WILL, IT HOLD UP?

Is your current Will valid? Do you have your originally signed Will? Is it kept in a safe place? Do you know who your executor is? Are the provisions in your Will feasible?

All these questions are of utmost importance to ensure that your wishes are adhered to and your loved ones are able to avoid undue frustration during their time of mourning.

The Testator or Testatrix typically have good intentions when drafting certain provisos, but these often lead to unforeseen consequences.

The basic requirements for ensuring that you have a valid Will are set out in the Wills Act 7 of 1953.

Be sure to take note of the following formalities:

  1. The Testator or Testatrix must sign at the end of the Will;
  2. The Will must be signed in the presence of at least two competent witnesses, who are present at the same time and the witnesses must:
    1. Be competent persons (older than 14);
    2. Sign the Will in the presence of the Testator or Testatrix and each other;
    3. Acknowledge the signature of the Testator or Testatrix, not the content;
  3. If the Will has more than 1 page:
    1. The Testator or Testatrix needs to sign each page;
    2. The Testator or Testatrix needs to sign the last page at the end;
    3. The witnesses need to sign only the last page.
  4. If the Will is signed by the Testator or Testatrix, by the making of a mark or by some other person in the presence and by the direction of the Testator or Testatrix – additional formalities will apply.

The person who writes or witnesses a Will is disqualified from receiving any benefits from the Will. The executor, appointed trustee or guardian will also be disqualified to act should he/she or his/her spouse sign as witness.

We are able to assist and ensure that your Will gives effect to your wishes.

To draft a Will, update your Will or receive sound advice, contact the experts:

Call us: 012 361 5001 or Email us: info@delberg.co.za

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)

TAXATION LAWS AMENDMENT BILL 2017

Interest free loans or low interest loans to trusts and related companies – sec 7C revisited.

In our circular dated the 10th of January 2017 we discussed the newly introduced Section 7C of the Income Tax Act, which has since been promulgated into law. We made the following statement:

It seems from the wording that an interest free loans or low interest loans to a company, even if the trust owns all the shares, will not fall foul of these provisions. As legislation stands at the moment, this seems to create an opportunity to circumvent the provisions of Section 7C.

Unfortunately and, in our opinion, due to a variety of avoidance schemes utilised by certain practitioners in order to circumvent Section 7C, it was announced in the 2017 Budget Speech that Section 7C will be amended to include interest free loans or low interest loans to companies owned by a trust.

The Draft Taxation Laws Amendment Bill, 2017, which is still open for comments, contains the following amendments to Section 7C:

Section 7C (a) has been redrafted to include a loan, advance or credit made by:

  • a natural person; or
  • at the instance of that person, a company in relation to which that person is a connected person in terms of paragraph (d)(iv) of the definition of connected person,
    • trust in relation to which-
      • (aa) that person or company, or
      • (bb) any person that is a connected person in relation to the person or company referred to in item (aa),
    • to a company that is a connected person to the trust referred to in subparagraph (i) of this section.

With reference to the explanation contained in the Explanatory Memorandum to the Bill, it is clear that there must have been an oversight in the wording of the new paragraph 7C(1)(b)(ii). As the paragraph stands at the moment, and due to the very wide definition of “connected person” in the Income Tax Act, even a loan to a company that has nothing to do with a trust can fall under Section 7C due to the fact that, for instance, the sole director of the company is also a beneficiary of a trust. Clearly this could not have been the intention of the legislator and we are confident that subparagraph (ii) will be amended to refer to a loan to a company that is a connected person as envisaged in paragraph (d)(iv) of the definition of connected person, to the trust referred to in subparagraph (1)(b)(i).

That would mean that only a company where the trust individually, or jointly with any connected person in relation to the trust, holds directly or indirectly at least 20% of the company’s equity share capital or voting rights, will fall foul of these provisions.

To counter certain further avoidance schemes a new subsection (1A) was introduced stating that:

  • If a natural person acquires a claim to an amount owing by a trust or a company in respect of a loan, advance or credit referred to in subsection (1), that person must for purposes of this section be treated as having provided a loan, advance or credit to that trust or company –
  • On the date on which the person acquired that claim; or
  • If that person was not a connected person on that date in relation to-
    • that trust; or
    • the person who provided that loan, advance or credit to that trust or company, on the date on which that person became a connected person in relation to that trust or person, that is equal to the amount of the claim so acquired.

This was brought into the act to counter certain avoidance schemes where a person, who made a loan to a trust, entered into an arrangement in terms of which the claim for the loan against the trust is transferred to another natural person (i.e. a beneficiary of the trust) in order to try and ensure that the link between the natural person who advanced the loan and the loan itself is severed.

