Fundi Blue Star
FostNews 24 January 2014
TAXATION
Exchange of information between RSA and International Authorities
I received an email enquiry recently regarding a FATCA email notification sent by Old Mutual. This took me back to the 1990’s and early 2000’s when we were requested to obtain amnesty from the SA Reserve Bank in respect of foreign investments. The process of international co-operation has not gone away. It is driven by the fact that most countries tax their residents on worldwide income. Earlier newsletters have discussed the residence issues pertaining to South Africans.
Tax authorities worldwide, are working together to collect taxes, which they believe are collectable in their respective jurisdictions. Countries are entering into bilateral and multilateral agreements to assist each other in the collection of information and taxes. South Africa is actively taking part and in some respects is a regional leader in issues relating to the gathering of information and sharing thereof with other states to ensure that taxes are paid where they should rightfully be paid. The most notable of these types of agreement is the United States of America (US) Foreign Account Tax Compliance Act (FATCA) Agreement. The South African and US governments signed the Inter-Governmental Agreement (IGA) on 9 June 2014 for the reciprocal automatic exchange of information, which is still to be ratified and passed by Parliament.
Institutions that must report under FATCA include South African banks and custodians, brokers, asset managers and private equity funds. Information reported to SARS will then be exchanged with the US Treasury through a process of automatic exchange of information under the legal framework provided by the double taxation agreement that exists between South Africa and the US. The US will reciprocate under the IGA and provide similar information to South Africa in relation to South African taxpayers. The aim of the IGA is to combat tax evasion and improve international tax compliance.
In addition, SARS has entered into the Multilateral African Tax Administration Forum Agreement on Mutual Assistance in Tax Matters and the Multilateral Southern African Development Community Agreement on Assistance in Tax Matters. South Africa also signed and ratified the Multilateral Convention on Mutual Administrative Assistance on Tax Matters, which came into effect on 1 March 2014. Other states which have entered into the aforementioned convention include India, the Netherlands, the United Kingdom and many others.
South Africa has also entered into Bilateral tax information exchange agreements with states such as Bermuda, Guernsey, the Cayman Islands and many others.
The 2013 appeal case of Ben Nevis (Holdings) v Commissioners for HM Revenue & Customs [2013] EWCA civ 578, the England and Wales Court of Appeal (Civil Division) was a landmark case, which enshrined the above mentioned principles in international case law.
The gap for secrecy provisions and regimes is slowly closing in on non-compliant taxpayers as tax authorities co-operate more and more with each other to protect their respective tax bases and to assist each other to collect taxes owing to them.
ENS Africa
Article 25A of the South Africa/UK double tax treaty
TAA: Chapters 5 and 11
IGA Agreement Model 1
Integritax December 2014
DEBT MANAGEMENT
How to create a business on a shoestring
If you are wondering what this has to do with debt management, I will tell you that 78% of our working population [i.e. people in salaried jobs] are over indebted and that the only realistic opportunity that they have of getting out of their over-indebted status, is to create a 2nd and 3rd income stream. The most intelligent way of doing this, is to set up a business from home, which will create the income stream needed to pay off all debts and hopefully take you out of your salaried job into a full time business career.
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Decide on how much money you have to invest. Set up a budget for expenses and revenues for at least six months. Create plans in case the income is less than expected, such as cutting down on expenses or spending more time on the business to generate additional income.
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Run the business from home to avoid having to pay rent. Check with the zoning office of your city or town to see if you may do so.
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Develop an internet strategy for the business. With all the website design templates and software programs available for downloading, you most likely won't need to hire a website designer. You need to budget approximately R350 to R500 per month for running costs of the website. If you choose to implement an e-commerce initiative, which is highly recommended, there will be marketing costs to pay to Google or other search engines that send leads to your website.
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Find secondhand office furniture and equipment rather than buying new. Upgrade a computer rather than purchasing a new one. Do not purchase non-critical assets. It might be nice to have a scanner and fax machine but if you only scan documents once a month, the money you save can be put to better uses.
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Do not carry stock. Buying products to resell eats up cash. Find a supplier that allows you to deliver the product directly from the source to the customer when they order. You only pay for the product when it is delivered. Find customers that pay you first, so that you will have the money on hand to pay the supplier.
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Find a supplier that allows you to stock the product and not pay for it until a customer buys it. This is called Consignment Selling. This saves money in buying products. You might receive less commission but the cash flow saving is worth it. As your business grows you can move towards holding stock and increasing your commission earnings.
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Perform as many of the tasks and projects of the business yourself rather than hiring employees. If you don't have the expertise to do certain tasks, outsource and hire an independent contractor to do the job based on a fixed project cost.
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Plan to spend 10 hours per week on your home business. This time can be increased as your revenue and profits increase.
BUSINESS & PERSONAL DEVELOPMENT
The art of investing
Is investing an art, a business, a science or a sport? I have read many books and articles where the authors have compared the running of a business to that of managing a sports team and it always reminded me of my own explanations to friends and ex-team mates, when they asked me why I had stopped playing competitive sport and my reply was that I was busy playing a bigger sport, called business. Over many years I have arrived at the conclusion that business and every aspect thereof, such as investing, is a combination of art and science and sport and vice versa. The following comparison makes for amusing reading. I have an almost identical comparison to rugby available.