left. What an easy method. :TU:

I now realize that most accountants do not understand complex trading accounts if they themselves do not trade or experienced trading tax like mine.
Brokers seem to use a standard program to simplify tax. You must just know how to use it.
Title: Re: Tax
Post by: Bundu on August 19, 2013, 03:42:29 pm
if for example you sell some shares that you have held for only a year and also sell others that you have held for more than 3 years, will you automatically be taxed on the longer than 3 years held shares at PAYE rates or can you assume that those will be taxed at CGT?
Title: Re: Tax
Post by: Orca on August 19, 2013, 07:08:31 pm
Forget it. Your gains will be added to your income at 100%. I still have a prob with trading stocks ie. If you stop trading the stocks for 10 years, SARS will still consider them as "Trading Stocks".
How to get out of this, I don't know. I believe that if you change your stocks from Trading Stocks to Investing Stocks, you must consider your stocks as SOLD at some point and pay gains at 100% into your income. This is "Change of Intention" clause.
I need more clarity on this.
Title: Re: Tax
Post by: Bundu on August 19, 2013, 07:14:30 pm
But surely a portfolio could consist of two parts, one part being long term investments and the other short term, i.e. trading
Title: Re: Tax
Post by: Orca on August 19, 2013, 07:31:24 pm
But surely a portfolio could consist of two parts, one part being long term investments and the other short term, i.e. trading
That is the way to go. Split the 2. I never did and will pay for my mistake.
Title: Re: Tax
Post by: Bundu on August 19, 2013, 07:43:25 pm
But surely a portfolio could consist of two parts, one part being long term investments and the other short term, i.e. trading
That is the way to go. Split the 2. I never did and will pay for my mistake.

Orca, could you maybe ask TheImposter if that would be acceptable to SARS?
Title: Re: Tax
Post by: gcr on August 19, 2013, 08:37:38 pm
I raised the issue with Simon Brown of JustOneLap.com fame who runs the Power Hour at the JSE monthly - he said you need to speak to your broker and partition your accounts - termed trading accounts by most brokers. One would be designated as an investment account and the other a real trading account where your frequency of buying holding and selling happens within the 3 year window - this account is flagged as a trading account where profits and losses will be treated as income and expenditure. I presume home computer costs and office usage and packages can all be treated as deductions from revenue. The other account would be subject to the 3 year resell criteria imposed by SARS. The essence is you do need to have 2 separate accounts for appropriate treatment by SARS - if you give up trading then you merely let your trading account become dormant, because to reclassify a trading account to an investment account in SARS eyes is going to be an absolute mission
Title: Re: Tax
Post by: Bundu on August 19, 2013, 08:48:00 pm
thanks gcr - I will have to find out if ABSA even offers dual accounts - seems like quite a schlepp, but it would be a PIA to pay full tax in single year on a shares growth over three years, just because you sold a trading share....
Title: Re: Tax
Post by: tgg78703 on August 19, 2013, 09:32:08 pm
I doubt that anyone of  the share trading platforms can seperate trading from investing, they just send sars a reconcile of your trades for the year. profits made losses made.

It will be for  your tax person  to do the to reconciling and motivation. Happened to me when I inherited shares from my father and they were transferred onto my account at his cost. The estate had already paid all the taxes, but they reflected on my trading account at a massive profit, I sold most of them and the profit was adjusted to the actual value at time of transfer.

But only after I pointed this out to my tax person. They are it would appear not to clued up on this.

So the same should happen on your tax return. The tax person should point out that profits made on a certain share where l/t and not trading.

Just read this please

    http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G11%20-%20Tax%20Guide%20for%20Share%20Owners.pdf
Title: Re: Tax
Post by: Bundu on August 19, 2013, 09:43:10 pm
I have previously read through that SARS doc and that's why I'm assuming 3 years is 'safe' - and that you can actually motivate shorter periods as not being a 'trader' - surely SARS can't conveniently assume if you 'trade' one share, you are now a trader - fukkkkem!  :mad:
Title: Re: Tax
Post by: gcr on August 20, 2013, 10:08:22 am
I have previously read through that SARS doc and that's why I'm assuming 3 years is 'safe' - and that you can actually motivate shorter periods as not being a 'trader' - surely SARS can't conveniently assume if you 'trade' one share, you are now a trader - fukkkkem!  :mad:
I concur with your last comment. I had dealings with SARS last week and they are the most arrogant collection of people I have come across, and they hide behind the Act and won't negotiate on any matter - there is no grey area whatsoever. They frequently hold themselves up as one of the primary operations within government who work efficiently and effectively but in reality the intelligence levels are pretty dismal
Title: Re: Tax
Post by: Orca on August 20, 2013, 08:15:36 pm
I dunno now. Breezed through my 2013 to 2009 and came up to a problem. I went from front to back. My 2008 was a Managed Account and they split my account. One in the old and then a new one that I never knew about. I had no access to it. R33k was transferred to into it with 4 stocks and no indication of any Sell ever. Only Buy in the old account. SARS will want to know about this. "Burp"
Title: Re: Tax
Post by: Bundu on August 20, 2013, 08:48:57 pm
AFAIK SARS is only interested when you sell something
Title: Re: Tax
Post by: Moonraker on September 09, 2013, 07:06:44 pm
Direct payments from eFiling axed (http://www.moneywebtax.co.za/moneywebtax/view/moneywebtax/en/page259?oid=80339&sn=Detail&pid=1)

It's to be 'credit push'  for security reasons.
Title: Re: Tax
Post by: Orca on September 15, 2013, 07:40:47 pm
Change of intention. How confusing and open ended.

If you had been buying and selling then you are considered as a trader and all your gains are taxed as income. Now if you keep those same shares for 10 or 20 years, they will still be seen by SARS as Trading Shares and will be taxed as Income and not CGT.

The only way to get your "Change of Intention" from Income to Capital Assets is to close your stocks at market value and pay the tax as income. You don't actually have to Sell. You just have to deem them as Sold and pay accordingly. From then onward,  they will be subject to CGT if you keep them for at least 3 years.

I will add the complications of this in a latter post.



Title: Re: Tax
Post by: Patrick on September 16, 2013, 10:49:39 am
I have another weird tax question.

Let's say you have no other income besides dividends, obviously you pay dividends withholding tax before the money gets into your account, but come tax season, will you be entitled to the primary rebate on some of those dividends?
Title: Re: Tax
Post by: Moonraker on September 16, 2013, 11:00:33 am
I have another weird tax question.

Let's say you have no other income besides dividends, obviously you pay dividends withholding tax before the money gets into your account, but come tax season, will you be entitled to the primary rebate on some of those dividends?

Well the only income you have from dividends will be declared under 'exempt local and foreign dividends' under 'amounts considered non-taxable'.
So you will pay nil tax (withholding tax has already been deducted). Consequently there is nothing to deduct a rebate from. It would be a miracle if SARS would allow one to deduct the rebate(s) from nil, and credit you accordingly.
Title: Re: Tax
Post by: Orca on September 17, 2013, 05:38:49 pm
A Tax 22 situation. I don't expect my 3 shares to make any more gains. Actually I expect them to tank and stay down for months. I cannot sell them as my calculations show that if I do then my Tax Owing will be R360k.  :wall:
Selling and buying new stocks will cost another R70K. So now I'm stuck in the brown stuff.  :-[
Title: Re: Tax
Post by: Orca on September 17, 2013, 07:30:16 pm
 :wtf: Yesterday I went on SARS website and checked that the "RFC" ie Request For Correction is there. Today I can't find it as I want to correct my returns. It showed that my Adobe is outdated and I updated it. Flash player and reader. Still nix.
Went over to Internet Explorer and SARS shows that I need the latest Adobe??? WTF. I have it.
Went back to Google Chrome and still no RFC. Where has that gone?
have they changed their website?
 
Title: Re: Tax
Post by: jaDEB on September 18, 2013, 08:11:17 am
I remember when I did mine,  I use windows internet explorer and Firefox. So open it with explorer see if it works, if not, try Firefox. I remember one did work lekker, and the other did not. just cannot remember which 1.
Title: Re: Tax
Post by: Moonraker on September 18, 2013, 02:57:41 pm
:wtf: Yesterday I went on SARS website and checked that the "RFC" ie Request For Correction is there. Today I can't find it as I want to correct my returns. It showed that my Adobe is outdated and I updated it. Flash player and reader. Still nix.
Went over to Internet Explorer and SARS shows that I need the latest Adobe??? WTF. I have it.
Went back to Google Chrome and still no RFC. Where has that gone?
have they changed their website?
What version of flash player do you have installed ? http://www.adobe.com/software/flash/about/
What is your operating system ? If Android there is an app http://www.sars.gov.za/AllDocs/OpsDocs/Brochure/IT-BR007%20-%20How%20to%20download%20the%20SARS%20eFiling%20App%20Android%20-%20External%20Brochure.pdf

With my Linux I needed to install Google Chrome that comes with Pepperflash, being latest flash version. Adobe no longer supports the latest players in Linux - only Chrome will work.
Title: Re: Tax
Post by: gcr on September 18, 2013, 03:00:11 pm
Orca - if you are having to recompile your tax returns and SARS are seeing your transactions as a "trader" rather than an "investor" and thus have to declare your gains as revenue, then surely you can recompile on the basis of lumping these funds together with any other revenue but then you are allowed to make deductions for office space, telephones, cost of operation i.e. normal tax deductible expenses. Also through the latter part od 2007 and into 2008 did you not suffer any losses on sale of shares which would be considered business losses and could also reduce revenue so that you don't end up paying your life's investments to a rather dubious crowd of people
Title: Re: Tax
Post by: Orca on September 18, 2013, 03:52:13 pm
Just got back from SARS. My tax loss from the 2008/9 crash amounts to -R284k but they say it has prescribed so the loss will not carry over.
Any tax loss or money due older than 3 years is prescribed but money owed by you never prescribes.
This will now cost me plenty. The auditors will get back to me within 3 weeks.

Got sorted with the Request for Correction. I had already clicked on it so it stayed open although I could not see it.
Title: Re: Tax
Post by: gcr on September 18, 2013, 04:20:36 pm
Just got back from SARS. My tax loss from the 2008/9 crash amounts to -R284k but they say it has prescribed so the loss will not carry over.
Any tax loss or money due older than 3 years is prescribed but money owed by you never prescribes.
This will now cost me plenty. The auditors will get back to me within 3 weeks.

Got sorted with the Request for Correction. I had already clicked on it so it stayed open although I could not see it.
Orca - since you were unaware of the fact that they were treating you as a trader I believe they should waive the prescription period - I would approach their appeals board to get them to apply leniency. The reality is they can't hide behind the Act when it suites them and then chose to ignore under different circumstances
Title: Re: Tax
Post by: Orca on September 18, 2013, 06:00:15 pm
Thanks gcr. I will most certainly appeal it. Must do some research first.
Title: Re: Tax
Post by: Orca on September 18, 2013, 06:52:13 pm
Found this. Can someone please translate it into English please.

Prescription of a tax assessment is an important and powerful tool for a taxpayer when it comes to obtaining certainty in respect of one’s tax affairs and can serve as an important defence when disputing an assessment.  Prescription is governed by section 99 of the Tax Administration Act No. 28 of 2011 (“TAA”).



A three year prescription period applies where the South African Revenue Service (“SARS”) has had a previous opportunity to assess a taxpayer (such as in the case of income tax) and a five year prescription period applies in the case of a self-assessment tax (such as value-added tax (VAT) and employees’ tax (PAYE)).

Generally, the prescription period that prohibits SARS from issuing an assessment does not apply if the reason why the full amount of tax was not charged was due to fraud, misrepresentation or non-disclosure of material facts.  When the tax is a self-assessment tax, the basis on which the period of limitation does not apply differs in that it refers to fraud, as well as intentional and negligent misrepresentation or non-disclosure.

The prescription period that prohibits SARS from issuing an assessment will also not apply where SARS and the taxpayer so agree prior to the expiry of the limitations of time.  Practically, such agreements are often entered into when SARS is conducting an investigation into a complex matter which involves the auditing of substantial information and facts.

Clause 34 of the 2013 Draft Tax Administration Laws Amendment Bill (“the Bill”) provides for an additional circumstance where the period of prescription can be extended.  It proposes to amend section 99 of the TAA by inserting a new subsection (3) which will provide for the extension of the prescription periods where “a taxpayer without just cause fails to submit relevant material requested by SARS for purposes of verification, inspection or audit ... commencing on the day that the relevant material was required to be submitted and ending on the day that the taxpayer submits the relevant material.”

The proposed amendment accordingly appears to have the effect of allowing SARS to extend the prescription periods provided for in section 99 of the TAA where a taxpayer exhibits a certain behaviour vis a vis the provision of information to SARS, assuming SARS was entitled to request the information in the first place.  What is unclear from the provision is what  would constitute “without just cause” where there is a delay in a taxpayer providing information and practically, what interaction is required, if any, where the period for prescription is extended in terms of this provision.  In challenging any assessment, a taxpayer can raise prescription as a ground of objection.  Accordingly, where SARS has relied on this proposed new provision in issuing an adverse assessment on the basis that the period of prescription has been extended due to the taxpayer’s behaviour, this should be able to be dealt with by a taxpayer in the objection and appeal process.

This new proposed provision certainly places an additional burden on taxpayers as regards the timeous provision of information to SARS and may have the effect of weakening the important defence for a taxpayer which prescription presents.  It is certainly a departure from the tool which is currently available to SARS to extend a prescription period which involves participation by the relevant taxpayer, namely where SARS and a taxpayer may enter into an agreement in respect thereof and it could be used by SARS to its strategic advantage when it comes to late requests for information when the prescription date for an assessment is looming.

Due to the important role which prescription can play in tax disputes, it is crucial for taxpayers to be aware of the prescription status of assessments and what rights are available in respect thereof.  Should the new proposed amendment to section 99 of the TAA be adopted by Parliament in the form discussed in this article, taxpayers should be vigilant in respect of information requests from SARS and deal with same fully and timeously.

Title: Re: Tax
Post by: Orca on September 18, 2013, 07:38:28 pm
Here is the latest one.

TAX ADMINISTRATION

2195. Prescription

APRIL 2013 – ISSUE 163

 

 

The coming into force of the Tax Administration Act (TAA) has brought the issue of prescription into sharp focus. There are two reasons why this is so: firstly, the standard prescription period of three years has been extended to five years for ‘self-assessments’, and secondly the assessment returns seem to require only limited disclosure and taxpayers are left wondering whether the limited disclosure affords them the prescription protection they need.

The reason for the extension of the basic period of prescription from three to five years is to accommodate the system of self-assessment. In light of the fact that the bulk of current assessments are completed on a ‘self-assessment’ basis, SARS requires a longer period in which to interrogate and audit the assessment. Self-assessments require no thought process from an assessor; they are simply captured by the SARS computer system, and theoretically could run the course through to prescription without any intervention in the form of a revenue official applying his mind. Prior to the e-filing self-assessment era, all income tax returns were subject to an assessment of sorts by an assessor whose job it was to identify and query anything problematic. That no longer applies and SARS requires a longer period to enable them to run risk assessment programs or analytics on returns which should identify potentially contentious issues and leave them time to query and reassess where necessary.

The TAA specifically defines a ‘self-assessment’, which on the face of it, gives rise to a surprising result since income tax returns would not constitute ‘self-assessments’ as defined, since self-assessments require a determination of the tax due whereas income tax returns, for companies and individuals, do not require any such determination. On that basis, these returns, not being self-assessments, would be subject to the three year rather than the five year prescription rules.

Whether the three to five year prescription rule applies, the protection afforded by prescription is extremely important for all taxpayers and indeed for SARS too. Taxpayers, who have made full and complete disclosure, are entitled to know that at some point they are beyond the stress of a SARS audit, and SARS needs to ensure that its system highlights and red-flags for query and audit, all those returns which warrant such attention, prior to the prescription period expiring.

