February = Tax Planning

The end of the tax year is around the corner. With a budget deficit widening in South Africa, the opportunities to save on tax is getting smaller and smaller but there is still a few tax planning scenarios left especially for investors.


The window to take advantage of these opportunities closes at the end of February 2018.


The opportunities you have is as follows:


Retirement Annuity

A gift from me to me.

The deductibility of contributions to an RA (subject to certain limits) can help ensure that a smaller portion of an individual’s total earnings is taxed by the South African Revenue Service. Taxpayers may deduct contributions to all retirement funds up to a maximum of 27.5% of the greater of remuneration and taxable income, capped at R350 000 per tax year.

Bovest or your tax practioner can help you calculate what additional contribution you can make to get the full tax benefit


There is also no tax payable on the growth of investment.

The added benefit of it has favorable tax treatment of lump sum proceeds at retirement or death and it is protected against creditors.


Liquitdity is the only constraint of a Retirement annuity, as you can only take a third of the money at retirement (earliest 55). You will then be taxed on the income produced from your retirement annuity.


Tax Free savings

Tax free savings accounts (TFSAs) are a great initiative from government to encourage savings in South Africa. You pay no tax on dividends and interest received and no tax on capital growth. As a result you benefit from increased compounding of returns

You can only contribute R 33 000 a year and R 500 000 over lifetime and you have access to the investment at all times.

The real benefits of a tax-free savings account however only realize after a long term of consistent investing.


R 100 000 Tax Free Donation

Individuals may donate up to R 100,000 per annum tax free, to their Trust or dependents.

The benefit of this donation is to reduce the personal estate value for Estate Duty purposes or can be used to help reduce the loans to trusts (see below)


Need to Review Loans made to Trusts

From 1 March 2017, SARS implement art 7C, that states that interest should be levied against related party loans.

The interest not charged on the loan (i.e. the amount of interest below interest at the official rate of (currently) 8% per annum) would be treated as a donation on the last day of the tax year and subject to donations tax at the rate of 20% payable by the lender.

Loans need to be reviewed before the 28th of February or will be taxed on that date.


Section 12 J Investments – Venture Capital

Section 12J funds are a good investment for investors who seek tax relief.

Investors can claim the full amount used to acquire shares in the S12J company as a deduction from taxable income in the year of that investment. Provided the shares are held for at least five years, the initial tax benefit will not be recouped by the tax authorities. After five years, the full proceeds from the sale of the shares will be subject to capital gains tax.

Not all S12J companies are created equal. Not only do they have different roles and objectives, they also differ in their strategies and methodologies. Some might be investment club-type entities in which a few friends get together to invest in a portfolio of businesses; others are highly sophisticated operations run by professional asset management companies.


Please contact us if you have any questions or want to make use of any of this tax savings vehicles

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