Monthly Archives: May 2017

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?

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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:
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  • 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)

Influence on estate planning

The purpose of this communication is to inform clients of certain tax increases and proposals that will have an effect on Estate and Financial Planning. Only those changes and proposals directly affecting Estate Planning will be dealt with.
1. DIVIDEND WITHHOLDING TAX

Dividend income paid to shareholders was taxed at a rate of 15 per cent. The dividend withholding tax rate was increased by 5 percent to 20 percent.

The new rate is applicable to all dividends declared on or after the 22nd of February 2017.

2. CAPITAL GAINS TAX

The inclusion rates, which increased substantially in the 2016 budget, has remained unchanged for the 2017/2018 tax year. However, the increase in the marginal tax rate for individuals and trusts have an effect on the effective rate of Capital Gains Tax.

2.1 Individuals/Special Trusts:

  • Inclusion rate: 40% (remains unchanged)
  • Maximum effective rate: 18% (currently 16.4%)

2.2 Companies:

  • Inclusion rate: 80% (remains unchanged)
  • Effective rate: 22.4% (remains unchanged)

2.3 Trusts:

  • Inclusion rate: 80% (remains unchanged)
  • Effective rate: 36% (previously 32.8%)

2.4 Annual exclusion and exclusion on death:

  • Annual exclusion:R 40 000 (remains unchanged)
  • Exclusion in year of death: 300 000 (remains unchanged)

Effective for years of assessment commencing on or after 1 MARCH 2017.

3. TRANSFER DUTY

There has been certain adjustments to the Transfer Duty rates. The duty free threshold has been increased from R750 000 to R900 000. On transfers of property valued above R10 000 000 Transfer Duty will amount to R933 000 (previously R937 500) plus 13% of the value above R10 000 000.

The rates between R900 000 and R10 000 000 has been adjusted proportionately.

Effective for property acquired on or after 1 MARCH 2017.

4. ESTATE DUTY

No amendments to the rate or legislation was announced.

5. DONATIONS TAX

No amendments.

6. MEASURES TO PREVENT TAX AVOIDANCE THROUGH TRUSTS

In order to curb the use of interest-free or low-interest loans to finance the acquisition of assets by trusts, Section 7C was enacted as discussed in numerous previous circulars.

Section 7C does not apply to interest-free or interest-free loans to a company, even if the shares are held by a trust. This was discussed with SARS and Treasury during discussions of this section, but no changes in this regard ensued.

This “omission” clearly was too obvious to be overlooked by the legislator. For this reason the following statement contained in the Budget Review is, to say the least, perplexing:

“However, some taxpayers have already attempted to circumvent the anti-avoidance measure by making low-interest or interest-free loans to companies owned by a trust. To counter abuse, it is proposed that the scope of this anti-avoidance measure be extended to cover these avoidance schemes.”

At this point in time we have no indication of what the legislation will entail. Suffice to say that it will not be easy to draft.

7. DAVIS TAX COMMITTEE (DTC)

Mention was made that the report of the DTC on Estate Duty will receive attention in the 2018 budget.

8. COMMENTS

“In duplum” rule

The effect of this rule is that interest ceases to accrue when the amount of interest accrued equals the outstanding principal debt. It is proposed that the rules dealing with low-interest or interest-free loans be amended to explicitly exclude the application of the “in duplum” rule in order to ensure the efficacy of these rules.

Future of trusts

We maintain that trusts still have a place in the Estate Planning environment.

Choose your advisor carefully on the basis of:

  • Expertise in the field;
  • Trustworthiness;
  • Ability to keep abreast of new developments affecting your estate plan.

You will be kept up to date on developments in this regard.

For any enquiries contact our specialists below:

GPJ van den Berg | gert@delberg.co.za | T: +27 (12) 361 5001 | F: +27 (12) 361 6311

WC van der Merwe | callie@delberg.co.za | T: +27 (12) 361 5001 | F: +27 (12) 361 6311