In order for this system to work, it is clear that comprehensive and accurate disclosure on well-designed tax returns is critical. Oddly, the standard company tax return remains relatively abbreviated and one would expect in future, for example, a more comprehensive list of questions which would be required to be completed. The e-filing system does not require the submission of supporting schedules or even financial statements – these must simply be prepared and retained on file – so the taxpayer actually has limited opportunity for disclosure even should he wish to disclose more than the return demands. What happens, for example, when a taxpayer claims as a deduction an item which is not separately disclosed on the return, in a situation where the deductibility is somewhat debatable (as frequently happens in tax matters)? One option would be to retain an opinion on file supporting the claim, but that is not always practical. While the system of return disclosure remains in its current imperfect state, it is inevitable that disputes will arise with taxpayers claiming prescription on the one hand, while SARS on the other contests items on returns that have nominally prescribed.  Some legal precedent on this question involving a dispute on an assessment in the e-filing era would be particularly helpful.

Ernst & Young
TAA: Section 1 Definition of ‘self-assessment’
Title: Re: Tax
Post by: Moonraker on September 30, 2013, 03:10:43 pm
Why You Should Keep Shares For at Least Three Years

The tax consequences of not doing so could prove extremely costly

It is common knowledge that investing takes time and patience,and that the chances of a good return are increased the longer the investment horison.From an income tax perspective, there's also an incentive to hold shares for at least three years before selling them.

This is because of the ‘safe haven’ tax rules in Section 9C of the Income Tax Act, which provide that the proceeds from the sale of shares (with certain exceptions) are automatically deemed to be capital if held by the taxpayer for at least three years.

This essentially means that the more favourable capital gains tax rate (a maximum rate of 13.3%, as opposed to the income tax rate of a maximum of 40%) will apply to profits made on shares that are held for three years or more.

Where shares are held for less than three years, the normal rules governing capital gains versus income gains must be applied to determine whether the gain is capital or income in nature. If the gain is capital in nature, the capital gains tax rate will apply; and if it is income in nature, the income tax rate will apply.

There is a large volume of legal precedent governing the distinction between capital and income gains,and the approach of the courts has been to place a high emphasis on the intention with which the taxpayer acquired the shares—was the dominant purpose for investment (capital) or was it for speculation (income)?

 Speculation concerns the subsequent sale of the shares at an increased price, whilst investment is the holding of the shares more or less ‘for keeps’ in order to earn dividend income.However, a potential problem that a taxpayer faces with regard to the argument that he acquired shares in order to earn dividend income is that the dividend yields of shares on the JSE are generally extremely low,and it is therefore often difficult to argue that this is a rational investment strategy.

Our strongest case law on this issue, much of which was decided in a time when dividends were relatively higher, would certainly not prove helpful to a taxpayer who, in addition to earning dividend income, sought to bolster the performance of the portfolio by selling at a profit to any meaningful degree.

Two cases in point: In the case of Tod, which was decided in the Natal Provincial Division of the High Court in 1983, the taxpayer was retired and lived almost entirely on the dividends from his shares. Tod had embarked on a plan in order to increase his annual dividends, whereby he would purchase a share on which a dividend was imminent, and as soon as the dividend had been declared, he would sell the share,usually at a profit.

The court held that in order for profits on the sale of shares not to be subject to income tax, the taxpayer must have a dominant purpose of maximising dividend income, and that any selling of shares must be ‘purely incidental’ to this objective.Tod's share transactions were held not to be purely incidental to the objective of maximising dividend income, and the proceeds were subject to income tax.

In Nussbaum's case, which was decided in the Appellate Division of the High Court in 1996, Nussbaum was a retired schoolteacher who had inherited a substantial share portfolio.He testified that he always acquired shares for the earning of dividend income, and that he had never bought a share for profitable resale;however, his modus operandi was to sell a share if the dividend yield had fallen to unacceptable levels.

Since a fall in the dividend yield was generally caused by an increase in the price of a share, Nussbaum generally made profits,and the court found that even though he had the primary purpose of earning dividend income, there was a ‘secondary purpose’ of dealing in shares, which rendered profits subject to income tax.

Market conditions aside, it is therefore wisest from a tax perspective to wait a minimum of three years before selling shares.

Source: By David Warneke (Tax breaks)

 8)




Title: Re: Tax
Post by: Orca on September 30, 2013, 04:01:22 pm
Thanks Moon. I still can't find anything on this situation.
Hold the shares for 4 years and then start selling portions per month to supplement income. Will it be seen by SARS as income or CGT?
Title: Re: Tax
Post by: Bundu on September 30, 2013, 04:12:40 pm
obviously CGT, as every sale you make, is of shares that you've owned longer than 3 years
Title: Re: Tax
Post by: Nios on September 30, 2013, 07:57:39 pm
What about if you buy shares/etf's monthly over a period of 3years? There's going to be 12 transactions a year 36 transactions in total. Does it mean if you sell all in month 37 you'll only pay cgt?
Title: Re: Tax
Post by: Bundu on September 30, 2013, 08:04:12 pm
What about if you buy shares/etf's monthly over a period of 3years? There's going to be 12 transactions a year 36 transactions in total. Does it mean if you sell all in month 37 you'll only pay cgt?
if you sell all in mnth 37, you'll pay CGT on one month and PAYE on 35 months - gotta own the shit for 3 years
Title: Re: Tax
Post by: Nios on September 30, 2013, 08:47:11 pm
Was hoping this wasn't the case. Simpler way to look at it is if 100 shares/units purchased p/month over 36 month period you'd only be able to pay cgt if you sold 100 of them every month from month 37 for the next 36 months.
Title: Re: Tax
Post by: Bundu on September 30, 2013, 08:52:29 pm
that would work - main thing is, when you sell, you gotta tell SARS the date that you bought the shares that you are now declaring and it has to be 3 years prior, or you will have to motivate that there was some problem that changed your long term intent, in order to not pay PAYE
Title: Re: Tax
Post by: Orca on October 01, 2013, 01:09:17 pm
Just when I thought I was getting a grip on the tax, I read this in the Comprehensive share holder guide.
Not all sales of shares trigger a tax event.
If you rebalance your portfolio by selling some of share X and adding to share Y within 45 days then;
If you made a gain of R2 000 on the sale of X then this gain must be deducted from the cost price of share Y. This lowers the Base Cost of share Y.

If you made a loss of R2 000 then you must add R2 000 to share Y. This increases the Base Cost of share Y.
 :wall:
Title: Re: Tax
Post by: Bundu on October 01, 2013, 01:23:22 pm
interesting Orca - I was not aware of that - In what document on which page can that be found?

That could come in handy if you want to move your gain into a new tax year....
Title: Re: Tax
Post by: Patrick on October 01, 2013, 01:43:31 pm
Just when I thought I was getting a grip on the tax, I read this in the Comprehensive share holder guide.
Not all sales of shares trigger a tax event.
If you rebalance your portfolio by selling some of share X and adding to share Y within 45 days then;
If you made a gain of R2 000 on the sale of X then this gain must be deducted from the cost price of share Y. This lowers the Base Cost of share Y.

If you made a loss of R2 000 then you must add R2 000 to share Y. This increases the Base Cost of share Y.
 :wall:

Very interesting indeed. Please let us know where you found this. I'd love to know if this would apply to the sale of my unit trusts and purchasing of ETFs as I'm dying to do that but won't if I must pay income tax.
Title: Re: Tax
Post by: Moonraker on October 01, 2013, 01:56:34 pm
I think Orca found it under Chapter 9 of the Comprehensive guide to CGT which you can get from SARS site.

In a nutshell, form the guide:-

Mark buys 500 shares of Effe Ltd listed on a recognised exchange for R10 000 and sells them on 20 February 2002 for R3 000. On 1 April 2002, he buys 500 shares of Effe Ltd for R3 200

Result:
Since the shares were repurchased within 45 days of loss-sale date, para 42 applies. Mark cannot claim his R7 000 loss. Instead, he must adjust his base cost for the ‘repurchased’ shares. The base cost under para 42(1)(a) and (b) for his ‘new’ shares will be R3 200 (the actual cost) plus R7 000 (the held-over loss), therefore R10 200.
Mark would also be affected by this paragraph if he had purchased his ‘new’ shares on 24 January 2002 and then made the loss sale on 20 February 2002. On the other hand, if Mark had waited and repurchased the 500 shares 46 days after the sale, para 42 would not apply and the R7 000 capital loss would be allowable. The base cost of the 500 shares repurchased would equal the cost actually incurred.



Edit: Must be the same share, not share X and then purchase share Y
Title: Re: Tax
Post by: Orca on October 01, 2013, 02:21:04 pm
Moon is correct. Page 298 onward. It can be the same share or between similar shares of the same quality.
Title: Re: Tax
Post by: Bundu on October 01, 2013, 02:28:17 pm
"same kind and quality" - I wonder how that can be determined?  :o
I'm sure you won't even get two analysts to agree on that
Title: Re: Tax
Post by: Orca on October 01, 2013, 02:47:26 pm
One can use that method only once you have held them for longer than 3 years I presume.
Title: Re: Tax
Post by: Moonraker on October 01, 2013, 02:55:26 pm
"same kind and quality" - I wonder how that can be determined?  :o
I'm sure you won't even get two analysts to agree on that
$9.7
The expression ‘share of the same kind and of the same or equivalent quality’ refers to substantially identical shares in the same company.
Thus a shareholder who held a class A ordinary share in ABC Ltd (a listed company) that was forcibly acquired under s 311 of the Companies Act 61 of 1973, who wishes to take advantage of para 42A, must replace that share with a class A ordinary share in ABC Ltd. In the event that the particular class of share is no longer in issue, the share would have to be replaced with one bearing substantially identical rights
In other words, unless what I have highlighted is the case, it must be the same share.
Title: Re: Tax
Post by: Bundu on October 01, 2013, 05:51:09 pm
"same kind and quality" - I wonder how that can be determined?  :o
I'm sure you won't even get two analysts to agree on that
$9.7
The expression ‘share of the same kind and of the same or equivalent quality’ refers to substantially identical shares in the same company.
Thus a shareholder who held a class A ordinary share in ABC Ltd (a listed company) that was forcibly acquired under s 311 of the Companies Act 61 of 1973, who wishes to take advantage of para 42A, must replace that share with a class A ordinary share in ABC Ltd. In the event that the particular class of share is no longer in issue, the share would have to be replaced with one bearing substantially identical rights
In other words, unless what I have highlighted is the case, it must be the same share.


thanks! that would mean that this option is of very limited value to the average share holder
Title: Re: Tax
Post by: Orca on October 03, 2013, 06:06:09 pm
Now for a more difficult question. I lost R120k in a Forex Trading account in Ireland. Can I use this loss here?
Title: Re: Tax
Post by: Moonraker on October 05, 2013, 03:23:36 pm
Dividends and your tax return (http://spinews.co.za/Mastermind/English/185/27)

Quote
Local dividends
Although dividends withholding tax will automatically be withheld by the dividend-paying company (unless an exemption applies), the tax obligation remains on the shareholder. Dividend withholding tax is a separate tax and does not form part of the normal income tax calculation. This unfortunately does not mean that the taxpayer can ignore the dividends he or she received in their tax return. The gross dividends receipts (pre-dividend withholding tax) must still be included as part of gross income and as a consequence be included in the tax return.   :wtf:

Local dividends are however still fully exempt from normal income tax and as a consequence the amount of dividends included under gross income will then be excluded again under the exempt-income section.

For local dividends it must therefore be included in the return and the full amount excluded again; in other words it will be merely an in-out situation.

I have already completed my return and have been assessed, but certainly didn't add gross dividends to any
sections on the ITR12.
Provision was only made for 'Local Interest Income' and 'Exempt Local and Foreign Dividends'.
To which section on the ITR12 one is supposed to add gross dividends ?

If added to 'Local Interest Income', I would be fully taxed on the gross dividends at my marginal tax rate without
being able to deduct them again as they will not be deducted by showing them under 'Exempt Local and Foreign
Dividends' - they will merely be ignored as amounts considered non-taxable.
Rather confusing as no provision is made for this as far as I can see looking at my ITR12.
Title: Re: Tax
Post by: Orca on October 05, 2013, 08:07:45 pm
Hick. Burp. Look at the time.
Those guys doing CFD's must be hiding their gains. How can one possibly work out tax when you are doing 6 trades per day?
I find it difficult to do 4 per year.
Title: Re: Tax
Post by: yossarian on October 06, 2013, 05:05:48 am
Rather confusing as no provision is made for this as far as I can see looking at my ITR12.
  Yes, I had the same problem...
Title: Re: Tax
Post by: franz on October 06, 2013, 01:56:49 pm
Hick. Burp. Look at the time.
Those guys doing CFD's must be hiding their gains. How can one possibly work out tax when you are doing 6 trades per day?
I find it difficult to do 4 per year.

Orca and all, request a CGT Tax certificate for the Tax Year from your broker, all your trades, gains and losses are calculated for you. My broker is Ned Priv Wealth (previous BoE) and i request a CGT certificate, they charge R 150. and i give that to my accounting firm. I do a lot of trades per year (around 100) and have no problems with tax, pay CGT on my nett gains.
 
Hope this helps
Title: Re: Tax
Post by: Bundu on October 06, 2013, 04:49:07 pm
Hick. Burp. Look at the time.
Those guys doing CFD's must be hiding their gains. How can one possibly work out tax when you are doing 6 trades per day?
I find it difficult to do 4 per year.

Orca and all, request a CGT Tax certificate for the Tax Year from your broker, all your trades, gains and losses are calculated for you. My broker is Ned Priv Wealth (previous BoE) and i request a CGT certificate, they charge R 150. and i give that to my accounting firm. I do a lot of trades per year (around 100) and have no problems with tax, pay CGT on my nett gains.
 
Hope this helps

is that irrespective of how long you owned the share before taking profit?
Title: Re: Tax
Post by: Orca on October 06, 2013, 07:50:09 pm
As franz Trades about 100 times per year, he surely cannot have held them for 3 years. He is trading and should include it as revenue, not CGT. His ITR will eventually get a red flag and get looked at by human assessors. The new Prescription period is now 5 years so he will have his books audited from 5 years ago.
Same as me.  :wall:
Title: Re: Tax
Post by: franz on October 07, 2013, 07:59:20 am
Hi guys, all my taxes are handled by my accountants and submitted to SARS, i might be mistaken i understand as i get a CGT certificate from my broker that all my nett gains are subject to CGT. As i have other business income and supose all gains/losses are added/subtracted together.

I definetely will bring this up at our next meeting will keep you guys informed.
Title: Re: Tax
Post by: Orca on October 07, 2013, 09:17:14 am
I also get a "Holdings Report for CGT" every year that shows my totals of stock brought forward, Purchases, Sales and stock caried over. Then in small print it states that the report is to be used acording to my tax status for CGT or Income.
Title: Re: Tax
Post by: smiley on October 08, 2013, 01:23:42 pm
Come on guys, play nice

No vulgar language and targeting of individuals. Everyone is here to learn from each other.
Title: Re: Tax
Post by: Orca on October 08, 2013, 01:29:36 pm
Come on guys, play nice

No vulgar language and targeting of individuals. Everyone is here to learn from each other.
Wasn't me. Was my pal alf. He even gave me a "smite".  :TU:
Title: Re: Tax
Post by: Moneypenny on October 08, 2013, 01:34:42 pm
Come on guys, play nice

No vulgar language and targeting of individuals. Everyone is here to learn from each other.

+1 smiley
Title: Re: Tax
Post by: yossarian on October 08, 2013, 01:59:41 pm
Come on guys, play nice

No vulgar language and targeting of individuals. Everyone is here to learn from each other.

Did I miss something?
Title: Re: Tax
Post by: Orca on October 08, 2013, 03:06:11 pm
Sure did mate. Two crazy guys were at each others throats and clicking "smite" buttons. Then one called the other the "T" word. It was horrible.
Title: Re: Tax
Post by: Orca on October 16, 2013, 06:17:11 pm
I said that I will post my SARS trading outcome. Just to refresh your memory;
Due to ignorance on my part, I never disclosed my trading activity to SARS since 2008. Had a Managed Account with a broker and lost R170k for the 2009 tax year.
I then did my own "investing" in CML by buying at lows and selling at highs. Did not work very well but made good gains for 2010/11/12/13.
This made me a "trader" and I never knew it. I thought if one keeps the money in the JSE without withdrawals then tax will not come into play.

