Fidelis Vox | We discern what really matters to you

Individuals:

 

R10 MILLION FOREIGN INVESTMENT ALLOWANCE:

Who: An individual taxpayer in good standing and over the age of 18 years.

How often: Each calendar year.

Requirements: Tax Clearance Certificate, SA ID.

 

R1 MILLION SINGLE DISCRETIONARY ALLOWANCE:

Who: An individual taxpayer in good standing and over the age of 18 years.

How often: Each calendar year.

Requirements: Declaration, SA ID, if for travel purposes outside the Common Monetary Area a passenger ticket.

 

OVER R10 MILLION SPECIAL ALLOWANCE:

Who: An individual taxpayer in good standing and over the age of 18 years.

How often: On application.

Requirements: Application via Authorised Dealer, i.e. the commercial bank at which the individual has a bank account, to the Financial Surveillance Department of the SARB for approval. A printed SARS tax compliance status verification result must accompany the application. Note should be taken of any conditions attached to the approval to ensure compliance therewith. These funds may now be invested in offshore trusts.

 

Trusts:

SA trusts can generally only obtain foreign investment exposure through the utilisation of asset swaps.

Although the asset swap mechanism provides foreign exposure for SA trusts, proceeds of investments held via asset swaps must always be paid in South Africa Rand (“ZAR”) and credited to a local SA bank/investment account.

Asset swap mechanisms therefore do not provide direct foreign investments in the name of SA trusts.

 

Funding mechanisms from SA trusts to individuals:

 

From trust to beneficiary:

 

  • Capital/income distributions, or
  • Loans – can be on an interest free basis if trust deed allows it.

Take note of the following general guidelines:

 

  • Where capital or income distributions are considered, the deeming provisions in the Income Tax Act in SA, (“ITA”) as well as taxation in terms of the “conduit” principles must be carefully considered should the funds so distributed be or contain current year income or gains.
  • Where funding is done on a loan basis, and the funds utilised to provide the loan give rise to trust income or gains, then the trust will generally be liable for taxation thereon unless the deeming provisions or the conduit principles apply.
  • Loan to beneficiary will remain a liability against that beneficiary’s estate at time of death and could effectively reduce the potential future SA estate duty liability of that particular beneficiary as a deduction in his/her estate.
  • From an estate planning point of view, the deceased estate of the individual receiving the loan funding from the trust, should have enough liquidity to pay the liability on death. Most SA taxpayers do not want to repatriate funds from offshore to be able to repay these loans on death in a deceased estate.
  • If anyone else takes over the loan and pays it on behalf of the deceased, there may be a donations tax liability, and the deduction for estate duty purposes will not be available anymore. The deduction is only available if the loan was repaid by the deceased estate.
  • The beneficiary will be free to utilise the funding received from the trust, whether as loan or distribution, for externalisation purposes in terms of the relevant annual allowances.
  • The beneficiary will be able to invest these assets in practically any offshore investment medium including direct equities, unit trusts, offshore wrappers, etc.
  • The relevant beneficiary will also be able to fund e.g. an offshore trust, but if done by way of a loan this must be in the form of a market related interest-bearing loan to prevent the transfer pricing rules in the ITA and section 7C of the ITA from applying.

Please contact Marteen Michau at marteen@fidelisvos.co.za for advice on any the above, as these guidelines are stated in general and do not constitute advice as specific circumstances may differ and cause the above to not be applicable.

 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

We use cookies to improve your experience on our website. By continuing to browse, you agree to our use of cookies
Accept