Certain other subsections were amended to provide for the inclusion of loans to a company as mentioned above.

A new sub section 5(h) was added providing exemption from the provisions of Section 7C to a trust that was created solely for purposes of giving effect to an employee share incentive scheme under certain circumstances and provided that a person who is a connected person in terms of paragraph (d)(iv) of the definition of connected person in relation to any scheme company would not be entitled to participate in that scheme.

These amendments will come into effect on the 19th July 2017 and will apply in respect of any amount owed by a trust or a company as envisaged in respect of a loan, advance or credit provided to that trust or that company before, on or after that date.

The provisions of sub section 5(h) (employment share incentive trust) is deemed to have come into operation on 1 March 2017 and applies in respect of any amount owed by a trust in respect of a loan, advance or credit provided to that trust before, on or after that date.

A new Section 7D has been introduced, providing that:

Where it must be determined what amount would have been incurred as interest in respect of any loan, debt, advance or amount of credit provided to a person or an amount owed by a person had that interest been incurred at the official rate of interest, that amount must be determined without regard to any rule of the common law or provision of any act in terms of which –

  • the amount of interest, fee or similar finance charge that accrues or is incurred in respect of a debt may not in aggregate exceed the amount of that debt; or
  • no interest may accrue or be incurred in respect of a debt once the amount that has accrued or been incurred as interest is equal to the amount of that debt.

These measures are aimed at invalidating the effect of the in duplum rule in common law which basically states that the amount of interest recoverable from a debtor could never exceed the capital amount of the debt.

This section comes into operation on 1 January 2018 and applies in respect of years of assessment ending on or after that date.

SUMMARY

  • While the result of the amendments are unfortunate, it had to be expected. We again wish to stress the importance of clients contacting their advisors regarding any trusts or affected companies where loans, as envisaged above exist

Even if amended as suggested above, the provisions are still very wide.

For example:

A and four of his cousins (whether on both sides of the family or not) form a company for a business venture and fund the company with interest free loans.

As long as they are the shareholders, Section 7C will not apply. Should one of them decide to transfer his shares to a trust of which he is a beneficiary (or of which a connected person in relation to him is a beneficiary), Section 7C will apply to all loans to the company. Cousins are connected persons, and for that reason all the shareholders are connected persons in relation to the trust. They are shareholders of the company and as such, connected persons in relation to the company.

I do not think that this could have been the intention but, at the moment, it is the result.

  • This is a further chapter in the trust saga and will have an effect on the use of trusts. However, with careful planning by knowledgeable advisors it would still be possible to utilise the trust as a useful estate planning vehicle
  • Please note that this is still draft legislation open for comments. Further changes might and most probably will occur to the final bill being accepted by parliament.
  • We will inform you on any further development

GPJ van den Berg
Delport van den Berg
Estate and Trust Services (Pty) Ltd
gert@delberg.co.za
T: +27 (12) 361 5001

What if you’ve been a victim of cybercrime?

In the modern age, more and more criminals are exploiting the speed, convenience and anonymity of the internet to commit a diverse range of criminal activities that know no borders, either physical or virtual, and cause serious harm to victims worldwide.

In December 2016, cabinet gave the green light for a Cybercrimes and Cybersecurity Bill that has sparked criticism over its potential to curb a free internet. Cabinet said the bill is about, “combatting cybercrime, establishing capacity to deal with cybersecurity and protecting critical information infrastructures”.

What is cybercrime?

Cybercrime takes many different forms, such as using financial information to commit an offence, unlawful interception of data, computer related forgery, extortion, terrorist activity and the distribution of ‘harmful’ data messages.

Hackers can get access to your computer by simply sending you an e-mail that automatically causes malware software to download as you open the mail. The hacker then has full access to your computer and the data in it and can lock you out. So, what should you do if you have been a victim of cybercrime?

  1. Disconnect: If you’re a victim of a hack, then you should disconnect from the Internet immediately. If you’re connected via Wi-Fi, phone or Ethernet cable, you need to disable the connection as soon as possible.
  1. Scan your PC: It’s a good idea to have antivirus software to scan your computer.
  1. Create a backup: Create regular backups of your files and folders.
  1. Reinstall your operating system: Depending on the severity of the attack, it might be necessary to reinstall the operating system of your computer.

 Online Fraud

If you’ve been a victim of online fraud, such as your credit card information being stolen, then try the following:

  1. Close all accounts: If you find that you are the victim of online fraud or identity theft, the first thing you should do is close all affected accounts immediately.
  1. Contact your bank: By contacting your bank, you can notify them regarding the fraud and its source. They can also assist you in recovering any stolen finances and issuing new cards.