Stoopid me only found out this year that it does not work that way. Recalculated all my losses and gains from 2008 and presented them to SARS. I was only owing R12K for last year if the R170K loss was carried over.
This, I disclosed out my own accord. Now today I get a letter stating:
"Notice of Invalid Objection. ( I did not object to anything)
Your objection for tax year 2009 is not valid as it was made more than three years after the original 2009 assessment. (All the tax acts are mentioned)
This assessment is now final and conclusive.
You cannot object or appeal against this decision and the only recourse available to you is to approach the High Court for review. Your 2010 to 2012 revisions will be recalculated and forwarded to you soonest ".

So my 2009 tax loss has prescribed and now I must pay over R200k tax plus interest plus fines. I hate SARS.
Title: Re: Tax
Post by: gcr on October 16, 2013, 06:27:40 pm
Orca - empathy mate.
I too hate SARS they are incompetent and spiteful and you can't discuss anything technical with them as they hide behind the Act wherever they can
Title: Re: Tax
Post by: Bundu on October 16, 2013, 06:43:04 pm
Orca - it does make one wonder if one should come clear with SARS

I take it since 2009 they never discovered your mistakes and you came forward on your own accord? or did they pull the plug on you?
Title: Re: Tax
Post by: Orca on October 16, 2013, 06:48:54 pm
At SARS I was allocated a young fat BEEEE girl that had to keep asking others for advice as to what to do. I told my wife that there is shite coming.
She filed it as a NOO. ie. Notice of Objection. Geez. I NEVER objected to anything. I disclosed.
Title: Re: Tax
Post by: Orca on October 16, 2013, 06:55:07 pm
Orca - it does make one wonder if one should come clear with SARS

I take it since 2009 they never discovered your mistakes and you came forward on your own accord? or did they pull the plug on you?

I disclosed all. 

My tax consultant told me to not enter into an VDP as the 3 year prescription rule will apply and to just disclose all and the 5 year rule will apply. Not so it seems.
Title: Re: Tax
Post by: Bundu on October 16, 2013, 07:30:08 pm
Orca - it does make one wonder if one should come clear with SARS

I take it since 2009 they never discovered your mistakes and you came forward on your own accord? or did they pull the plug on you?

I disclosed all. 

My tax consultant told me to not enter into an VDP as the 3 year prescription rule will apply and to just disclose all and the 5 year rule will apply. Not so it seems.

why don't you simply hand the whole matter to the consultant to handle? will cost you less than dealing directly with SARS and I imagine the consultants costs can also be deducted from income
Title: Re: Tax
Post by: Orca on October 17, 2013, 05:15:51 pm
Bundu. If you read through the Tax Administrative Act or TAA on SARS website you will realize that getting professional advice or aid will not help at all.
The TAA was signed into law and gazetted and not even the minister can bend the rules of the act. Under Section 104(5) it states that if the objection is 3 years or older then no objection can be made. SARS has no discretion in this regard nor has the tax court nor the tax ombudsman. Only the High Court can make a ruling.
So my assessment is final and conclusive.
My only advice to people in my situation is to go for the Voluntary Disclosure Programme. I have not yet read it but I would think you can negotiate with the Commissioner for a 5 year max extension.

 
Title: Re: Tax
Post by: XXXXX on October 19, 2013, 07:01:26 am
Hi Orca,  You're correct in saying that 104(5) puts a time limit on submitting a objection.  However your potential escape  clause is provided for in section 93 of the Tax Administration act.  The relevant section makes it possible for the reduction of an assessment by SARS in the case of an undisputed error by the taxpayer.  No objection is required (so bypasses 104(5)). 

I haven't explored the relationship between section 93 and section 99 (section 99 puts a time period of the limitation of issuing new assessments). It is however worth investigating , and even if section 99 limits you, I would attempt a reduction anyway - you have nothing to lose and everything to gain.  The worst is that they say "No".

I attach an extract of section 93.
Section 93
1)SARS may make a reduced assessment if—
a)the taxpayer successfully disputed the assessment under Chapter 9;
b)necessary to give effect to a settlement under section 149;
c)necessary to give effect to a judgment pursuant to an appeal under Part E of Chapter 9 and there is no right of further appeal; or
d)SARS is satisfied that there is an error in the assessment as a result of an undisputed error by—
i)SARS; or
ii)the taxpayer in a return.

 
2)SARS may reduce an assessment despite the fact that no objection has been lodged or appeal noted.[/u]
Title: Re: Tax
Post by: Orca on October 19, 2013, 07:14:59 pm
Thanks XXXXX. I will read those sections but don't think it applies to me as I don't want a reduction. I want SARS to take my R170k tax loss for 2009 into consideration going forward.
The letter also states:
"In terms of section 99(1)(a) read with section 100(1)(b) of the TAA, the assessment is final and conclusive".

My only hope is that the new Draft bill on 5 year Prescription period for "Self Assessment" tax for Income Tax gets gazetted soon. 



Title: Re: Tax
Post by: Orca on October 22, 2013, 02:36:39 pm
Part 1 of my move to Portugal is done. Got a buyer for my Coffee shop today.
Now if I add this money to top up my current stocks, how will this affect the 3 year thingy?
I presume the new shares will start on this new date. Am I correct?
Title: Re: Tax
Post by: Bundu on October 22, 2013, 02:44:18 pm
yip

sell date minus buy date must be > 3years, but if you emigrate, you could perhaps make an argument that you had to sell to liquidate your investments
Title: Re: Tax
Post by: Orca on October 22, 2013, 03:09:25 pm
Thanks Bunbu. I don't intend selling when I leave but it does remind me about the Exit Tax. What a bummer. I will have to "deem" all my assets as "sold" on exit and pay CGT or income as in my case.
Title: Re: Tax
Post by: Aragorn on October 23, 2013, 07:06:52 am
Part 1 of my move to Portugal is done. Got a buyer for my Coffee shop today.
Now if I add this money to top up my current stocks, how will this affect the 3 year thingy?
I presume the new shares will start on this new date. Am I correct?
@ Orca
As your plan in due course is to liquidate your shares and place them into ETF's, would it not be prudent to place these funds directly into ETFs. That way you can avoid the 3 year thingy (unless of course the liquidation plans are still 3 years away.)
Title: Re: Tax
Post by: Orca on October 23, 2013, 10:35:05 am
Aragorn, if I read you correctly, you are saying that ETF's are exempt from the 3 year thingy?

I still have just over a year to go for the 3 year period. My CML gains are massive so selling now would attract tax of about R200k.
Between a rock and a hard place now.
Title: Re: Tax
Post by: Aragorn on October 23, 2013, 11:40:05 am
Aragorn, if I read you correctly, you are saying that ETF's are exempt from the 3 year thingy?
No, not at all.
Thought that you planned to move your CML etc to ETF's and live off the income and small withdrawals.
Title: Re: Tax
Post by: wtg on October 29, 2013, 10:59:54 am
I have a tax question.

So I have a FNB share investor acc in which I do my investing.
I want to open up a stockbroker account at FNB in which I can do share trading...

Will my investor account remain taxed CGT?? (assuming I do not sell anything within 3 years)
And my stock broking account be taxed as income tax??

Do I pay tax on either account if I use all gains for buying more shares?? (ie the profit/gains does not go into my cheque account)

Thanks for your help!
Title: Re: Tax
Post by: Orca on October 29, 2013, 12:28:10 pm
That's what got me into trouble. I was under the impression that I could buy and sell as I wished and as long as the gains are not withdrawn into my bank account for my personal use, it would not be considered a tax event.

If you hold your shares for a minimum of 3 years in either of your 2 accounts, you will only pay CGT.
You have done the correct thing by separating your investment account from your trading account as now you will only pay income tax as revenue on your trading account.  All your gains or losses made after each trade will be a tax event whether you withdraw it or not.
Title: Re: Tax
Post by: wtg on October 29, 2013, 01:14:49 pm
That's what got me into trouble. I was under the impression that I could buy and sell as I wished and as long as the gains are not withdrawn into my bank account for my personal use, it would not be considered a tax event.

If you hold your shares for a minimum of 3 years in either of your 2 accounts, you will only pay CGT.
You have done the correct thing by separating your investment account from your trading account as now you will only pay income tax as revenue on your trading account.  All your gains or losses made after each trade will be a tax event whether you withdraw it or not.

Thanks for the answer - much appreciated.

That is sad news! I hate tax. :wall:
Title: Re: Tax
Post by: Delusionsofgrandeur on November 10, 2013, 11:38:42 am
Read through the thread and Im still not sure of some questions.

Questions

Scenario:I buy one batch of shares ,lets say I invest in the INDI 25.Now,2 years later I buy my second batch of the INDI 25.Now,after the 3 year period from the first day I bought my first batch of shares,I want to sell some of them.Will all my shares be clumped together as non CGT tax shares,based on the date of the last purchased shares?

How does this work?Is my whole portfolio clumped together or is each individual share different in the date of their purchase?

Also,which type of tax will I be charged if I invest in different shares at different times,is it based on the last bought shares?
Title: Re: Tax
Post by: yossarian on November 10, 2013, 03:42:16 pm
Read through the thread and Im still not sure of some questions.

Questions

Scenario:I buy one batch of shares ,lets say I invest in the INDI 25.Now,2 years later I buy my second batch of the INDI 25.Now,after the 3 year period from the first day I bought my first batch of shares,I want to sell some of them.Will all my shares be clumped together as non CGT tax shares,based on the date of the last purchased shares?

FIFO.   SARS generally accepts FIFO as the the way to work out the age of your shares.

How does this work?Is my whole portfolio clumped together or is each individual share different in the date of their purchase?


Each *batch* of a single type of share you buy is a "stock item" for want of a better term.  Stock that you sell before 3 years attracts income tax; stock sold after 3 yaers attracts CGT.
[/quote]

Also,which type of tax will I be charged if I invest in different shares at different times,is it based on the last bought shares?

If you undertstand the concept of FIFO and stock the answer to this question should be obvious.
Title: Re: Tax
Post by: Orca on November 10, 2013, 03:49:25 pm
You can use the fifo method or the weighted average base cost method but must stick to that method.

If you elect to use the fifo method and cannot buy all the shares on the same day at the same price due to volume,
you can add up all the share costs (Due From You) together and divide it by the amount of shares. This will give you a weighted average base cost for your shares bought for that day at cost.
Now if after a year you add more then do the same calculation. Now you have 2 batches of shares of the same stock at at 2 different base costs.
If you sell, then you must first sell the ones from your first batch. If the first batch is 3 years or older then you will pay CGT less the R30k exclusion. If not, you might have to add all your gains to your other income and pay tax at your normal margin.

I prefer the weighted average method as it is less paper work for me.
Title: Re: Tax
Post by: Orca on November 10, 2013, 06:18:02 pm
Now that I'm bored, I will expand on that.

If you are selling within the 3 year holding period you are a trader and the method of calculation is the same as if you have a business.

Work out Cost of Sales.
Opening stock at cost. ie. Carried over from previous year.
Add any new purchases at cost.
Less Closing Stock at cost.

This will give you the cost of your stock that you had for sale in that year.

Work out your gains.
Total Sales at cost less the above Cost of Sales.
Now you have your Gain.

Now in E-Filing.
In the Trading Section.
Fill in the Sales and Cost of Sales.
Deductions. Internet costs, subscriptions, etc.

Source Code is 2514 as you made a gain.

Done. Any queries, ask Moon. He is our residential Tax Expert.



Title: Re: Tax
Post by: Orca on November 10, 2013, 06:44:04 pm
Part 2 as I am still bored.

The occasional sale of a share within the 3 year period does not always make you a Trader in shares. SARS states that "One swallow does not a summer make".
I would not personally enter a once off sale as a trade. I will go for CGT. Chances of a query is small as most e filing is computerized and no human gets to see it. Only if you consistently buy and sell will the sophisticated program raise a red flag for human intervention.
Title: Re: Tax
Post by: Delusionsofgrandeur on November 14, 2013, 04:14:11 pm
Part 2 as I am still bored.

The occasional sale of a share within the 3 year period does not always make you a Trader in shares. SARS states that "One swallow does not a summer make".

Does this refer to volume or frequency of stock sales within a 3 year period?
Title: Re: Tax
Post by: Orca on November 14, 2013, 05:17:09 pm
I would not try more than 1 within the first 3 year period to be safe.
Title: Re: Tax
Post by: scitrader on November 14, 2013, 05:55:45 pm
Hi Orca
When you take into account the deductions a trader can make, these can be quite substantial if the trader (as in your case) trades for a living.
These can include:
- internet costs and subscriptions (as mentioned)
- a percentage of your rent, electricity, water, insurance, domestic worker, gardener etc
- depreciation on your computer and other electronic gadgets required for trading
- telephone, cellphone,
- motor running expenses
- wages for your wife or assistant who helps with all the paperwork and research
- bank charges and other sundry expenses
Title: Re: Tax
Post by: Orca on November 14, 2013, 06:22:44 pm
Hi Orca
When you take into account the deductions a trader can make, these can be quite substantial if the trader (as in your case) trades for a living.
These can include:
- internet costs and subscriptions (as mentioned)
- a percentage of your rent, electricity, water, insurance, domestic worker, gardener etc
- depreciation on your computer and other electronic gadgets required for trading
- telephone, cellphone,
- motor running expenses
- wages for your wife or assistant who helps with all the paperwork and research
- bank charges and other sundry expenses
Unless your domestic worker and gardener helps you pick stocks and you drive to the JSE to Buy and Sell, then by all means, make those deductions.
You must pay your wife or assistant and pay UIF for them as well. Don't think SARS will like that.
Title: Re: Tax
Post by: scitrader on November 14, 2013, 07:01:34 pm
If you are running your own business from home, you can claim a percentage of all your home/office expenses (incl. the gardener, maid repairs to your home etc)  As far as the assistant goes, if SARS queries the UIF status of the wages claim, then register and pay the 2%.  If your wife or assistant is not earning any other income, you can pay them R60000 p.a. tax free.  (and R1200 UIF if you have to register)
As far as the travel expenses go, is your driving purely for leisure purpose, or do you need to travel to the bank to sort out your finances, or the post office to collect your share books, or the stationers to pick up supplies, or to meet with other traders ..............  I am sure you're business would not be the same if you had to walk everywhere  so I think you can justify a % work and % play.
Title: Re: Tax
Post by: Orca on November 14, 2013, 08:24:55 pm
To get real now. SARS will not allow those deductions. Yesterday I filed my tax and the red flag came up because I deducted R2K for internet costs. Never even deducted the R230 for the space I use in my rental property.
I have to pay in but the website says that I must wait for manual intervention before I pay.
Does your wife REALLY assist you? Does the maid bringing you coffee REALLY constitute "trading activity"? Does the gardener improve your performance?
 :wtf:
Title: Re: Tax
Post by: Bundu on November 14, 2013, 08:36:05 pm
What is a home study or home office?
Any area of your house (eg. a room or separate entrance or garage) which you use mainly to run your business.

Basic requirement:
An office at home must be specifically set up for a persons trade and used exclusively or regularly for that purpose

Example of home office relating to different trades:
- A self employed consultant will use part of his living room equipped with computer equipment
- Catering business who usually use the garage to store your table and chairs,
- Construction worker who have storage for their tools and an office set up at home for admin
- A person who run a food service (samoosa or koeksister maker) from home
- Photographer who uses part of his house for a studio
- A motor mechanic who uses his garage as his workshop
- Cabinet maker uses his garage or separate entrance mainly for his trade

Home office expenses:
1) House expense
-Rental paid for the house or
-Interest paid on the mortgage bond
-Repairs and maintenance to premises
-Water and Electricity
-Rates and taxes
-Cleaning cost (domestic worker)
-Security (Armed response)
-Insurance
-House phone

2) Office expense
-Wear and tear (use of you computer or any equipment needed for your trade)
-Other office equipment (chair, desk etc)
-Stationery
-Business calls from cell phone
Title: Re: Tax
Post by: scitrader on November 14, 2013, 09:06:58 pm
So long as you are REASONABLE and wherever you can legally save why not do it ! 

