Founded in 1920, Grant
Thornton South Africa provides a comprehensive
range of financial services, including assurance,
tax and specialist business advice to dynamic organisations.
Grant Thornton helps these companies unlock their
potential for growth by providing meaningful, actionable
advice through a broad range of fiduciary services.
Grant Thornton believes building a solid foundation
for a business is critical to achieve high performing
and financially thriving operations in future.
Grant Thornton provides advice based on financial,
analytical and business process skills to businesses
that are involved in establishing, buying or financing
a business, integrating them into existing operations
or improving their performance.
Specific financial services that relate to establishing
a solid foundation and making sensible business decisions
include performing due diligence checks, valuations,
and strategic and business planning.
Once operational, business owners are focused on operational
matters and generating income and may not consider
the threat of non-compliance with regulatory frameworks
relevant to their business.
Grant Thornton helps clients navigate regulatory red
tape through financial services such as outsourced
accounting and payroll, corporate compliance service,
company secretarial and regulatory advice.
Grant Thornton's audit methodology
has been developed to meet the highest international
standards and market expectations. It provides
assurance to businesses on their financial and operational
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reporting and adapting new regulatory requirements.
Tax planning is a critical aspect
to consider when investing in or starting a new business
and affects all stages of the business lifecycle.
While the tax system can appear complicated and confusing
our experience in tax planning for dynamic organisations
means that you get accurate, authoritative
tax advice to proactively mitigate
against tax-related risks and take advantage
of tax efficiencies to minimise the tax burden.
Feel free to contact
us at Grant Thornton South Africa
should you have any queries relating to financial
services.
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April 2013
PUTTING
YOUR HOSPITALITY BUSINESS IN
THE BLACK WITH A BIT OF GREEN
By
Nico Ackermann, Director Corporate
Finance and Capital Markets
Division at Grant Thornton Cape
Town |
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Consumer consciousness
regarding sustainability is
on the increase across the world.
The hospitality industry is
no different in this regard.
Along with this consumer demand,
consumer sophistication is also
on the rise, generalised “green
statements” without metrics
and targets, without baseline
data against which to evaluate
them are no longer adequate
in demonstrating true commitment
and transparency.
The overriding considerations
of holidaymakers and travellers
in general will always remain
price and service, however,
studies have shown that ”environmental
management systems brings significant
benefits, reputation and competitive
edge to the hotel and these
benefits have always outweighed
the cost” (Tsai et al
2003)
Some
recognised real world benefits
associated with embracing sustainability
include: |
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February 2013
PROPERTY
INVESTORS FACE HEFTY TAX BILL
By
Anton Kriel, Tax Director, Grant
Thornton Cape |
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The most important aspect
that real estate investors all over
the world are looking for is a capital
return on their investment. Inevitably,
exiting a property investment to realise
the capital return comes with a tax
cost.
Firstly, the capital
profit on the sale of a fixed
property attracts Capital Gains
Tax (CGT) and if the property
investment was made in a corporate
structure, the extraction of
the profits by means of a dividend
is subject to Dividends Tax.
Previously, CGT was payable
on 25% of the capital gain derived
by natural persons and 50% of
the capital gain derived by
companies, close corporations
and trusts. In the case of companies
and close corporations, the
extraction of the capital gain
via a dividend was subject to
Secondary Tax On Companies (STC)
at a rate of 10% of the net
dividend declared by the company.
Last year, however, the portion
of capital gain for inclusion
in taxable income was increased
and STC was replaced by a dividends
tax withholding regime. |
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December | January 2013
THE ACCIDENTAL
TAXPAYER
By
Anton Kriel, Tax Director, Grant
Thornton Cape |
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In the same
way that the travel writer,
Macon Leary in Anne Tyler’s
novel, The Accidental Tourist,
did not regard himself to be
tourist, so too are long term
holiday or business visitors
to South Africa often blissfully
unaware of being regarded as
tax resident in South Africa,
and therefore also unaware of
potentially large cash tax costs
that may arise from their new
found status, particularly,
in relation to indirectly held
assets located outside of South
Africa.
Non SA tax residents are generally
only subject to SA tax in respect
of income and gains arising
from SA activities / assets,
i.e. they are taxed on the so-called
‘source’ basis.