The new Cyber and Security Bill creates about 50 new offences for crimes such as hacking, using financial information to commit an offence, unlawful interception of data, computer related forgery, extortion, terrorist activity and distribution of ‘harmful’ data messages. Hopefully, this will help curb the growth of illicit online activities.

References:

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)

Is the tenant or landlord responsible for the water leaks?

Questions, and sometimes disputes, often arise between landlords and tenants regarding where the responsibility lies with the maintenance of a property. The simple answer is that tenants can generally only be held responsible for repairs/replacement on the property if the damage was caused by the tenant’s actions, or items that have a short life span, such as light bulbs.

On the other hand, alarm systems, auto gates and doors, locks, fixtures and fittings, appliances, or anything provided to the tenant are generally the responsibility of the owner to repair, unless damaged by the tenant.

Fair wear and tear

Damage due to fair wear and tear is the owner’s responsibility to correct. This includes situations where the property has, over time, experienced wear due to its use or age.

Examples would include:

  1. Fireplace chimneys: The landlord should maintain the fireplace e.g. having the chimney cleaned at appropriate intervals. Gardens, however, would require the tenant to do general maintenance.
  1. Blocked drains: This is usually due to tenant usage making it the tenant’s responsibility, but if blockage is due to tree roots, it would be the landlord’s responsibility.

Regarding appliances, as with any fixture or fitting, the landlord is responsible for repairs to appliances provided under the tenancy agreement unless the damage was caused by the tenant’s deliberate actions or negligence.

Tenants should report any damage on the property. If they fail to do this, they could find themselves held liable for any further damage due to lack of immediate attention to the initial problem. Furthermore, tenants are obliged to provide access for contractors to effect repairs.

Conclusion

If there is a water leak on the property, it would most likely be the landlord’s responsibility to fix. It is advisable for tenants to read and understand the lease agreement fully and for landlords to list as much as possible that needs to be maintained by the tenant. For example, if the unit has a garden that the tenant is responsible for maintaining, this should be mentioned in the lease.

Reference:

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)

Antenuptial contracts: Can I get one after marriage?

Couples who are interested in an antenuptial contract often make the decision to get one before they are married. That is the ideal scenario. However, some couples may have already gotten married in community of property, and later decide to change to another form of marriage contract.

Can it be done?

The Matrimonial Property Act allows a husband and wife to apply jointly to court for leave to change the matrimonial property system which applies to their marriage.

  • According to South African law, the parties who wish to become married out of community of property must enter into an antenuptial contract prior to the marriage ceremony being concluded.
  • If they fail to do so then they are automatically married in community of property. Of course, many people are unaware of this provision and should be able to satisfy the court that it should change their matrimonial property system if it was their express intention that they intended to be married out of community of property.

What are the requirements?

In order for the parties to change their matrimonial property system, the act mentions the following requirements:

  • There must be sound reasons for the proposed change.
  • The Act requires that notice of the parties’ intention to change their matrimonial property regime must be given to the Registrar of Deeds, must be published in the Government Gazette and two local newspapers at least two weeks prior to the date on which the application will be heard and must be given by certified post to all the known creditors of the spouses.
  • The court must be satisfied that no other person will be prejudiced by the proposed change. The court must be satisfied that the rights of creditors of the parties must be preserved in the proposed contract so the application must contain sufficient information about the parties’ assets and liabilities to enable the court to ascertain whether or not there are sound reasons for the proposed change and whether or not any particular person will be prejudiced by the change.

What is the downside?

The downside is that the application is expensive because you and your spouse have to apply to the High Court on notice to the Registrar of Deeds and all known creditors, to be granted leave to sign a Notarial Contract having the effect of a postnuptial contract. You must also have solid grounds for wanting to switch to an antenuptial contract. Therefore, it’s not something you can do on a whim.

References:

  • The Matrimonial Property Act 88 Of 1984

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)

Authenticating documents for use outside SA

If you need to use official South African documents in another country, it is necessary that they are legalised for use abroad. This can be for any number of reasons, such as legalising university degrees for a job in another country.

What is legalisation?

.
Legalising documents means that official (public) documents executed within South Africa for use outside the country are affixed, sealed and signed either with an Apostille Certificate (where countries are party to The Hague Convention) or with a Certificate of Authentication (where countries are not party to The Hague Convention).

  • Legalisationbasically means the process followed by which the signature and seal on an official (public) document is verified.