Your maid and gardener may not help you trade, but as a business owner operating from home, you are entitled to claim a % of the total home running expenses. 

I am real -  I have done hundreds of tax returns and claim all these expenses  every year for many of my clients.
Most sole proprietors do REALLY employ their wives as it reduces there taxable income.
Title: Re: Tax
Post by: scitrader on November 14, 2013, 10:45:16 pm
One more thing Orca. You mentioned earlier [color=blue]"Recalculated all my losses and gains from 2008 and presented them to SARS. I was only owing R12K for last year if the R170K loss was carried over"[/color]
 
If you had traded through a registered company, your losses would have carried over and could have been offset in the subsequent year where there was a gain.  Unfortunately as a Sole Proprietor, your loss can't carry foward.
Title: Re: Tax
Post by: yossarian on November 15, 2013, 07:58:35 am
To get real now. SARS will not allow those deductions. Yesterday I filed my tax and the red flag came up because I deducted R2K for internet costs.

With all due respect, perhaps it's time to hand over your tax affairs to an expert?  SARS will continue to profile you based on past performance.
Title: Re: Tax
Post by: XXXXX on November 15, 2013, 09:20:53 pm

 
If you had traded through a registered company, your losses would have carried over and could have been offset in the subsequent year where there was a gain.  Unfortunately as a Sole Proprietor, your loss can't carry foward.

Scitrader - your totally incorrect in the above statement, losses for sole proprietors/traders DO carry forward.  Orca's circumstances on how the disallowance arose was very unique and not related to the manner or legal form in which he carried on his trade.
Title: Re: Tax
Post by: XXXXX on November 15, 2013, 09:34:33 pm
So long as you are REASONABLE and wherever you can legally save why not do it ! 

Your maid and gardener may not help you trade, but as a business owner operating from home, you are entitled to claim a % of the total home running expenses. 



Hi Scitrader.  Your totally correct in saying any "home office" expenses incurred in carrying on a trade MAY qualify as a deduction, and certainly if they are genuine and have been incurred in the production of business income, they can be deducted.

However are you aware that any portion of your home utilized for business purposes (I.e. The % referred to above) will then be excluded from the "primary residence" exclusion when you sell the property (and thus be subject to CGT)?

Generally I find that in many cases, taxpayers are too aggressive in attempting to claim home office expenses, without understanding the implications.  My all time favourate was a taxpayer wanting to claim a percentage of his estimated dog food expenditure - apparently it was a security cost.
Title: Re: Tax
Post by: Bundu on November 15, 2013, 09:50:23 pm
So long as you are REASONABLE and wherever you can legally save why not do it ! 

Your maid and gardener may not help you trade, but as a business owner operating from home, you are entitled to claim a % of the total home running expenses. 



Hi Scitrader.  Your totally correct in saying any "home office" expenses incurred in carrying on a trade MAY qualify as a deduction, and certainly if they are genuine and have been incurred in the production of business income, they can be deducted.

However are you aware that any portion of your home utilized for business purposes (I.e. The % referred to above) will then be excluded from the "primary residence" exclusion when you sell the property (and thus be subject to CGT)?

Generally I find that in many cases, taxpayers are too aggressive in attempting to claim home office expenses, without understanding the implications.  My all time favourate was a taxpayer wanting to claim a percentage of his estimated dog food expenditure - apparently it was a security cost.

would that be just for the costs associated directly with the buildings (interest/maintenance)?
Title: Re: Tax
Post by: XXXXX on November 15, 2013, 10:16:20 pm
Hi.  Anything related to the bricks and mortar itself.......

Although, if I had to get technical, the trigger is not the claiming of the expenditure, but it's the use thereof for trade purposes.  I.e.  If you utilized that room for your business, and didn't claim anything for income tax purposes, that room would still be excluded from your primary residence exclusion on the basis that it was was used for trade purposes.  Practically however, I wouldn't be concerned unless you acclaimed expenditure related to it.
Title: Re: Tax
Post by: Bundu on November 15, 2013, 10:38:00 pm
thanks - makes sense!  :TU:
Title: Re: Tax
Post by: Delusionsofgrandeur on November 17, 2013, 02:37:35 pm
Can paying 40% trading tax be avoided by transferring your investment stocks to another account of yours,then just buy and sell in the trading  account when you see fit,whilst keeping the later acquired account for the long term stocks and paying cgt on that and Trading tax on the other.
 Is this possible?
Title: Re: Tax
Post by: Bundu on November 17, 2013, 03:09:45 pm
no, I would think that "trading account", by it's very name, would mean that each transaction will be taxed as Income
Title: Re: Tax
Post by: Orca on November 17, 2013, 04:47:43 pm
My broker co. holds all funds in " trading accounts " whether held as long term investments or short term trading.
It is better to separate the 2 into different accounts because at year end they send a holdings analysis for tax purposes for each account. Had you not separated the 2, you would have some difficulty separating it yourself to work out the tax.
Much easier to toss the long term Holding Analysis aside as there will be no tax and work with the other trading account.
Title: Re: Tax
Post by: Orca on November 17, 2013, 06:11:53 pm
Another thing to consider is this scenario.

Your wife gives you R300k by depositing it into your bank account. You transfer the money to your brokerage account and buy shares.
This is what we did this week and I bought OMN with it. I now have to transfer it into a new account under my name as my wife will be responsible for any tax gains and not me.
This was a personal choice to have both in my name but still share the tax burden.


Title: Re: Tax
Post by: Delusionsofgrandeur on November 18, 2013, 06:38:03 am
Thanks guys,this is the final petty question I have regarding tax on trading accounts.I just want to be 100 % sure off all variables.

Lets say I open 3 or 4 trading accounts for 3 or 4  different shares.Since who knows which shares would have to be sold abnormally early (before 3 years),can one just treat each share and account individually as trading or investment accounts.

This way each share can be taxed individually instead of the entire account long term investments and all getting slapped with 40% tax.

Thing is that I am not aware if this is possible,or if the tax man will object.
Title: Re: Tax
Post by: Bundu on November 18, 2013, 10:59:23 am
AFAIK a balanced portfolio should hold around 10 shares - that would then require 10 accounts  ???

I just have one account and use the 3 year rule O:-)
Title: Re: Tax
Post by: Orca on November 18, 2013, 11:12:53 am
As long as you keep records of purchses and sales. Keep a file for each tax year. Calculate the average base cost (use the Due By You as it includes the costs)  and keep it as Open Stock in the first page of your file.
Most important is for you to keep track of the date and cost of your shares.
Once any share in your portfolio reaches 3 years and 1 day old SARS is obliged to treat it as CGT if you sell any portion of it.

Title: Re: Tax
Post by: Bundu on November 18, 2013, 11:17:38 am
yip, I have all the trading notes and enter each transaction into an xls sheet - simple enough
Title: Re: Tax
Post by: Delusionsofgrandeur on November 18, 2013, 11:25:54 am
As long as you keep records of purchses and sales. Keep a file for each tax year. Calculate the average base cost (use the Due By You as it includes the costs)  and keep it as Open Stock in the first page of your file.
Most important is for you to keep track of the date and cost of your shares.
Once any share in your portfolio reaches 3 years and 1 day old SARS is obliged to treat it as CGT if you sell any portion of it.

So why don't all people do that,open up multiple accounts for multiple stocks,besides it being a pain in the butt to set up?In that way they avoid paying 40% tax on all their stocks instead of the ones that they actually have to sell before 3 years or sell frequently.

From what I understand now is that it is not you that are seen as a trader or an investor,but rather your accounts that are seen as investment or trading accounts.Am I right or delusional?

Also,if I am correct is this all legal?
Title: Re: Tax
Post by: Orca on November 18, 2013, 12:35:12 pm
Perhaps this will help. If you read up on Google, you will come across sites that state that it is up to you to prove your intention to SARS and once SARS deems you a trader, they will keep taxing you as a trader even after 30 years.
Those are old websites and articles. Only read stuff from SARS website as it has the latest documents and acts.
The 3 year rule has been signed and added to the act.
Even if you have 1 portfolio with 1 three year old share and 100 trading stocks in that same portfolio, that 1 share will be taxed at CGT if you sell it. The others will be taxed as revenue.

Stick to your main aim. Two portfolios. One for long term and one for trading. So what if you sell one or two stocks in your long term before the 3 years are up. You simply add the gains to your trading account gains.
Title: Re: Tax
Post by: Delusionsofgrandeur on November 18, 2013, 03:35:59 pm
Ok,thanks Orca,I understand completely now.
Title: Re: Tax
Post by: Orca on November 18, 2013, 06:27:13 pm
Write this down Delusional. When filling in your tax for your trades if you did actually do some trading in any of your portfolios. It works exactly the same as any small business.

Cost of Sales = Opening Stock at cost + Purchases less Closing Stock at cost.

Gain/Loss = Sales less Cost of Sales.

All this will be on your year end Holdings Analysis sent to you except that you need to work out the Opening Stock Cost ie, the weighted average cost that I told you about.

Your long term stocks will not have any effect as they will open at year start and close at year end at the same cost price.

From the Gain/Loss, you can deduct internet costs and wear and tear of you maid and stuff.

Title: Re: Tax
Post by: Delusionsofgrandeur on November 26, 2013, 06:58:04 am
Thanks for the Cheat sheet Orca.
Title: Re: Tax
Post by: Orca on December 02, 2013, 06:47:46 pm
Just seen my tax results for my disclosure of trading activities since 2009.

2009. Objection denied due to prescription.
2010. Objection denied due to it being invalid.
2011. Objection denied due to it being invalid.
2012. Objection denied due to it being invalid.

 :wtf: They don't want my money.  :TU:
Title: Re: Tax
Post by: Orca on December 02, 2013, 06:53:48 pm
Now where is Bread? He was in the same predicament as me.
Title: Re: Tax
Post by: Orca on December 04, 2013, 06:41:51 pm
http://www.sharenet.co.za/der/

Good reading.
Title: Re: Tax
Post by: yossarian on December 04, 2013, 08:34:13 pm
That link won't work properly tomorrow...

Try this (and "like" the dudes if you feel like rewarding them for writing interesting articles):

https://www.facebook.com/notes/seed-investments/making-use-of-the-cgt-exclusion-gerbrandt/687151884648866 (https://www.facebook.com/notes/seed-investments/making-use-of-the-cgt-exclusion-gerbrandt/687151884648866)
Title: Re: Tax
Post by: Orca on December 05, 2013, 07:45:18 pm
I have one problem with Seed's method. Obviously the larger your portfolio value, the less you score. Now if you have a R100K portfolio and do as they say then at some point SARS will not tax you at CGT but Revenue. The 3 year term will catch up very quickly if you are using the FIFO method. Obviously you cannot use the weighted ave for this.
I emailed them as to this and waiting for a reply.
Title: Re: Tax
Post by: Orca on December 08, 2013, 07:34:41 pm
A new problem. I have held my shares for 2 years and intend to go for the 3 year thingy. When I bought my stocks, I used the Weighted Average method.
Now after 2 years, I want to add a substantial amount to these same stocks and will apply the same Weighted Average Method for the base cost.
Will my 3 year thingy start all over again? Obviously I cannot change to FIFO now as I have been using W A for years.
Title: Re: Tax
Post by: gcr on December 09, 2013, 10:07:44 am
Orca - maybe I am looking at this issue too simplistically but my tax form requires that you provide "proceeds" and "base costs". So if you buy more shares now you are likely to be buying at a higher price than your first parcel, thus when you buy subsequent parcels the base cost would rise - so in 3 years when you sell you would then have a higher base cost and you proceeds would be diminished by this higher base cost and as such your CGT would be less. However the problem comes in when you buy a second parcel of the same shares at a lower price than the 1st parcel as this would depress your base cost. To play it safe I would print a copy of your brokers portfolio listing which evidences your base costs, and then make purchases and do a screen print again - hold these prints in a tax file until the 3 year period has elapsed on the first parcel and the second printout when the 2nd parcel gets to its 3 year window. I have a brilliant financial package which mirrors all my accounts and I capture every transaction on it be it current, cards, savings, investments ,shares mutual funds as it gives me one figure net worth. The package is Quicken but you can't acquire it anymore as the American bought it from the South African company and they won't open the system to multi currencies - only available in US$. One of its components is shares and a share portfolio and it logs dates of purchases and sales so I can always check dates of purchases, base costs and then upon sales date of sale proceeds (less brokerage) etc. This Quicken is one of the best home finance packages I have ever seen and it has the capability of absorbing data from your internet banking and daily share prices etc. It has a budgetary component where you can set budgets into the future, produce pie charts interrogate your income and expenditure and it was available in the early 2000's - I am running on the 2004 version and hope that it never crashes (did once in 2005 but recaptured and put in another hard drive on my computer as back up) 
Title: Re: Tax
Post by: Orca on December 09, 2013, 06:52:22 pm
I hear what you are saying gcr. My broker sends me a yearly summary for tax purposes that is quite adequate for working out my tax. My job is to see to the Base Cost. This I do and print out the Contract Note and file it.

When you stop "trading" your stocks and Change your Intention to Investing, you have to deem your stocks as 'sold" and pay the tax at market value whether you sold or not.

I fortunately sold off my whole portfolio before some bad news and bought back in afterwards. Since then, I have not sold or added to them and consider them as Investment Stocks since then. I now have just over a year to go for the 3 year thingy to Upgrade to CGT.

Post getting too long for attention span. Part 2 coming.



 
Title: Re: Tax
Post by: Bundu on December 09, 2013, 06:57:11 pm
I hear what you are saying gcr. My broker sends me a yearly summary for tax purposes that is quite adequate for working out my tax. My job is to see to the Base Cost. This I do and print out the Contract Note and file it.

When you stop "trading" your stocks and Change your Intention to Investing, you have to deem your stocks as 'sold" and pay the tax at market value whether you sold or not.

I fortunately sold off my whole portfolio before some bad news and bought back in afterwards. Since then, I have not sold or added to them and consider them as Investment Stocks since then. I now have just over a year to go for the 3 year thingy to Upgrade to CGT.

Post getting too long for attention span. Part 2 coming.

I doubt that..... how does one pay tax on an unrealized "profit"

3 year rule... and tax when you sell
Title: Re: Tax
Post by: Orca on December 09, 2013, 07:10:57 pm
Bundu. I will find the clause and post it here. The same applies when I emigrate. All my assets will be deemed as sold the day before my departure and I will have to pay CGT tax on it and the new Base Cost will apply.
Title: Re: Tax
Post by: Bundu on December 09, 2013, 07:16:46 pm
that could perhaps be different, as SARS wants to grab the last bit they can, but with shares, I never 'inform' them that I'm now selling a trade or an investment - I simply use the period I held the shares and then deduct PAYE or CGT
Title: Re: Tax
Post by: Orca on December 09, 2013, 07:25:07 pm
What are the implications of such a change in the character of your shares? A change from
trading stock to a capital asset will trigger an income inclusion equal to the market value of
the shares.14 A change of a capital asset to trading stock will trigger a disposal for CGT
purposes at market value.15
A change in your intention will be irrelevant once section 9C applies to your shares.
Section 9C deems the proceeds on the sale of JSE-listed equity shares and equity shares in
resident companies to be of a capital nature once they have been held for at least three
years. Section 9C does not, however, trigger a deemed disposal of your shares held as
trading stock after you have held them for three years because the shares technically remain
trading stock despite them only being able to produce proceeds of a capital nature.16


The above was copied and pasted from SARS. You might be correct or not. Depends on how you read it.
Title: Re: Tax
Post by: Bundu on December 09, 2013, 08:01:54 pm
I just let the conclusion guide me

19. Conclusion
Section 9C provides taxpayers with certainty that if they hold equity shares for at least three continuous years the gains and losses on disposal will be of a capital nature regardless of the intention with which the shares were originally acquired. The section has a much wider application than its predecessor (section 9B) in that it covers unlisted shares and a member’s interest in a close corporation instead of only JSE-listed shares. But not all types of shares qualify under section 9C; for example, non-participating preference shares, shares in foreign companies (other than JSE-listed shares) and participatory interests in portfolios of collective investment schemes in property fall outside section 9C. Its provisions are now mandatory and no election is required or even possible. The wider ambit of section 9C has necessitated the inclusion of a number of anti-avoidance measures. The capital or revenue nature of shares disposed of within three years of acquisition will continue to be determined according to principles laid down by case law.
Title: Re: Tax
Post by: Orca on February 03, 2014, 07:55:46 pm
This sux. Got a R250 penalty for understatement of income. Surely if you are investing actively this should not happen. You never know when you have to sell. I never anticipated that I would have to sell a stock in January with a good profit.
It is impossible to predict profits if you are a trader or active investor. If I under estimate my profits will SARS pay me R250? Don't think so.
Title: What is the use?
Post by: Snakepit on February 07, 2014, 08:11:11 am
Guys I am new at this so help me right.

