Author Topic: Tax  (Read 265122 times)

gcr

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Re: Tax
« Reply #270 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
Not everything that counts, can be counted, and, not everything that can be counted counts - Albert Einstein

Orca

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Re: Tax
« Reply #271 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.


I started here with nothing and still have most of it left.

Delusionsofgrandeur

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Re: Tax
« Reply #272 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?

« Last Edit: September 27, 2015, 04:05:35 pm by Delusionsofgrandeur »

Moonraker

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Re: Tax
« Reply #273 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
« Last Edit: September 27, 2015, 05:38:55 pm by Moonraker »

Patrick

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Re: Tax
« Reply #274 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?

Orca

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Re: Tax
« Reply #275 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.
« Last Edit: October 26, 2015, 10:46:47 am by Orca »
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Patrick

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Re: Tax
« Reply #276 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.

gcr

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Re: Tax
« Reply #277 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
Not everything that counts, can be counted, and, not everything that can be counted counts - Albert Einstein

Orca

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Re: Tax
« Reply #278 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.
I started here with nothing and still have most of it left.

Patrick

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Re: Tax
« Reply #279 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.
« Last Edit: October 26, 2015, 11:48:05 am by Patrick »

Orca

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Re: Tax
« Reply #280 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.



 

« Last Edit: October 26, 2015, 02:01:54 pm by Orca »
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Patrick

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Re: Tax
« Reply #281 on: October 26, 2015, 12:59:12 pm »
Thanks Orca  :TU:

Orca

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Re: Tax
« Reply #282 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.
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Orca

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Re: Tax
« Reply #283 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.

« Last Edit: March 31, 2016, 06:27:41 pm by Orca »
I started here with nothing and still have most of it left.

Patrick

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Re: Tax
« Reply #284 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...