The process involved in signing/executing documents:

If a country is part of The Hague Convention, the following process applies:

  • The documents are signed and/or executed in the presence of a Notary Public. The Notary Public will attach the Certificate of Authentication to the documents which must bear his signature, stamp and seal.
  • The documents are then forwarded by the Notary Public to the High Court in the area in which the Notary Public practices. The Court will then attach an Apostille Certificate authenticating the Notary Public’s signature.
There are certain documents that the High Court will not Apostille/Authenticate and must be sent to the Department of International Relations and Co-operation (DIRCO), which is based in Pretoria. For example:
.
  • All Home Affairs documents; and
  • Police Clearance Certificates.

If a country is not part of The Hague Convention, the following process applies:

  • The documents are signed and/or executed in the presence of a Notary Public. The Notary Public will attach the Certificate of Authentication to the documents which must bear his signature, stamp and seal.
  • The documents are then forwarded by the Notary Public to The High Court in the area in which the Notary Public practices. The Court will then attach an Apostille Certificate authenticating the Notary Public’s signature.
  • Documents are then submitted to the Legalisation Section at DIRCO to be legalised.
  • Once legalised by DIRCO the documents are then forwarded to the Embassy/Consulate of the country in which they are intended to be used for further authentication.

References:

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)

How do I cancel a lease?

What happens when a landlord or a tenant wants to cancel a lease? What rules and what legislation apply? What protection does the law provide?

If you want to end your lease early, this can be done in situations where:

  • the Consumer Protection Act or Rental Housing Act applies, or
  • there’s a clause in the contract that allows for early cancellation, or
  • if both parties agree to it.

If on the other hand, one of the parties wants to cancel because the other is in breach of the contract, then certain notice periods come into effect – the first of which being, of course, that the aggrieved party is required to give written notice for the breach to be remedied.

For tenants

  • If your landlord is in material breach of the lease, then cancelling your lease early will not be in breach of the contract.
  • If your landlord has met all the conditions of the lease and you decide to cancel your lease early, you will be in breach of contract unless the termination of the lease has been mutually agreed upon. Speak to your landlord before making any rushed decisions, chances are, you may be able to come to a mutual agreement whereby you are able to find a replacement tenant or sublet the property for the remainder of your lease.

For landlords

  • Firstly, look to the provisions of the lease itself. Most leases contain a breach clause, which indicates a period of a number of days that are necessary to be given as notice to the tenant of a breach. If there is no breach period specified, it will be a ‘reasonable period’ in terms of the common law.
  • If you give notice of the breach, and it is not remedied in the breach notice period, this means that you can take action to sue for whatever is owed or even issue summons and attach the tenant’s goods by evoking your landlord’s hypothec, but you cannot cancel the lease and evict.

When it comes to cancelling agreements, it is always best to consult a legal expert since doing something from your own understanding and experience could lead to a court case.

References:

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)

Email management system? Get it before it gets you

If your company uses emails to communicate with clients, then it’s not enough to just rely on traditional ways of managing email, such as backing up emails periodically. There needs to be a well-equipped email management system in place that will keep your business safe.

The key point that relates to the heavy use of email, is the maintenance of the integrity of the email, and being able to prove that integrity. Unfortunately, you can’t simply do nothing and leave your email system as is and hope for the best. Firstly, it is important to understand the legal requirements. This includes the Electronic Communications and Transaction Act, 2002, or the ECT Act.

The ECT Act provides that information is not without legal force and effect simply because it is in electronic form. These are some of the rules set out by the ECT Act regarding electronic communications.

  1. An electronic document must be captured, retained and retrievable.
  1. Electronic documents must be accessible so as to be useable for subsequent reference, this includes the origin, destination, date and time it was sent or received.
  1. If a signature is required, it must be accompanied by an authentication service.

So what should you do?

All companies who wish to comply with the regulations should implement an effective email management system. The core requirements of a good email management system are as follows:

  1. The ability to monitor and intercept email;
  1. Effective capturing of all email;
  1. Cost effective storage of all email and efficient discarding of email that has lost its business value or is no longer required for legal or regulatory or compliance;
  1. Efficient and cost effective restoration of email;
  1. The ability to maintain the integrity of email and the contents thereof; and
  1. The ability to audit email use in order to be able to prove integrity.

Although it seems like a trivial matter, it is worthwhile to implement an email management system in your company. It will help protect your business in the event that you need a record of communication due to an incident or contract dispute. New regulations introduced by POPI will also make this a necessary part of how your company handles information.

Reference:

  • The Electronic Communications and Transaction Act, 2002

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)

Owning property without a will

If you die without a will, an administrator will have to be appointed to administer your estate which will be distributed according to the laws of intestate succession. As such, your assets may not be distributed as you would have wished. It also means that the process will be delayed and that there will be additional expense and frustration which most people would not want to inflict on their loved ones during a time of loss.