Guys, if you buy a share and it goes up that is good, but then if the share starts falling after reaching a nice profit point, you have to sell it to lock in the profit.
Then the tax rule of not keeping the share for 3 years kick in and you are seen as a trader. That means you pay extra tax/CGT or whatever.
Here is my question - how much tax/cgt do you pay because that tax is actually your loss. You have to deduct that from your profits. Further more if you buy a share that goes into profit slowly, yes you are making profit but your capital is locked in for 3 years otherwise you will get this special tax being applied.
So what is the use of buying any share that is even semi volatile? You might make nice profits but your profits must always be more than the tax/cgt deduction for you to make a profit.
That means you have to concentrate on shares that you know will have a good 3 year run. I mean, come on, who knows what a share will do in 3 years time?

But just for clarity as I am not sure - If I buy a share for R10 today and sell it next week at R20, how much will I be punished by SARS?
Title: Re: What is the use?
Post by: Snakepit on February 07, 2014, 08:23:27 am
To add to this whole share thing - you take R100 000 and buy R50 shares you get 2000 shares +-. The price goes up by R5 per share. Whooped di doo. You made R10 000. That is 10% on a
R100 000 investment. That is not very impressive. What can you do with R10 000? Now deduct tax and fees and you are even worse off. If you take that R10 000 and buy more of the same share you will have to pay R55 per share, giving you even less shares than your original purchase. I think you can get a far better return on R100 000 in other investments. The bottom line is, you need beeeeeg money to buy shares and make a good profit.

Is that why share growth is shown as a percentage and not in true blue rand and cent.
Title: Re: What is the use?
Post by: jaDEB on February 07, 2014, 08:29:29 am
Orca is the man for tax, Mr Bond aswell (I think). The first R30 000 is tax free, thus you only pay tax on profits above R30,000 profit. Unless of course they change it.
Title: Re: What is the use?
Post by: Snakepit on February 07, 2014, 09:03:19 am
I have another question - I am a working man. Will my dividends be taxed as income at my current tax rate?
If I sell my shares is that seen as income and will it be taxed at my current tax rate?
Title: Re: What is the use?
Post by: jaDEB on February 07, 2014, 09:06:18 am
Your divvie is taxed before it gets paid to you.
Title: Re: What is the use?
Post by: Snakepit on February 07, 2014, 09:08:23 am
Orca is the man for tax, Mr Bond aswell (I think). The first R30 000 is tax free, thus you only pay tax on profits above R30,000 profit. Unless of course they change it.

If I hold the share of 5 companies and sell them all, is the first R30 000 tax free per company or cumulative?































Title: Re: What is the use?
Post by: jaDEB on February 07, 2014, 09:18:48 am
No it is total - not per share / comp you sell. Please note I am no tax expert, I believe you need to try and make money, if you limit yourself - i.e. scared of making profit cause you scared of paying tax, it is not the right thing. Go to SARS website and read their papers on shares / tax.
Title: Re: What is the use?
Post by: Patrick on February 07, 2014, 09:22:32 am
Orca is the man for tax, Mr Bond aswell (I think). The first R30 000 is tax free, thus you only pay tax on profits above R30,000 profit. Unless of course they change it.

If I hold the share of 5 companies and sell them all, is the first R30 000 tax free per company or cumulative?

The R30k exemption is for capital gains tax, only applies after you've held for 3 years. For less than three years you add the profit of the sale to your annual income when you do your taxes. Then you pay normal income tax.

Like jaDEB says, your first worry should be making any profit, then you can worry about taxes! Ideally just don't sell for 3 years...

Here's the tax thread, all 13 pages, but some great info in it: http://www.shareforum.co.za/shares/tax/
Title: Re: What is the use?
Post by: jaDEB on February 07, 2014, 09:57:23 am
Sorry about giving not 100% correct info. click on my smite button.... :(
Title: Re: What is the use?
Post by: Delusionsofgrandeur on February 07, 2014, 10:24:32 am
I thought that the R30 000 exclusion was for normal income tax,oops.Also,am I correct in assuming that all the transaction costs in a trade is included in the sell and buy price for tax purposes?
Title: Re: What is the use?
Post by: Moonraker on February 07, 2014, 10:35:12 am
I thought that the R30 000 exclusion was for normal income tax,oops.Also,am I correct in assuming that all the transaction costs in a trade is included in the sell and buy price for tax purposes?
Yes, transaction fees (brokers fee, strate costs etc.) are included in base cost and proceeds.
Title: Re: What is the use?
Post by: Orca on February 07, 2014, 11:38:54 am
In my case, I had 2 trading businesses. One was a coffee shop and the other was stock trading as I had not held the stocks for 3 years yet.
So this means that I had 2 incomes and the profits from both must be combined.
A loss from one can be deducted from the gain of the other.

Title: Re: What is the use?
Post by: Snakepit on February 07, 2014, 12:48:16 pm
Orca the other link does not talk about the working man that receives a salary and then takes that after tax money and buy shares with it. That is why I am asking these questions. The moderators are welcome to combine all these tax questions into a single blog.

Okay so the 30 000 is right out the window as I want to move my funds around between shares, especially when shares take a nice dip.

"The R30k exemption is for capital gains tax, only applies after you've held for 3 years. For less than three years you add the profit of the sale to your annual income when you do your taxes. Then you pay normal income tax."

He, so my profit from the sale of the shares will be taxed at my current tax rate! Dem that means I need even more growth to make a profit. Suddenly buying shares does not seem such a good idea at all.

Does all this mean that if I keep shares for 3 years I will be taxed CGT on amount more than R30 000 plus I will be taxed  my current tax rate because it is seen as income?
Title: Re: Tax
Post by: Orca on February 07, 2014, 02:58:45 pm
You deduct the Base Cost of the stock you sold from the "Due to you" amount. This will be your gain. If you held it for 3 years or longer, you can deduct R30k from this gain. From this, you add 33.3% to your income. That's it.
To work out your Base Cost I use the weighted average method.
Add all the "Due from you" amounts from the Contract Notes Each stock separately.
Divide this by the number of shares you hold. This is the Base Cost. By using the Due from/to you amounts, you need not work out the costs separately.
Tips.
Keep a flip file for each share.
Print out your Contract Notes and file them. SARS most likely will want them so have them in a folder on your computer as well. You can attach them to e filing.
Keep an updated page of the Base Cost and share movements. SARS will want this as well. I do mine in Excel.
At year end you will get an Account Holdings Analysis. File it as this is the doc that makes your tax simple.

These files are very important for tax and should you expire, it will simplify things for your spouse or kids.

Title: Re: Tax
Post by: Orca on February 07, 2014, 06:01:12 pm
Part 2. (tax is fun)ny.
If you traded your stocks then here is a simple method to work out your tax.

After tax year close, your broker will send you an account holdings for the tax year. It will have a summary of all your trades.
Cost of Sales. E filing will ask for this amount.

COS = Opening stock value at cost. Plus purchases at cost. Less closing stock at cost.

Opening Stock will be in shares and not Rand value. This you must work out yourself. From the above post. Work out your base cost and multiply it by the amount of shares. Do this with all your shares shown in Open Stock. Open Stock are shares bought the previous year and brought forward to this year.
Do the same with Closing Stock to get the Rand value at your base cost.

Now you have your Cost of Sales. From this you must deduct Sales. E filing will ask for Sales and do the sum for you. The doc I referred to above will have Total Sales in Rands and will include costs. Use this amount.

Now you can deduct internet costs. (I deducted R1900.00 with no problem). Forget about that little Office space costs as it gets too complicated.
If you have a gain, the Source Code is 2514.

Done. All business owners must use this method.

Tip.
Make a note in your file as to this years Closing Stock Value as it will be next years Opening Stock Value. (Balance Sheet).Will save you stacks of time.

If in doubt, ask Moon. He taught me all this stuff.





Title: Re: Tax
Post by: Snakepit on February 09, 2014, 08:05:35 pm
ORCA, dem, that really is a mouthful! Thanks, but I'm still a bit lost.

1. In a nutshell, are you saying that as a man that works for a salary, I would deduct all costs for having the shares from my total profit,  then if the 3 year rule applies, deduct a total of R30 000 from my total remaining profit and then what ever is left, I add 33.3 % of that to my income statement for tax purposes?

2. What if my tax rate is 40% or is the most you will pay 33.3%?

3. I'm not sure if this was clearly answered - The R30 000 - If I have shares in 10 companies and sell them all in one go, after holding for 3 years, is the R30 000 on the profit per company or on all the companies profit combined?
Title: Re: Tax
Post by: Snakepit on February 09, 2014, 09:08:55 pm
Guys these are just things that pop into my head.

I trade shares via Standard Bank. When dividends are payed out, it is payed out to my trading account. I then immediately buy more shares with it. The share statement will reflect that I received dividends, but in reality I did not take the money to use for day-to-day living. Must I still declare it as income for tax purposes?
Title: Re: Tax
Post by: Bundu on February 09, 2014, 09:16:20 pm
Guys these are just things that pop into my head.

I trade shares via Standard Bank. When dividends are payed out, it is payed out to my trading account. I then immediately buy more shares with it. The share statement will reflect that I received dividends, but in reality I did not take the money to use for day-to-day living. Must I still declare it as income for tax purposes?


Your divvie is taxed before it gets paid to you.

do you actually read when people answer? ::)
Title: Re: Tax
Post by: Orca on February 09, 2014, 09:32:23 pm
ORCA, dem, that really is a mouthful! Thanks, but I'm still a bit lost.

1. In a nutshell, are you saying that as a man that works for a salary, I would deduct all costs for having the shares from my total profit,  then if the 3 year rule applies, deduct a total of R30 000 from my total remaining profit and then what ever is left, I add 33.3 % of that to my income statement for tax purposes?

2. What if my tax rate is 40% or is the most you will pay 33.3%?

3. I'm not sure if this was clearly answered - The R30 000 - If I have shares in 10 companies and sell them all in one go, after holding for 3 years, is the R30 000 on the profit per company or on all the companies profit combined?

No. You will need your Account analysis from your broker and use the amounts in the totals as they already have the costs deducted.
If you don't get this Account analysis report, then you must total all your Contract Notes "Due to you" for the year. The Due to you will already have the costs deducted.

From your total profits for the year, you can deduct R30k only. A third of this after your R30k deduction, you must add to your other income.
This is only for CGT and not applicable to trading.
Title: Re: Tax
Post by: Orca on February 09, 2014, 09:40:56 pm
Yip. Your tax on divies are already paid by SARS regulations. You can withdraw it tax free or reinvest it.
Title: Re: Tax
Post by: Snakepit on February 10, 2014, 07:08:27 am
Aha thanks guys. Yes I knew that the divvies were taxed before I received it but thought since I did not physical receive it and moved it like when you move money from one RA to another RA the tax could be delayed.

And another question - Is there any benefit what so ever if you sell shares after retirement, after turning 60? This is your "pension" or part of your pension.

Orca, that 33.3 % you mention is it still the same percentage if you sell all your shares after turning 60 (retirement)?
Title: Re: Tax
Post by: Moonraker on February 10, 2014, 12:33:37 pm

And another question - Is there any benefit what so ever if you sell shares after retirement, after turning 60? This is your "pension" or part of your pension.
Nope.
Orca, that 33.3 % you mention is it still the same percentage if you sell all your shares after turning 60 (retirement)?
33.3% is the cgt rate applied to your gains. Your effective rate depends on your marginal tax rate eg. @ 40% marginal tax rate, you would effectively pay 13.3%. At a lower marginal rate you would pay less, eg. 9.99% @ 30% marginal tax rate.
Title: Re: Tax
Post by: Bundu on February 10, 2014, 01:35:24 pm

And another question - Is there any benefit what so ever if you sell shares after retirement, after turning 60? This is your "pension" or part of your pension.
Nope.
Orca, that 33.3 % you mention is it still the same percentage if you sell all your shares after turning 60 (retirement)?
33.3% is the cgt rate applied to your gains. Your effective rate depends on your marginal tax rate eg. @ 40% marginal tax rate, you would effectively pay 13.3%. At a lower marginal rate you would pay less, eg. 9.99% @ 30% marginal tax rate.


or put differently, a third of your CGT gains are fully taxed

(CGT Gain - R30 000)/3 fully taxed
Title: Re: What is the use?
Post by: Delusionsofgrandeur on February 26, 2014, 06:54:06 am
In my case, I had 2 trading businesses. One was a coffee shop and the other was stock trading as I had not held the stocks for 3 years yet.
So this means that I had 2 incomes and the profits from both must be combined.
A loss from one can be deducted from the gain of the other.

But what if I am only stock trading and have a job,can the loss from one trade be deducted from the gain tax free from another trade before tax is calculated?
Title: Re: Tax
Post by: Bundu on February 26, 2014, 10:41:43 am
yes
Title: Re: Tax
Post by: Moonraker on February 26, 2014, 06:42:43 pm
Buget tax pocket guide attached.
Title: Re: What is the use?
Post by: Delusionsofgrandeur on March 25, 2014, 01:50:34 pm

[/quote]

But what if I am only stock trading and have a job,can the loss from one trade be deducted from the gain tax free from another trade before tax is calculated?
[/quote]

I have an add on segment to the previous question I asked.Can the loss from one trade be deducted from the gain from another trade before tax is calculated,even if the 2 trades are in 2 different  tax year's?
Title: Re: What is the use?
Post by: jaDEB on March 25, 2014, 02:35:40 pm


But what if I am only stock trading and have a job,can the loss from one trade be deducted from the gain tax free from another trade before tax is calculated?
[/quote] - Yes you take your overall Profit or loss.

I have an add on segment to the previous question I asked.Can the loss from one trade be deducted from the gain from another trade before tax is calculated,even if the 2 trades are in 2 different  tax year's?
[/quote] - No  - unless some1 else corrects me, you cannot do different  tax year's

Read on SARS website - CGT - does not take long.
Title: Re: Tax
Post by: Alsie on March 27, 2014, 08:38:38 pm
Go and study the guide for share owners issued by SARS (latest update 17 Feb 2014).
You can find it at:
http://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G11%20-%20Tax%20Guide%20for%20Share%20Owners%20-%20External%20Guide.pdf
Title: Re: Tax
Post by: Orca on March 28, 2014, 11:59:24 am
If you are stock trading (not yet held for 3 years) and have a job, then you have 2 incomes. Your trading must be calculated separately by you to Balance Sheet. No matter how many trades you made, you must get a total gain or loss for efiling as a single entry.
The loss will be automatically deducted from your other job income. Or.
The gain will be added to your other income.
If your trading loss is more than your income, then the resultant loss will be carried over to the next year.
Title: Re: Tax
Post by: Delusionsofgrandeur on April 07, 2014, 09:23:41 am
Allrighty, S.A and the country I work in have a double taxation agreement, which means that if I'm taxed here, then I won't be taxed in S.A(as I understand it).