This restricted basis of tax
is extended to a worldwide basis
of tax where the individual
is regarded as SA tax resident. |
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| The often unexpected consequence
of a residence basis of tax
is that it extends not only
to directly earned income and
gains outside of SA, but may
capture income and gains earned
by foreign companies controlled
by SA residents or foreign trusts
funded by that person or of
which that person is a beneficiary.
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October 2012
PROPOSED
CHANGES TO THE WITHHOLDING TAX
ON ROYALTIES TO NON-RESIDENTS
By
Douglas Gaul, Tax Manager, Grant
Thornton Johannesburg |
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South African entities
paying royalties to non-residents
are currently required to withhold
tax at the rate of 12%, subject to
a possible reduced rate in terms of
the relevant Double Taxation Agreement
(DTA).
However, significant changes to the
Income Tax Act are proposed to take
effect from January 2013. |
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proposal in a nutshell: |
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The
withholding tax
rate will
increase from 12%
to 15%
for royalties paid
after the effective
date. This increase
aligns the royalties’
withholding tax
rate with that of
dividends tax (introduced
in March 2012),
as well as the new
withholding tax
on interest (also
effective from 1
January 2013). |
| • |
The
withholding tax
on royalties is
a final tax and
the initial liability
to withhold the
tax and pay SARS
remains with the
payer of the royalty.
The ultimate liability
will nevertheless
remain with the
beneficial owner
of the royalty. |
| • |
A
foreign person will,
in specific circumstances,
be exempt from the
withholding tax
in respect of royalties
that are paid, or
become payable after
1 January 2013. |
| • |
The
exemption relating
to controlled foreign
corporations (CFCs)
will be dropped.
A further exemption
will apply in respect
of certain royalties
that are paid or
become payable by
headquarter companies. |
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August 2012
VAT RELIEF
FOR COMPLIANT RESIDENTIAL PROPERTY
DEVELOPERS
By
Cliff Watson - Associate Director,
Tax at Grant Thornton South
Africa |
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Many residential
property developers have
been forced to let units
they have been unable
to sell due to the current
uncertain economic conditions.
Developers who decide
to let the properties
in order to defray costs
are required to account
for VAT output-tax based
on the market value of
the property, as there
is a change in use of
the property. This clearly
has adverse cash flow
consequences for the developer.
Temporary
Relief
SARS acknowledged this
as an issue and introduced
temporary relief to developers
who are now allowed a
maximum grace period of
36 months to rent the
property before sale,
without incurring the
VAT liability. This grace
period commences when
the property is rented
for the first time. |
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June 2012
CAREFUL
PLANNING OF YOUR LAST WILL AND
TESTAMENT TODAY, SECURES YOUR
WISHES FOR TOMORROW
By
David Nathan, Senior Partner
and Head: Accounting, compliance
and estates at Grant Thornton
Johannesburg
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Changes
Important changes to your
last will and testament
need to be dealt with
regularly, in order to
give effect to your latest
wishes. Circumstances
that could have a significant
impact on your stated
wishes, change continuously.
Consider for example the
effect of events such
as; the birth of new family
members, changes in marital
status, the demise of
an heir, or considerations
by the testator or beneficiaries
to emigrate.
Appointing the
Best Executors
Appointing an executor
who is known and trusted
is critical to ensure
that your wishes are executed
accurately. However, don’t
forget to consider the
succession of executors,
so that, should you survive
the appointed executor,
your wishes will not be
left in the hands of a
stranger. |
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April 2012
ACQUIRING
A DISTRESSED BUSINESS MAY BE
A BARGAIN BUT BEWARE PITFALLS |
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The
ongoing global economic
turmoil has resulted in
a deluge of distressed
companies available at
bargain deals. While these
deals provide the opportunity
to generate value, they
can be risky as buyers
overlook important objectives
in favour of the attractive
low price of the target
company.
In addition to financial
due diligence, which is
as important in a distressed
transaction as a healthy
deal, the following areas
require particular focus.
Suppliers
Many types of distressed
transactions permit the
buyer to leave working
capital liabilities with
the old entity and start
afresh. From a valuation
perspective this means
that the company can generate
profit from its inventory
on hand and simultaneously
continue buying new material
on credit. |
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August 2011
NEW FRINGE
BENEFIT FOR EMPLOYEES |
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Jonathan
Coetzee
Tenk Loubser & Associates |
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A
number of Employers have, for
several years, been contributing
towards either an employee death
or an employee disability policy
on behalf of their employees
(long-term insurance policies).