Marriage and property

When drafting your will, it’s important to consider the nature of your relationship with your ‘significant other’. If you are married in community of property, you only own half of all assets registered in your name and that of your spouse. Your spouse therefore still remains a one half share owner of any fixed property you may want to bequeath to a third party which could potentially present difficulties.

If you are married in terms of the accrual regime, the calculation to determine which spouse has a claim against the other to equalise the growth of the respective estates only occurs at death. Your spouse may therefore have a substantial claim against your estate necessitating the sale of assets you had not intended to be sold.

Alongside your will, you should also prepare the following in relation to any immovable property you may own:

  1. State where your title deeds are kept and record any outstanding bonds and all insurance
  1. File up-to-date rates and taxes receipts
  1. Record details of the leases on any property you have
  1. State who collects your rent
  1. State who compiles your yearly accounts
  1. State where your water, lights and refuse deposit receipts are kept

If you die without a will

According to the according to Intestate Succession Act, 1987, your estate will be distributed as follows:

  1. Only spouse survives: Entire estate goes to spouse.
  1. Only descendants survive: Estate is divided between descendants.
  1. Spouse & descendants survive: The spouse gets R250 000 or a child’s share and the balance is divided equally between the spouse and descendants.
  1. Both parents survive: Total share is divided equally between both parents.
  1. One parent: Total Estate goes to the parent.
  1. One parent & descendants: Half the Estate goes to the parent; balance is divided equally amongst descendants.
  1. No spouse; No descendants; No parents; but descendants through mother & descendants through father: Estate divided into two parts: half to descendants through mother; half to descendants through father.
  1. No spouse; No descendants; No parents; No descendants through mother or father: Full Proceeds of the Estate has to be paid into the Guardians Fund in the event of no descendants whatsoever.

References:

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)

The validity of tax invoices: It is your responsibility

The audits of Value-Added Tax (VAT) returns by the South African Revenue Service (SARS), have increased the focus on the validity of tax invoices for the purposes of VAT.

A VAT vendor submitting VAT returns is responsible for ensuring that all invoices included in the returns comply with the relevant legislation. If valid tax invoices cannot be provided at the time of a VAT audit, the vendor may lose up to 100% of the input tax being claimed on the invoice, even if an amended valid invoice can be provided subsequent to the audit. Furthermore, serious penalties, interest and other consequences may be imposed on the VAT vendor for errors, intentional omissions and fraud.

The requirements

Section 20 of the Value-Added Tax Act, no 89 of 1991, together with the VAT404 Guide for Vendors as updated in March 2012, sets out the requirements for a valid tax invoice.

A VAT vendor must issue a tax invoice within 21 days of the supply having been made where the consideration for the supply exceeds R50, whether the purchaser has requested this or not. If the consideration for the supply is R50 or less, a tax invoice is not required. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier, will be required to verify the input tax.

The requirements for tax invoices of which the consideration or taxable supply is more than R5 000 are:

  1. the words “tax invoice” should be displayed;
  1. name, physical address and VAT registration number of the supplier name, physical; address and VAT registration number of the recipient;
  1. original serial number of the tax invoice;
  1. the date of issue of the tax invoice;
  1. full and proper description of the goods sold and / or services rendered;
  1. quantity or volume of goods and / or services supplied; and
  1. total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

The requirements for tax invoices of less than R5 000 are:

  1. the words “tax invoice” should be displayed;
  1. name, physical address and VAT registration number of the supplier;
  1. original serial number of the tax invoice;
  1. the date of issue of the tax invoice;
  1. full and proper description of the goods sold and / or services rendered;
  1. total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

Second-hand goods

In the case of second-hand goods purchased from a non-vendor, the purchaser has to record the following information:

  1. name, address and identity number of the supplier, confirmed by the person’s identity document or passport. (If the value of the supply is equal to or greater than R1 000, a copy of this document must be retained by the purchaser. If the non-vendor is a juristic person, a letterhead or similar document stating the name and registration number of the juristic person is required);
  1. date of acquisition;
  1. quantity or volume of goods;
  1. description of the goods;
  1. total consideration paid for the supply; and
  1. declaration by the supplier stating that the supply is not a taxable supply.

Conclusion

If a vendor fails to deduct an input tax in respect of a particular tax period, that input tax may be deducted in a later tax period, but limited to a period of five years from the date that the particular supply was made. However, when a vendor becomes aware of an output tax not declared in the relevant period, a corrected VAT return for that specific period should be submitted. It is not acceptable to declare the output tax in the next period and SARS may impose penalties and interest on the output VAT omitted.

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)