Does this mean that the income from my job is excluded from being processed into e-filing?

Also, as I understand it,Fifo and weighted average work together,and are not mutually exclusive.
Are there any other benefits to the other method?

The way I understand the deductable tax from gains is as follows
CGT tax on profits from equities that obey the 3 year rule are taxed at 33,3% of 40%.

This works out to 13.3% for CGT,if the 3 year rule is observed.

This all depends if you are in the 40% bracket, which applies to taxable income in excess of R638 600 P.A for 2014.

My taxable income is below this, even if I had to pay tax in S.A.Do I still fall in the same tax bracket of 40%?




Title: Re: Tax
Post by: Bundu on April 07, 2014, 11:17:29 am
No, your specific marginal tax rate at your own earnings is used AFAIK
Title: Re: Tax
Post by: Orca on April 07, 2014, 12:37:35 pm
SA will tax only earnings sourced in SA but you must declare your Ossie earnings. It gets quite complicated as I don't know your circumstances.
Did you inform SARS that you are emigrating and pay exit tax on your SA assets?
Where do you regard your home to be?
Do you spend time in SA every year?
What address has SARS for you?
If you are contacting overseas but have a home here or a wife that rents in SA, you can still be regarded as a SA resident for tax purposes.
Very important tip. If you are non resident, let your Broker know as your dividends might be tax free.
Not updating your address with SARS is a criminal offense.


Title: Re: Tax
Post by: Delusionsofgrandeur on April 09, 2014, 09:03:34 am
I see.
I did not emigrate but work temporarily overseas on a contractual basis.
I consider my home to be in South Africa.
I have not been home in a few years tho.
I believe SARS has my S.A address,so for tax purposes I am a S.A resident I think.

Title: Re: Tax
Post by: Orca on April 09, 2014, 03:06:07 pm
I'm afraid that you will not satisfy the physical presence test as you have not been present in SA for at least 91 days in a tax year.
You are a non resident and will only pay tax on your SA earnings. CGT is only payable on the disposal of immovable property. Selling of property stocks are taxable but not other shares.
You must get your a into g and change your address as SARS is taxing you as a resident and you will pay more than you are required to.
Title: Re: Tax
Post by: Delusionsofgrandeur on April 10, 2014, 08:42:53 am
Yeah,I was taxed on my share earnings.I haven't filed taxes for any share profits from sales.

My broker has me as a resident and tells me that there is no difference in the tax implications between being a resident and non-resident.


I think the tax treaty(double taxation avoidance) overrides the physical presence test.

So do S.A earnings tax not refer to me since I earned the capital in another country,even though investing in S.A?

Are you saying I shouldn't pay tax,trading,CGT,or otherwise as long as my investments/trading is not related to property.
Title: Re: Tax
Post by: Orca on April 10, 2014, 11:33:38 am
There is a big diffs in tax consequences between residents and non residents. The double tax treaty will not apply to you as you are a SA resident in SARS eyes. You must get this sorted out and become non resident in SA.
That way SARS has no claim on your foreign earnings and you will not pay CGT on non property shares you sell in SA.
You will only pay tax if the shares have not yet reached the 3 year term as you will be trading in SA. All interest is tax free.
Any earnings you make from your SA shares must be declared in Australia and you will get credit for tax paid here according to the DDT. This is to prevent tax avoidance and to protect you from paying tax twice.
If your tax rate in Australia is 35% and 30% in SA, then your tax on SA share sales will be 5% in Australia.
Title: Re: Tax
Post by: Delusionsofgrandeur on April 15, 2014, 07:14:28 am
This is a little confusing.

1) So this means no tax on dividends in S.A,but I should pay tax on the dividends(and any other profits) in the country I am in?

2)Is it possible to claim back dividend taxes I was already charged with?

I just changed my status to non-resident with SARS.However,My broker account is still a local account,even though I opened it overseas.

3)So I still have to submit everything to SARS and they will know not to tax me on foreign income,correct?
Title: Re: Tax
Post by: Orca on April 15, 2014, 12:17:27 pm
My case is likely to be the same as yours as most DTT's are standard. I will pay normal tax on the sale of shares in SA to SARS and get Credit for this in Portugal. As Portuguese tax is a bit higher, I will pay some tax in Portugal.
Once my shares are held for 3 years, then as a non resident in SA, I will pay no CGT in SA but will pay it in Portugal.

Non residents do not pay dividend tax in SA but are liable to pay it in the country of residency.
So whether you paid here makes little diffs as you would have paid it there.
Title: Re: Tax
Post by: gcr on April 15, 2014, 12:25:29 pm
My case is likely to be the same as yours as most DTT's are standard. I will pay normal tax on the sale of shares in SA to SARS and get Credit for this in Portugal. As Portuguese tax is a bit higher, I will pay some tax in Portugal.
Once my shares are held for 3 years, then as a non resident in SA, I will pay no CGT in SA but will pay it in Portugal.

Non residents do not pay dividend tax in SA but are liable to pay it in the country of residency.
So whether you paid here makes little diffs as you would have paid it there.
Orca - I and I am sure a number of other people would be most interested in once you have set yourself up in Portugal as to what the real tax implications really are, whether you do end up paying double tax etc. I am sure that you will also look at the European or even London markets and dabble a bit in shares when resident in Portugal, so I would hope that you will continue to post once you have left these shores
Title: Re: Tax
Post by: Orca on April 15, 2014, 06:08:20 pm
I surely will gcr. My stocks will stay in SA so I will keep irritating you guys here.

As a general rule with DTT's, you may not be subjected to more tax than the locals in your country of residency would pay and this includes any taxes paid in any other country. ie. Your TOTAL tax for the year CANNOT be more than what the locals would pay for the same amounts as it will be discriminating.

Title: Re: Tax
Post by: XXXXX on April 15, 2014, 07:31:22 pm
A couple of points on residents/non-residents, dividends and DTA's

1. Any dividend is exempt from South African income tax (normal tax), whether resident or not.
2. Dividends received by a non-resident, would still be subject to a dividends withholding tax.  The following being the notable exceptions
       a) any dividend declared by a foreign company listed on the JSE  (i.e. the dividend is paid from a non-resident to a non-resident).  BHP is an example.
       b) where via a DTA, the dividend withholdings tax has been reduced to below the 15% withholding tax rate.  For example, the DTA with the UK, allows the withholding tax to be reduced to 10%.  Having a quick look at the SA-Portugal DTA, the rate stays at 15%
3. To qualify for the exemption/reduction referred to 2(a) or 2(b) above, one needs to apply for exemption with the withholding agent, typically your stock broker.
4. Note that when your residency status (via either the "ordinarily residence" test or "physical presence test"), changes from resident to not resident, you have a deemed capital gain (at current market value) on any shares held for investment purposes.
5. Thereafter,  any capital gains on the RSA shares are exempt from South African Capital gains tax.  But may, depending on local rules, be subject to tax in any other tax jurisdiction.
6. The effect of DTA, is to clear up source rules (i.e. where taxed), and attempt to eliminate any possible double taxation.  Similar rules, also exist in the RSA income tax act which may assist in ensuring you aren't taxed in two countries.
7.  The general underlying principles that exist with DTA, is that you only get taxed once, and that any withholding tax paid in the other country, could be set off against the tax that you pay in the 1st country.  I.e. should you be resident in Portugal, and receive a dividend from a South African company, any withholding tax withhold in South Africa, may (depending on the provisions of the DTA and the Portuguese tax legislation), be set off against your Portuguese tax liability.
8.  Do not assume that a DTA exists between the two countries.  Check - they are all listed on the SARS website.  Individual provisions can differ between DTA's.
9.  Also do not assume South Africa principles apply in other juridicitions, i.e, dividends may be taxed as ordinary income, and the tax rate be higher than the 15% you effectively pay in SA.
10.  If in doubt, consult a tax expert who deals with DTA's.  Tt might save you money.

Hope all the above makes sense

Title: Re: Tax
Post by: Delusionsofgrandeur on April 17, 2014, 07:43:31 am
Thank you .That is  informative.

Could you or anyone else please paraphrase point 4,especially the second half of it?I'm unclear on it.

Secondly,I am a non-resident,which means that I do not have to pay CGT in S.A.What would happen if after a few years I have to be classified as a resident in SARS eyes?Will I have to pay back that CGT I hadn't paid in previous years?

Or must this CGT tax be paid in the country of residence?
Title: Re: Tax
Post by: Orca on April 17, 2014, 04:10:21 pm
You have to declare it there and see what happens.
Point 4. When you cease to be a SA resident then all your assets will be deemed as sold at closing price the day before you exit. This will be CGT even if you had not yet held for 3 years. Called Exit Tax.
This is not bad as you now will have a higher Base Cost if you had gains or a loss that can be offset against future gains.
In my case, I will score as my CML made massive gains and I will pay CGT instead of normal tax and I get the R30k exclusion.
Title: Re: Tax
Post by: XXXXX on April 17, 2014, 06:05:19 pm
Thank you .That is  informative.

Could you or anyone else please paraphrase point 4,especially the second half of it?I'm unclear on it.

Orca covered this aspect.  Let me know if you need more detail.
Secondly,I am a non-resident,which means that I do not have to pay CGT in S.A.What would happen if after a few years I have to be classified as a resident in SARS eyes?Will I have to pay back that CGT I hadn't paid in previous years?

Or must this CGT tax be paid in the country of residence?

1.  The day you become a resident (or deemed to be a resident), the market value of your assets (world wide) are deemed to be the base cost for SA CGT tax purposes.  You only pay SA CGT tax on any subsequent increase in value from this point in time.
2.  If you are a non-resident, you may be subject to tax (on world wide income) in your country of residence - but this all depends on local tax legislation. 
3. Also note that the differing countries have differing rules on taxation and residence. 
4.  For example, there are countries, that tax you on your world wide income, irrespective of residence.  An example of this, is the US, where if you are a US citizen, you are taxed on your worldwide income, irrespective of residence or location.  Reliance would then have to be placed on DTA and legislation that may reduce the effect of double taxation.

Hope that all makes sense.



Title: Re: Tax
Post by: Orca on April 18, 2014, 06:24:35 pm
I must still get clarity on if a non resident still pays CGT after paying the Exit Tax in SA. Different websites state that you do and some state that you don't. Perhaps some of the websites/blogs are dated.
I will ask SARS when I go sign the exit "permission" forms.
Title: Re: Tax
Post by: XXXXX on April 18, 2014, 07:17:25 pm
Hi Orca.  The legislation is pretty clear, and is covered in para 2 of the 8th schedule, which reads as follows

"Subject to paragraph 97, this Schedule applies to the disposal on or after valuation date of—
a)any asset of a resident; and
b)the following assets of a person who is not a resident, namely –
i)immovable property situated in the Republic held by that person or  any interest or right of whatever nature of that person to or in immovable property situated in the Republic; or
ii)any asset which is attributable to a permanent establishment of that person in the Republic"


Effectively the 8th schedule (which contains our capital gains tax legislation), simply does not apply to non-residents (as defined by the income tax act.)  (however note the exclusion of immovable property and business establishments from this general rule).

You need however to look very closely at the definition of a "resident" in the income tax act.  For example, it is possible that you fall within the definition of a "resident" after you formally immigrate, in which case you would be subject to further capital gains.   I'd however argue that the "exit tax" or deemed capital gain is only triggered when you fall outside of the definition of a a resident for income tax purposes.
Title: Re: Tax
Post by: Orca on April 18, 2014, 07:54:09 pm
Here is a good read from SARS website.http://www.sars.gov.za/ClientSegments/Individuals/Learn-About-Taxes/Pages/Non-Residents.aspx

Seems like if you are non resident in SA, your CGT is not taxed in SA.
Title: Re: Tax
Post by: Orca on April 18, 2014, 08:08:46 pm
Thanks for your input XXXX. But if you don't comply with the "Physical Residence" test, you will be considered a Non Resident??
Title: Re: Tax
Post by: XXXXX on April 18, 2014, 08:12:35 pm
Hi,

its a two fold test.  To be regarded as a SA resident, you need to be either ordinarily resident OR meet the physical presence test.  Meet either one of those tests, then you are a SA resident.  In your case, i'd argue that when you formally immigrate AND move your household, you'd meet the ordinarily resident test (to be a non-resident), then you just need to be outside of the requirements of the physical presence test and you'll be outside the SA resident net.
Title: Re: Tax
Post by: Orca on April 21, 2014, 08:18:19 pm
XXXX seems very knowledgeable on this so Delusion, take note.
Once you have completed the MP336b and the IT21a successfully, you will be considered as formally emigrated and will not pay tax on your sale of SA investments.
I only have one hurdle and that is this. Once these are completed, then my bank account will be blocked and my investments will be in the control of my bank. All my bank cards will be frozen as will my internet banking.
This week, I will get more clarification on this. 
Title: Re: Tax
Post by: Delusionsofgrandeur on April 30, 2014, 05:06:27 am
I just want to be clear.

1-As a non-resident am I still supposed to file my foreign earnings on e-filing along with my stock sales profit together(in the same entry) as voluntary disclosure or ITR12?

2-I am not emigrating.I am just a non-resident.Am I correct in assuming that as a non-resident I do not have to submit anything except change my adress?

3-Is it possible to subtract Forex loss's from any gains.For example,lets say I send some money to S.A from a foreign country,and then the Rand drops even furthur significantly.Could that be seen as a loss?
Title: Re: Tax
Post by: Orca on April 30, 2014, 06:51:07 pm
You are a non resident temporally overseas according to SARS.
You have to file your e-filing every year and if you are considered as a trader in SA, then you will be a Provisional Taxpayer and must file twice per year plus the end of year normal tax.
Your gains as a trader will attract normal tax and you will pay tax on Capital Gains at 33.3% added to your yearly income that would be zero as you don't have other income here. Less the 30k exclusion.
Your income is taxed in Australia so it won't affect your SA stuff so I would not declare it. You can but it will not be included as SA only taxes at SA source and it was not sourced here.

That said. You have a predicament now. Once your SA stocks are held for 3 years, you will continue to pay CGT in SA on any disposals as long as you have not formally emigrated.

Once you have formally emigrated, your Capital Gains are tax free (for non property stocks) as is Divies and Interest. This, you may be taxed on in Australia at their rates though. You will have to do your own research there.
If you do get taxed there on SA stuff then it really makes makes no diffs where you pay it as the difference will be minimal and you get credit for any tax paid in SA due to the DTA.

As to your FX question. No ways. This is your prob and will have to live with it. Exchange rates and bank fees as far as I know are not tax deductible with money transfers.

You can officially emigrate without coming to SA to do it. I can give you details and it is not expensive. 




 
Title: Re: Tax
Post by: Orca on April 30, 2014, 07:54:57 pm
 I will post this tax thread here for those wanting to emigrate.

If you have assets other than property or property stocks in SA and wish to hold them in SA then this is for you. Part one.

If you formally emigrate you get a Blocked Bank Account in SA. This means that you can only do SA money transfers locally. If you want to transfer money overseas, you can only do so via an email to your bank that will use SWIFT to transfer the money into your overseas account. This is to keep track of your money for the SARB regulations. They have to after all know how much you are withdrawing from SA and how much in total is going out and coming into the country.

All your SA bank accounts will be closed except for your Non Resident Blocked Account at the bank of your choice. All your cards must be handed back to the banks and canceled. You will leave only with your blocked account card for local money transfers to creditors.

You must fill in the MP336(b) and the SARS IT21(a) and hand them in at your bank. I have found FNB to be the most helpful. Make sure you have your e-tickets for your flights, ID docs and passports for them to make copies to include them in you application.

This done, you go to SARS with the stamped docs mentioned and they will look if your tax is up to date and nothing owing. They will give you a tax clearance for emigration that will take some days to clear.

Once cleared, you will get a Tax Clearance Certificate. This you take to your bank with the original docs and off you go.









 
Title: Re: Tax
Post by: Orca on April 30, 2014, 08:57:54 pm
Part two.