The aforementioned policies
were provided either by means
of ‘approved’ plans
or ‘unapproved’
plans, as defined by the South
African Revenue Service (SARS).
These policies
can be structured in the following
ways:
1. The proceeds can be paid
directly to the employees
2. The proceeds can be paid
directly to the employer, with
a side arrangement existing
between
2.
the employer and employee
whereby the employer will pay
proceeds over to the employee
For many years, these contributions
to policies on behalf of employees
were allowed as a deduction
for the employer, with no matching
accounting for a fringe benefit
in the hands of the employee.
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August 2011
FICA INCREASES
RISK ON ESTATE AGENTS |
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The three month compulsory registration
period for Estate Agents to register
with FICA has recently ended on 28
February 2011. Since that date the
requirements of the Financial Intelligence
Centre Act 38 of 2001 is applicable
to all estate agents.
In short The Act prescribes
certain duties to all accountable
institutions (including estate agents).
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June 2011
COMPANIES
ACT 2008 – DIRECTORS’
RESPONSIBILITIES AND LIABILITY
By Willie
Smith, Exceed, in association
with Tenk Loubser & Associates |
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Willie
Smith
Exceed, in association with
Tenk Loubser & Associates |
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Do
you still want to be a director under
the new Companies Act? Directors’
need to know their rights and must
be aware of what is expected of them.
They are subjected to the common law,
as found in court rulings and judgments.
New Companies Act
The new Companies Act 2008 became
effective on the 1st of May, after
numerous changes and delays, 4 days
after the act was published in the
Government Gazette and, will no doubt,
have significant consequences for
all stakeholders and directors of
companies.
Who is
a Director?
A director means a member of a board
of a company, as contemplated in section
66, or an alternate director of a
company and includes any person occupying
the position of a director or alternate
director, by whatever name designated.
Accountability and Transparency
While the new Companies Act 2008 aims
to provide a flexible regime that
balances accountability and transparency
with less of a regulatory burden,
one aspect of the new Companies Act
(No 71 of 2008) is that it records
the common law duties and responsibilities
of directors, which provides clarity
in the performance of the obligations. |
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April 2011
BANK LIKE
A BANKER
By Suzette
van Niekerk, Exceed Asset Management |
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| Suzette
van Niekerk, Director: Exceed
Asset Management |
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In
the following paragraph, we’ll
be asking you three questions. For
each of them, answer either ‘yes’
or ‘no’. When you set
out to buy new shoes, do you generally
tend to browse around and compare
the options at different stores before
making a purchase? When you buy a
new car, do you compare the costs
of various models before taking the
plunge? When you order food at a restaurant,
do you check the price of a meal first
before telling the waitress what you
want?
Trick
Question
Now here’s the trick question:
Do you apply the same principles in
terms of banking? Because whether
you answered yes once, twice or three
times in the above paragraph, the
principle stays the same – banking
is part of your monthly expenses and
only by comparing costs and shopping
around for the best deals will you
really be able to save on those nagging
fees.
Here are ten expert
tips to get you started: |
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February 2011
INVESTING
OFFSHORE
By Sonja
Frank, Exceed |
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The
Minister of Finance, Pravin Gordhan,
announced during his Medium Term Budget
speech that the foreign capital allowance
for private individuals (resident
in South Africa) is increased to R4
million per resident per annum. This
allowance is of course subject thereto
that the resident obtains a tax clearance
from the South African Revenue Services
(SARS).
Three
Offshore Investment Options
In this article we will discuss three
offshore investment options available
to South African residents (SA residents)
and the income tax and estate
planning consequences of
each.
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The funds can be invested
in the individual’s own
name offshore. |
| 2. |
The funds can be
loaned and advanced to an offshore
Trust. |
| 3. |
The funds
can be donated to an offshore
Trust. |
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February/March 2011
SOUTH AFRICA'S
NEW SKILLS STRATEGY
By Carina
de Swardt, Exceed Human Resource
Consultants |
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The
key driving force of this strategy
is improving the effectiveness
and efficiency of the skills
development system. The emphasis
is particularly on those who
do not have relevant technical
skills or adequate reading,
writing and numeracy skills
to enable them to access employment.