Now you are officially emigrated but will still keep your SA citizenship if applicable. ie You were a SA citizen. You do not loose it.

All your Capital Gains from stocks held in SA that are non property after you have emigrated will be tax free but if you are still a trader and sell stocks within the 3 year thingy then you will still pay normal tax as you are carrying on a trade in SA.

This is why I chose Portugal as they become a tax haven.

Before I get to this I must add that Portugal has a cost of living that is cheaper than SA especially in the North or inland. The South has become too British and expensive. I can live cheaper in Portugal than in SA. Some may say that Eastern Europe is cheaper and I agree but the winters are too harsh for me.

Back to the tax haven.
As a SA emigrant, I will not pay tax on my SA Capital Gains as I do not own property stocks. Portugal has a new system that allows immigrants to register as Non Habitual Residents and be tax free for 10 years to attract foreign money.

This means that I pay no tax anywhere. How good is that?

They also have a Golden Visa for non EU residents where you can get Portugal citizenship if you have big bucks or employ 10 locals. You will only pay 20% flat rate tax. No matter how big your business.

So if you are considering emigration, I would suggest Portugal.
 

 

 

 
Title: Re: Tax
Post by: XXXXX on May 01, 2014, 03:53:08 pm


2-I am not emigrating.I am just a non-resident.Am I correct in assuming that as a non-resident I do not have to submit anything except change my adress?


Key concept of resident (for tax purposes), is whether the SA tax act deems you to be a resident etc.

You say you are a non-resident, but haven't formally emigrated.  Some questions which will go a long way to resolving your post.
1.  Even though you are out of the country, do you still see SA as your home?  Are you maintaining a household in SA?  When (or if) do you see yourself returning to SA?
2,  How long have you been out the country?  How many days a year a year do you spend out the country.

I'll address your other questions in a separate post once i have clarity on the above.

Title: Re: Tax
Post by: Delusionsofgrandeur on May 12, 2014, 01:20:20 pm
1-I am not maintaining a household in S.A.I do not see myself returning to S.A in the near future,for at least 5 years if at all.I do see S.A as my home,but I don't specifically have any intention of going back unless I have to.

2-I have been out of the country for 3 years and have not returned since.I may return to visit people for s short period of time but I plan to stay out of country for the foreseeable future.
Title: Re: Tax
Post by: Orca on May 12, 2014, 07:34:30 pm
So SARS will still consider you as a SA tax payer temporarily living abroad. So you must use an agent with POA to Officially Emigrate you.
I would recommend exchange4free.co.za to do it for you. With my research, I have found them to be the cheapest and the best to use for FX rates should you wish to sell SA shares and send it to you. The full fee is just under R10 000.00 but is well worth it as they have tax consultants and banking guys that will open a Blocked SA bank account for you.

A Blocked SA bank account is merely an account that is monitored by your bank according to SARB exchange rules. You can use it only in SA transactions freely but if you want to send money abroad, you have to email your bank agent. They will do so for you but the above agent can also do it.

I would recommend you to officially emigrate as it is tax effective. No divi tax and no tax on interest.

   
Title: Re: Tax
Post by: Patrick on May 13, 2014, 02:30:55 pm
I would recommend you to officially emigrate as it is tax effective. No divi tax and no tax on interest.

Are you allowed to keep your SA passport and work again in SA if you wanted to?
Title: Re: Tax
Post by: Orca on May 13, 2014, 04:20:57 pm
You get classed as a non SA resident but keep your passport and citizenship. Even if you stay long enough in your new country and become a citizen, you keep your SA citizenship.
Two of my daughters are citizens of SA, Finland and UK.
Title: Re: Tax
Post by: XXXXX on May 13, 2014, 09:07:03 pm
Hi Orca

Your interpretation of SA residence is incorrect.  At no stage does the lack of formal immigration automatically treat you as a South African tax resident for tax purposes.  It is of course a indicator of residence, but not a conclusive one.  Just think of all the kids that have done there 2 years in the UK and never come back - with no intention of coming back.  They have never formally emigrated, but are not regarded as South African residents for tax purposes.

1-I am not maintaining a household in S.A.I do not see myself returning to S.A in the near future,for at least 5 years if at all.I do see S.A as my home,but I don't specifically have any intention of going back unless I have to.

2-I have been out of the country for 3 years and have not returned since.I may return to visit people for s short period of time but I plan to stay out of country for the foreseeable future.

As detailed in one of my earlier posts, there are 2 tests.  One being regarded as a SA residence under common law, and another via the so called physical residence test..  Hence the 2 questions above.  To interpret your answers and give you guidance.

1.  Under common law, you will be regarded as a SA resident for tax purposes, if you regard SA as your home.  Case law has also indicated that if it is your intention to return to SA after your wanderings, you would be regarded as a SA resident.  The whole concept is a bit "iffy", and if you had to re-evaluate your position and find that you have no real intention (with no contradictory evidence) of returning to SA, i'd say you could regard yourself as a non-resident.  The fact that you have no SA household and no-need to return assists in this argument.

2.  Under the physical presence test, as long as you're not in the country for a certain period of times (90 days plus in a tax year) for each of the last 5 tax years), then you don't meet the requirements of being regarded as a SA resident via the physical residence test.  In your case, you don't meet this requirement for SA residency.

Hence, you'd have a good argument for being regarded as a non-resident for tax purposes.

Hope it all makes sense
Title: Re: Tax
Post by: XXXXX on May 13, 2014, 09:08:29 pm
Oh.  Almost forgot.  Do not confuse citizenship, residency and being a resident for tax purposes.  They are different animals.
Title: Re: Tax
Post by: Orca on May 14, 2014, 01:40:57 pm
Delusion and I will have assets in SA in the form of shares on the JSE. As my wife and I have formally emigrated, we cease to be residents and will pay no tax on divies and our interest earned will also not be taxed.
Delusion on the other hand, has not formally emigrated and will have to pay the witholding tax on all his divies and normal tax on his interest if over the limit here as normal.
Lump sum pay outs of RA's, insurance etc from SA can't be moved overseas without the SARB permission. This can only be done via a non resident blocked bank account.
Delusion does not have to complete the tax clearance form IT21(a) as he has not been back in SA for 5 years.
He will have to download the SARB form MP336(b) and post it to his bank in SA together with certified copies of his ID/passport , proof of residence and his foreign residence permit. The bank will do the rest at a cost of R1 200.00.
From then onwards, he can remit funds freely up to R1m pa via his blocked account.
Title: Re: Tax
Post by: Orca on May 14, 2014, 01:59:20 pm
From SARB website.
Title: Re: Tax
Post by: XXXXX on May 14, 2014, 05:36:19 pm
Delusion and I will have assets in SA in the form of shares on the JSE. As my wife and I have formally emigrated, we cease to be residents and will pay no tax on divies and our interest earned will also not be taxed.
Delusion on the other hand, has not formally emigrated and will have to pay the witholding tax on all his divies and normal tax on his interest if over the limit here as normal.


Hi Orca

Wrong on multiple accounts.

1.   There is absolutely no reference to formal immigration in the South African income tax act as far as tax residency is concerned.  You can for example formally immigrate, and be found to be a SA resident via the physical residence test.  For your reference, the definition of residence in the income tax act is as follows. 
"resident

means any—
a)natural person who is—
i)ordinarily resident in the Republic: or
ii)not at any time during the relevant year of assessment ordinarily resident in the Republic, if that person was physically present in the Republic-
aa)for a period or periods exceeding 91 days in aggregate during the relevant year of assessment, as well as for a period or periods exceeding 91 days in aggregate during each of the five years of assessment preceding such year of assessment; and
bb)for a period or periods exceeding 915 days in aggregate during those five preceding years of assessment,
in which case that person will be a resident with effect from the first day of that relevant year of assessment,"


The act of formally emigrating will assist in determining if you are ordinarily resident in the SA.  But it is not the only test.

2.  Any dividends paid to a non-SA resident (whether you've formally emigrated or not), will be subject to a dividend withholding tax.  Exceptions include the following;
a)  Where the company declaring the dividend is not resident in SA (i.e.  easy way to remember it, its a non-SA resident company paying a dividend to a non-SA resident.  Why would you pay SA tax on it?)
b) Where the withholding tax is amended by the specific provisions of a double taxation agreement with a country in which you are resident. 

3.  Any interest paid to a non-SA resident (whether you've formally emigrated or not) will typically (there are exceptions) be exempt from South African income tax. 

I also refer you to the SARS info page on the South African tax consequences of being a non-residence are nicely captured on the SARS website.  Note however this is not complete and i advise any individual to consult a professional when the need arises

http://www.sars.gov.za/ClientSegments/Individuals/Learn-About-Taxes/Pages/Non-Residents.aspx

It is also important to differentiate the income tax consequences away from exchange control rules.  They are different animals governed by different legislation.

Another important consideration is other consequences of seeking to be deemed a non-resident, these included deemed capital gains and potential withholding tax on property sales.  It is important to consult an expert if you are affected.  It could save you in the long run.





Title: Re: Tax
Post by: Orca on May 14, 2014, 06:25:00 pm
Thanks XXXX. Got confused with divies and CGT. I have non property stocks and I presume Delusional also.

I Quote;

Is a non-resident subject to CGT on the sale of shares?

In general, this is not the case. There is, however, an exception to this rule for property-owning companies. The selling of shares in a property company owned by a non-resident will be subject to CGT if that non-resident–
directly or indirectly owns together with any connected person 20% or more of the equity shares in that company; and
80% or more of the market value of those equity shares at the time of disposal is attributable directly or indirectly to immovable property in South Africa.
Title: Re: Tax
Post by: Bundu on September 19, 2014, 02:29:36 pm
so I got stuffed pretty well with the ABL collapse  :'(

Does anybody know how I can deduct these losses from my share profits for tax purposes?

I still own quite a lot of the shares, but can't sell them now to "bank" my loss and don't want to wait till they turn into a CGT loss.......
Title: Re: Tax
Post by: jaDEB on September 19, 2014, 03:33:34 pm
Yip also have small amount bought at R1, thus you cannot show loss till they announce next year what is happening. Say you add as loss now (which u cannot) and then next year the share (good bank / bad bank / ugly bank) and you get share back - say R20 a share  :LHST: - no say you get rights to buy share in good bank, but you can sell your rights for say R20.00 a right, no  :LHST:, say 8c. then you have not made a 100% loss.

What did you buy it at.

Title: Re: Tax
Post by: Alsie on September 19, 2014, 03:55:18 pm
If things stay as it is now up until 28 February, I would claim the loss down to the 31c at which the shares were suspended. There clearly is a case to be made for this being a "realised" loss, only being prevented by reason of the suspension.  Whatever the eventual value is that can be realised some time in the future, must then be calculated with the 31c as basis. I advise you to do this and see how SARS react.  If they allow,  :D ;D :TU:, if not, you are not worse off. Don't make an issue of it, just do it on the schedule that you lodge together with your return.
Title: Re: Tax
Post by: Moonraker on September 19, 2014, 04:05:47 pm
Thanks XXXX. Got confused with divies and CGT. I have non property stocks and I presume Delusional also.


Tax brochure for non residents and withholding tax on immovable property (>2mil.) may be of interest ...

Title: Re: Tax
Post by: Bundu on September 19, 2014, 08:04:12 pm
Yip also have small amount bought at R1, thus you cannot show loss till they announce next year what is happening. Say you add as loss now (which u cannot) and then next year the share (good bank / bad bank / ugly bank) and you get share back - say R20 a share  :LHST: - no say you get rights to buy share in good bank, but you can sell your rights for say R20.00 a right, no  :LHST:, say 8c. then you have not made a 100% loss.

What did you buy it at.

I bought at various stages (catch a falling knife comes to mind.....), but in total, my loss is about R350k - around R107k I can prove, as I sold a batch at about R8

excuse me now....... I need a Rennies   ;) :'( :mad: :wall:
Title: Re: Tax
Post by: Bundu on September 19, 2014, 08:05:42 pm
If things stay as it is now up until 28 February, I would claim the loss down to the 31c at which the shares were suspended. There clearly is a case to be made for this being a "realised" loss, only being prevented by reason of the suspension.  Whatever the eventual value is that can be realised some time in the future, must then be calculated with the 31c as basis. I advise you to do this and see how SARS react.  If they allow,  :D ;D :TU:, if not, you are not worse off. Don't make an issue of it, just do it on the schedule that you lodge together with your return.

yip, that's what I was also thinking of trying - if SARS wets their pretty panties, they're welcome to take over my holdings in ABL  :LHST:
Title: Re: Tax
Post by: jaDEB on September 20, 2014, 09:49:06 am
Ouch, maybe in future try and stick to a stoploss, I know it is not easy. Lots of companies are also in ABL, i.e. coronation. I think if you bought under R8, there might be small change that u can recover a bit. If u claim now and say u get something back in Feb, how will u treat it then, maybe wait till then. And claim next year. The bank is operating, and if Feb the offer to shareholders is dismall all will climb out and it will fold, thus the offer will need to be kinda ok. But yes good luck, I feel for u, will drink 2 Rennies and a play on your behalf now.
Title: Re: Tax
Post by: Bundu on September 20, 2014, 12:03:45 pm
Ouch, maybe in future try and stick to a stoploss, I know it is not easy. Lots of companies are also in ABL, i.e. coronation. I think if you bought under R8, there might be small change that u can recover a bit. If u claim now and say u get something back in Feb, how will u treat it then, maybe wait till then. And claim next year. The bank is operating, and if Feb the offer to shareholders is dismall all will climb out and it will fold, thus the offer will need to be kinda ok. But yes good luck, I feel for u, will drink 2 Rennies and a play on your behalf now.

I'm with ABSA stockbrokers and they don't have a standard stoploss function AFAIK  :-[

I will wait for a while and see what happens in 2015 and only act if any of my buys approach 3 years holding  :o
Title: Re: Tax
Post by: Alsie on September 22, 2014, 11:48:43 am
I will still try to claim the loss for this tax year if possible.  If it so happen that the worth goes beyond the 31c in future, then ride the 3 year time out and make a capital profit.
Title: Re: Tax
Post by: Bundu on September 22, 2014, 12:10:34 pm
I will still try to claim the loss for this tax year if possible.  If it so happen that the worth goes beyond the 31c in future, then ride the 3 year time out and make a capital profit.

lekker skelm!  ;D ek like!  :TU:

will see what my profits are for the year and then take a decision
Title: Re: Tax
Post by: Alsie on September 22, 2014, 12:54:02 pm
Not skelm.  Fully compliant with the letter of the law
Title: Re: Tax
Post by: XXXXX on September 23, 2014, 09:20:18 am
Not skelm.  Fully compliant with the letter of the law

Umm.... Not actually......
Title: Re: Tax
Post by: gcr on September 23, 2014, 09:46:05 am
Not skelm.  Fully compliant with the letter of the law

Umm.... Not actually......

Agree :-X
Title: Re: Tax
Post by: Nivek on September 23, 2014, 02:51:26 pm
The line between tax avoidance and tax evasion is often an uncomfortable one.
Title: Re: Tax
Post by: Orca on December 07, 2014, 07:00:48 pm
 I read somewhere that one can offset a tax loss of a failed stock by increasing the base cost of another share in your portfolio by an equivalent value.
Is this correct or did I dream it?
Title: Re: Tax
Post by: XXXXX on December 09, 2014, 07:48:29 pm
Hi,  I think it must have been a dream.  I'm also not too sure why you would want to do it (will elaborate on that later).  Whether you are a "trader" or a "investor", any loss would be effectively be (depending on your status and tax situation) deductable immediately or carried forward to deduct against future profits (or gains). 

As a example, should your share sales be regarded as a "investor" and subject to capital gains.  The the following principle will apply.  Any capital losses will first be set off against any capital gains earned in the tax year, and if after setting off capital gains, any (net) capital losses remains, they will be carried forward to your next year of assessments to be set off future capital gains.  Ringfencing provisions may modify the above principle, but the basic principle would normally be valid for share sales.

If you're a trader, broadly the same principles apply, but depending on your own individual situation, trading loss may be set off against other taxable income (e.g. salary income) prior to being carried off.  Again, there may be specific ringfencing provisions that may limit your ability to set off against taxable income.

Note, that your suggestion achieves the same result, to the extent the replacement share is sold.  i.e, the benefit of the loss is only received when the replacement share is (eventually) sold.

Hope that all makes sense.

Title: Re: Tax
Post by: gcr on December 09, 2014, 10:08:01 pm
Hi,  I think it must have been a dream.  I'm also not too sure why you would want to do it (will elaborate on that later).  Whether you are a "trader" or a "investor", any loss would be effectively be (depending on your status and tax situation) deductable immediately or carried forward to deduct against future profits (or gains). 

As a example, should your share sales be regarded as a "investor" and subject to capital gains.  The the following principle will apply.  Any capital losses will first be set off against any capital gains earned in the tax year, and if after setting off capital gains, any (net) capital losses remains, they will be carried forward to your next year of assessments to be set off future capital gains.  Ringfencing provisions may modify the above principle, but the basic principle would normally be valid for share sales.

If you're a trader, broadly the same principles apply, but depending on your own individual situation, trading loss may be set off against other taxable income (e.g. salary income) prior to being carried off.  Again, there may be specific ringfencing provisions that may limit your ability to set off against taxable income.

Note, that your suggestion achieves the same result, to the extent the replacement share is sold.  i.e, the benefit of the loss is only received when the replacement share is (eventually) sold.

Hope that all makes sense.

This carry over of losses from one tax year seems to run until you start making profits on sales out of your portfolio. I am a provisional tax payer and current I have applied losses made in 2008 and 2009 against my profits made over this period - I am now down to about R 50,000 in terms of losses which I can carry forward into the 2015 tax year. However I still hold Alert Steel and they are suspended at present and if they liquidate then I could accrue some R 22,000 in losses if this happens before February 2015
Title: Re: Tax
Post by: Orca on December 09, 2014, 10:56:50 pm
Thanks XXXX for staying on this forum. Your tax expertise is surely needed here.  Most people do not understand the tax implications of share trading and investing.

My emigrating out of SA and keeping my investments in SA is a sore point. My portfolio will be deemed as sold on a certain date unknown to me as yet and I will have to pay tax on the gains at either income if SARS sees it as "not held for 3 years yet according to section 9C" or as CGT as all the websites state.

Section 9H might complicate this.

If I have to pay as "income" , my liability will be 40%. This will send me back to SA. I will not survive with this reduction.

CGT on the otherhand will be a mere R70 000.00 and I can live with this.


Title: Re: Tax
Post by: Delusionsofgrandeur on September 27, 2015, 04:01:04 pm
I'm abit unclear on something.I have read the Tax guides .Let me give you a basic scenario.

Tax exclusion is R30 000 for losses or gains from stocks.Since I will have(and will continue to) paid tax on my income separately in the country I work,I presume this will be seperate.

2014- I make a loss of R50 000.
   
Tax exclusion              R30 000
Net loss                      R20 000

2015-I make a net profit  of R50 000 on Stocks(trading),commodities,Forex etc.

Tax exclusion                               R30 000
Net Gain                                      R20 000

1.In 2015 I will have made a tax free profit of R20 000.Is that right?

2.Its only possible to offset that loss to the following year,not any other consecutive year.Is that right?

Title: Re: Tax
Post by: Moonraker on September 27, 2015, 04:44:57 pm
Losses are carried over to subsequent tax years until they can be offset or partially offset against gains.

That's how it works with me, but I am not classified as a trader. See also XXXXX post .

http://shareforum.co.za/shares/tax/msg8155/#msg8155
Title: Re: Tax
Post by: Patrick on October 26, 2015, 10:03:40 am
Ok, it's time for my tax question.

I moved out of RAFIND and into DIVTRX when the market was at it's lowest. Now I'd only held RAFIND for maybe a year, so would that be considered a trading loss rather than a capital loss?

Then following on from that, could I use that to offset a capital gain, for example:
Sell RAFIND for R100k loss after holding for 1 year.
Sell FOORD equity for a R330k gain after holding for 3+ years.

Therefore income loss is R100k, capital gain is R330k. Capital gain has R30k exclusion, then 13.3%, 330-30/3=100, of that is income gain in income gets added to the trading loss and I end up owing 0 tax in those transactions?
Title: Re: Tax
Post by: Orca on October 26, 2015, 10:42:59 am
That will be a trading loss. All private income not included in your employers IRP will be audited. You can try and get away with a Capital Loss Tax but SARS will ask for documentation and chances are that a junior accountant will just glance at it and send you mail stating...."We will accept your calculations but reserve the right to review it at a later stage". This is what I received.

If they do go through your papers thoroughly and see it was a trade, it will not be a serious offence as you did not know about the 3 year rule...Did you? No.
Title: Re: Tax
Post by: Patrick on October 26, 2015, 10:49:55 am
Thanks Orca, yeah I want it to be a trading loss, as that means it's worth 3 times as much as a capital loss, but the question is, can I use that to offset the capital gain?

If I can, I can get out of my stupid unit trust pretty much tax free, if not I'll have to cough up more than I'd like.
Title: Re: Tax
Post by: gcr on October 26, 2015, 11:01:47 am
You can use it as a trading loss. The tax form only asks for base costs and realised gain but if you sold a number of counters then it gets absorbed within the malaise of the figures you declare - so losses will reduce any profits you are deemed to have made. The tax form only call for 2 figures for CGT as it relates to shares. One of the reasons I always have a small portion of my portfolio in speculative shares (like Alert Steel) I will when the company is wound up or declared bankrupt use the cost of purchase to reduce my CGT profits by R 21,600
Title: Re: Tax
Post by: Orca on October 26, 2015, 11:17:49 am
Not quite correct. Your e filing will ask if you were trading. A page will open where you enter Cost of Sales, Purchases and Sales. If you had Expenses then you can include them in the box as well.

I will post the exact method here today as I don't recall all the details now.

You cannot offset a Capital loss with your income. The loss carries over until you can offset it against future Capital gains.
Title: Re: Tax
Post by: Patrick on October 26, 2015, 11:45:32 am
Thanks Orca, it would be great if you could post it. In the meantime I did find some good news. Apparently the fact that the two accounts are separate counts in my favour, so the Unit trust account can be deemed for investing, and the stockbrokers account deemed for trading, and then it all works out.

Also it looks like SARS has adderssed this here: http://www.sars.gov.za/FAQs/Pages/781.aspx
Quote
Can an assessed loss – as opposed to an assessed capital loss - be set off against a taxable capital gain?

Yes. Some commentators have questioned this point because a taxable capital gain is included in taxable income. The definition of the term “taxable income” in section 1 provides as follows:
 
“taxable income” means the aggregate of—
 (a) the amount remaining after deducting from the income of any person all the amounts allowed under Part I of Chapter II to be deducted from or set off against such income; and
 (b) all amounts to be included or deemed to be included in the taxable income of any person in terms of this Act;
 
It is evident from this definition that taxable income can be a negative figure. Paragraph (a) would become negative when the amounts allowed under Part I of Chapter II exceed the income of a person. Furthermore, Part I of Chapter II includes section 20 which deals with assessed losses.
 
The intention of the legislature can also be seen from the amendments to section 103(2) which provides that a ‘tainted’ capital gain cannot be set off against an assessed loss. These amendments would not have been necessary if a taxable capital gain could not be set off against an assessed loss.​

So it looks like I can finally get out of my stupid unit trust, and not take a huge hit! The only thing I'll have to make sure of in future, is that I don't sell any shares for profit in the next three years, as those will then also be considered trading gains. Not that I plan to, all I hold now is STXIND and DIVTRX, and I plan on holding those for a very, very long time.
Title: Re: Tax
Post by: Orca on October 26, 2015, 12:26:56 pm
I suggest you write this down for future reference.
You broker will give you an analysis of your activities for the tax period. Mine is called "Holdings Analysis for year ending 28 Feb 2015" and all the figures are at cost so no expenses such as brokerage, taxes and VAT need be calculated as they are already included.

First you need to work out Cost of Sales. The report will only give you the Opening Stock amount of shares you had at year start. This you have to calculate depending if you used the FIFO or Weighted Ave method. This is at cost or the "Due From You" amounts.

Cost of Sales
Opening Stock
Add: Purchases  (this is the total amount shown in Rands on your report)
Less: Closing stock (this is according to your FIFO or WA method)
Total: Rxxx

Disclosure in SARS efilling.
In Trading section. Number of trades will be 1 even if you traded 100 times. Patrick might have 2
due to his 2 accounts.
1. Sales. (this is the amount shown in the Totals column of the report)
2. Cost of Sales.
3. Deductions. Internet costs, Stationary etc.
4. Source Code. 2514 if it was a gain. A Loss will be 2515

Note: Your Closing Stock will be next year's Open Stock so after you calculated it, write it on the report then you need not calculate your Open Stock next year.

Capital Gains will not be in the Trading Section.



 

Title: Re: Tax
Post by: Patrick on October 26, 2015, 12:59:12 pm
Thanks Orca  :TU:
Title: Re: Tax
Post by: Orca on October 26, 2015, 02:04:08 pm
Thanks Orca  :TU:
No problem. Please see the Note I edited in now. I am forgetful so need to keep it for prosperity.
Title: Re: Tax
Post by: Orca on March 31, 2016, 06:23:59 pm
I would just like to clear up a tax matter that was brought up here today.

If I trade stocks on the JSE here from Portugal then the source would be Portugal and I will pay tax in Portugal only.
Many companies trade in SA but have their headquarters and offices overseas. They will be exempt from SA tax as they apply their time and wit overseas for the income.

If I had a micro internet business here in Portugal and am an affiliate for Herbal Life SA, I can sell to SA clients without incurring tax liabilities in SA.

Case Study:
CIR v Black.
The appellant, a South African resident carried on a business of dealing in FX. Although he deposited the funds in the USA with the brokerage through which he conducted his activities, the court held that he exercised his wits and labour in SA and therefor it was in SA that he conducted his business.

My post in the "Shout Box" that I should be exempt was tongue in cheek.

Title: Re: Tax
Post by: Patrick on March 31, 2016, 06:48:33 pm
Very good to hear. Not because I want to trade, but because I plan to live overseas while having website money paid into an SA bank account...
Title: Re: Tax
Post by: Patrick on April 30, 2016, 11:25:41 am
My emigrating out of SA and keeping my investments in SA is a sore point. My portfolio will be deemed as sold on a certain date unknown to me as yet and I will have to pay tax on the gains at either income if SARS sees it as "not held for 3 years yet according to section 9C" or as CGT as all the websites state.

Section 9H might complicate this.

If I have to pay as "income" , my liability will be 40%. This will send me back to SA. I will not survive with this reduction.

CGT on the otherhand will be a mere R70 000.00 and I can live with this.
What was the outcome here Orca? I'm guessing by the fact that you're still abroad that you paid only CGT?
Title: Re: Tax
Post by: Orca on April 30, 2016, 06:30:46 pm
I contacted a chartered accountant Hugo van Zyl. He specializes in cross border tax stuff. He advised me that as I have Officially Emigrated, I have no more tax liabilities to SARS.
I have not paid a cent but am doubting his advice.
SARS has not contacted me and I am the type that will ignore this as it will go away then.
I will copy and paste his reasoning if I can find his email.
Title: Re: Tax
Post by: Orca on April 30, 2016, 08:35:42 pm
Here.
Title: Re: Tax
Post by: Tovad on June 11, 2016, 09:33:39 am
Nevermind I re-read the second part and it is only a CGT event if the capital returned is more than the acquisition cost....

I noted a new tax section regarding a capital return that could trigger a CGT event  in my Standard Bank CGT statement (see at end):

My interpretation (am I right?) is that this could affect Aspen which does not pay a dividend but use a "capital returned".
(1) If share bought before 1 Apr 2012 then its cost is reduced by the capital returned
(2) If share bought after 1 Apr 2012 then it triggers capital gains event for the tax year in which the capital is returned

Paragraph 76B: Reduction in base cost of shares as result of distributions

(1) Applicable to pre-valuation date assets
Where a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by
or accrues to a holder of a share and that return of capital or foreign return of capital is received by or accrues to the
holder on or after 1 April 2012 but prior to the disposal of that share and the share constitutes a pre-valuation date asset
in relation to the holder of that share, then for purposes of determining the date of acquisition of that share and the
expenditure in respect of the cost of acquisition of that share, the holder of that share must be treated as:
i. having disposed of that share at a time immediately before the return of capital or foreign return of capital is received or
accrued for an amount equal to the market value of the share at that time; and
ii. having immediately reacquired that share at that time at an expenditure equal to that market value less any capital
gain that would have been determined had the share been disposed of at market value at that time; and increased by
any capital loss that would have been determined had the share been disposed of at market value at that time, which
expenditure must be treated as an amount of expenditure actually incurred for the purposes of paragraph 20(1)(a).

(2) Applicable to post-valuation date assets
Where a return of capital or foreign return of capital by way of a distribution of cash or an asset in specie is received by
or accrues to a holder of a share and that return of capital or foreign return of capital is received by or accrues to the
holder of that share on or after 1 April 2012 but prior to the disposal of that share, the holder of that share must reduce
the expenditure in respect of the share by the amount of that cash or the market value of that asset on the date that the
asset is received by or accrues to the holder of that share. Where the amount of a return of capital or foreign return of
capital referred to above exceeds the expenditure in respect of the share of which that return of capital or foreign return
of capital is received or accrues, the amount of the excess must be treated as a capital gain in determining the aggregate
capital gain or aggregate capital loss of the holder of that share for the year of assessment in which that return of capital
or foreign return of capital is received by or accrues to the holder of that share.
Title: Re: Tax
Post by: Moonraker on June 11, 2016, 02:45:14 pm
Nevermind I re-read the second part and it is only a CGT event if the capital returned is more than the acquisition cost....

I noted a new tax section regarding a capital return that could trigger a CGT event  in my Standard Bank CGT statement (see at end):

My interpretation (am I right?) is that this could affect Aspen which does not pay a dividend but use a "capital returned".
(1) If share bought before 1 Apr 2012 then its cost is reduced by the capital returned
(2) If share bought after 1 Apr 2012 then it triggers capital gains event for the tax year in which the capital is returned

Return of capital on or after 1 April 2012 on post-valuation date shares.

Only base cost is reduced - no CGT (unless the return of capital was greater than the original base cost when there would be CGT payable and the base cost would of course be nil - Very unlikely and rare I would assume).

Remember pre-valuation date is 1st October 2001. I assume you aquired APN after that date. If not it gets a little more complicated.

I also have APN - dividend was paid by way of a capital reduction - the base cost was lowered accordingly and definitely no CGT.
CGT only payable on disposal of APN (if held on capital account).

"With effect from 1 April 2012 a return of capital will no longer trigger a part-disposal of a share. Instead, it will be treated as a reduction of the base cost of the share."



216 cents per ordinary share was the last dividend by way of capital reduction (no cgt and no withholding tax).
Title: Re: Tax
Post by: Tovad on June 11, 2016, 08:10:39 pm
Ok thanks - yes SB Securities did the same to my APN base cost but as they do not always do things right regarding CGT I was worried there for a while until I re-read the wording - I agree that it is unlikely unless a share increase by 30x or more - Aspen was about R 130 in 2012...
Title: Re: Tax
Post by: Moonraker on June 12, 2016, 08:34:06 am
Ok thanks - yes SB Securities did the same to my APN base cost but as they do not always do things right regarding CGT I was worried there for a while until I re-read the wording - I agree that it is unlikely unless a share increase by 30x or more - Aspen was about R 130 in 2012...

What I mean is this :-

On or after 1 April 2012 a return of capital must be deducted from the base cost of your shares.
If the base cost becomes negative as a result of the deduction of the return of capital the excess is treated as a capital gain

Example from SARS:-

Base cost 150
Less: Return of capital (400)
Capital gain 250
The base cost of the shares going forward will be nil.

Just for clarification - this will probably never happen.