Key Imperatives
The NSDS (New Skills Development
System) will be guided by, and
measured against, several key
developmental and transformation
imperatives:
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race, |
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class, |
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gender, |
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geographic considerations
and |
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age differences, as
well as |
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disability and the HIV
and AIDS pandemic. |
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December 2010
INTERNAL
AUDIT AND RISK MANAGEMENT SIMPLIFIED
- Part 2
By Louw
van der Merwe, Exceed |
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This is the 2nd part in a series
of articles where our resident specialist,
Louw van der Merwe, explains and clarifies
on a very practical level exactly
what value can be added by Internal
Audit and Risk Management within your
organisation.
The first article, published
in last month’s newsletter (August
201), included information on controls,
the role of internal audit, as well
as typical internal audit reviews.
Internal Audit planning
Internal Audit has to review every
process within the organisation at
least once in a 3 year cycle.
| • |
For areas that
represent a very high risk to
the organisation, more regular
assurance on the continued effectiveness
of key controls might be needed,
however. |
| • |
The question therefore arises
which areas or processes should
be reviewed every year, which
every 2 years, and which only
once in the 3-year audit cycle. |
The answer lies in the
results from the Risk Management process.
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October 2010
FRAUDULENT
FINANCIAL REPORTING
By Tenk
Loubser, Exceed |
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A study
conducted in the USA provided a comprehensive
analysis of fraudulent financial reporting.
Some of the
key findings may also apply to businesses
in South Africa.
These include:
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Medium-size companies engaged
more regularly in financial
statement fraud than big companies.
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In most fraud cases, the
CEO and/or the CFO were involved.
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The most common
fraud techniques were improper
revenue recognition, followed
by the overstatement of existing
assets or capitalisation of
expenses. |
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Relatively few differences
were found in the characteristics
of the Board of Directors of
firms engaging in fraud compared
to similar firms not engaging
in fraud. |
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October 2010
INTERNAL
AUDIT AND RISK MANAGEMENT SIMPLIFIED
By Louw
van der Merwe, Exceed |
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This is the first in a series
of articles where our resident specialist,
Louw van der Merwe, explains and clarifies
on a very practical level exactly
what value can be added by Internal
Audit and Risk Management within your
organisation.
What
are Controls?
| • |
At its most basic level, any
organisation converts inputs
into outputs. The one that does
so most effectively and efficiently
would be the most successful.
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Inputs are converted into
outputs via a process, and controls
govern the effectiveness and
efficiency of processes. |
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It therefore
follows that the organisation
with the best controls would
be the most successful. |
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There are many definitions
of internal control. |
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The simplest remains the original
COSO definition, stating that
controls can be classified as
either financial, compliance
or operational. |
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August 2010
RISK MANAGEMENT:
TOOL OR ADMINISTRATIVE NIGHTMARE?
By Louw
van der Merwe at GRA Services |
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“I
have seen many, if not most, risk
management processes fail within the
first year,” declared Louw van
der Merwe, director of GRA Services,
a company that specialises in risk
management services. Here he discusses
the reasons for that.
King Code
The release of the King Code of Corporate
Governance (King 3) last year has
brought the concept of risk management
to the fore again, with most organisations
nowadays attempting to establish a
risk management function.
Many risk management processes
fail for two main reasons... |
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June 2010
CORPORATE GOVERNANCE
WORKSHOPS
By Louw van
der Merwe, Exceed |
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Since November 2009, Exceed
has offered a series of workshops to discuss
the implications of the latest King Report
on Corporate Governance (King 3), which
took effect on 1 March 2010.
International Benchmark
Regarded as an international benchmark,
the Report is applicable to all organisations
regardless of size, nature and form of incorporation.
Necessary Evil Debunked
According to presenter Louw van der Merwe,
“Many participants arrive at the workshops
believing that King is a ‘necessary
evil’”. However, they soon realise
that the underlying philosophy of the report
is sustainability, while its objective is
to ensure a long-term view within businesses.
“These are good, solid business principles,”
Louw said. |
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June 2010
USING A
PRIMARY RESIDENCE FOR BUSINESS
By Sonja
Frank, Exceed |
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Are you considering using a part of
your primary residence for business purposes?
If so, the information contained in the
recently amended paragraph 45 of the Eighth
Schedule of the Income Tax Act 58 of 1962
is relevant to you.
Primary Residence Exclusion
Paragraph 45, which deals with the so-called
Primary Residence Exclusion, provides that
natural persons must disregard the first
R1,5 million capital gain or loss on their
primary residences when these were sold.
Capital Gain or Loss
After its amendment, it now further states
that from 1 March 2009 natural persons may
completely disregard the capital gain or
loss on their primary residences where the
proceeds of the sale do not exceed R2 million.
There are two conditions...
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June 2010
DEPRECIATION
ALLOWANCES
By Sonja
Frank, Exceed |
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In
an interpretation note of November
2009, SARS provided a schedule of
depreciation write-off periods applicable
to all types of machinery and equipment.
Depreciation Allowances
Interpretation Note No 47 (Issue 2),
dated 11 November 2009 contains information
regarding depreciation allowances
as set out in Section 11(e) of the
Income Tax Act.
Assets
The Note is applicable to assets that
have been brought into use during
any year of assessment commencing
on or after 1 March 2009, and prescribes
the write-off periods acceptable to
SARS. |
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June 2010
IGNORANCE
OF THE LAW IS NO EXCUSE
by Louw
van der Merwe, Exceed |
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One of the key risks facing organisations
worldwide is the challenge of adhering to
relevant laws and regulations. In South
Africa with its myriad of sometimes very
complex legislation, this is particularly
relevant.
Corporate Governance
The recently released King Report on Corporate
Governance devotes an entire chapter to
this topic.
Adherence to
Laws and Regulations
The report concludes that directors should
see to it that a formal and structured process
is implemented in organisations to ensure
identification of and adherence to applicable
legislation. Adherence to laws and regulations
should be a regular agenda point, while
feedback regarding this process should form
part and parcel of every directors meeting. |
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THE
FIFA WORLD CUP, ACCOMMODATION AND SARS
By Willie Smith at Exceed |
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The 2010 FIFA World Cup
starts in a few months. South Africa has
not hosted an event of this magnitude and
will probable not host such an event again
for a long time. Everybody is looking for
ways to take advantage of various opportunities
that the World Cup will offer.
VAT Implications
Some people/companies have targeted the
letting of accommodation over the World
Cup. Whether the landlord receiving this
rent is a company, CC, trust or individual,
beware of the VAT implications. This caution
comes from Willie Smith, director of Tenk
Loubser Inc.
The VAT Act
divides letting of accommodation into 2
main categories:
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Letting of residential
accommodation (exempt supply for VAT
purposes) |
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Letting of commercial accommodation
(standard rated supply for VAT purposes) |
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SPECIAL
INCOME TAX ALLOWANCE FOR ENERGY EFFICIENCY
SAVINGS
Do you own a property, which is used
in the carrying on of any trade e.g. a Guesthouse
or B&B property? |
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Consider Alternatives
Have you ever considered replacing the electrical
geysers of this property with a more energy
efficient alternative such as solar energy
but have been discouraged from incurring
this substantial capital expenditure due
to the long pay-back period?
The
Good News
In terms of the Taxation Laws Amendment
Act published on 30 September 2009, a new
special allowance for energy efficiency
savings has been gazetted. |
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| DOING
BUSINESS IN SOUTH AFRICA |
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Establishing a private
company or a close corporation are the most
frequent choices for most overseas investors
rather than trading as an individual or
a partnership.
| Key feature
of a Private Company |
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A company is a
separate legal entity and is
registered with CIPRO (Company
and Intellectual Property Registration).
The company’s name ends
with “(Proprietary) Limited”
or (Pty) Ltd”; |
| • |
A company is formed
with share capital which may
consist of ordinary, preference,
redeemable, convertible shares
or a combination thereof. There
is a minimum ordinary share
capital of R1 requirement for
a company; |
| • |
Both natural persons
and juristic persons can hold
shares. There is no requirement
that a shareholder must be a
South African resident; |
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The board of
directors is appointed by the
shareholders. There is no requirement
that a director must be a South
African resident; |
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A company must
appoint an auditor practicing
in South Africa. |
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