A retirement annuity (RA) is a voluntary pension plan in which individuals can contribute in a tax-efficient manner to provide for their retirement years. Unlike pension and provident funds which are occupational in nature, RAs are private and, as such, an employee/employer relationship is not necessary for membership. Subject to a few exceptions, the earliest a member can retire from an RA is age 55, with no upper age limit for retirement, at which point they are required to use at least two-thirds of the fund to purchase an annuity income. But what happens if the member dies before retiring from the RA? How are the funds distributed and to whom?
A persons death gives rise automatically to a deceased estate following which the process of winding up the estate begins. The timeframe for winding up a deceased estate depends on several factors including the complexity of the estate, the experience and efficiency of the executor, the service levels of the relevant Masters Office, and the cooperation of all parties involved, including financial institutions, family members and attorneys.
Author: Heinrich Louw. On 21 January 2016, the South African Revenue Service (SARS) issued Binding Private Ruling 217 (Ruling). The Ruling deals with the estate duty implications for non-resident individual investors (Investors), specifically where such an Investor, who is a resident in Country X, purchases a linked investment plan from a company incorporated and resident in Country X, which carries on the business of life insurance (the Company). The key issue was how certain sections of the Estate Duty Act, No 45 of 1955 (EDA), would apply.
Author: Lorys Charalambous (Tax-News.com) On December 17, the South African Revenue Service (SARS) issued an explanatory memorandum on the 2015 Tax Administration Laws Amendment Bill (TALAB). In particular, the memorandum looks at the TALAB provisions giving effect to the collection of information from South African financial institutions (FIs), and the associated obligation on the FIs to register with SARS regarding the Foreign Account Tax Compliance Act (FATCA) intergovernmental agreement (IGA) with the United States that was signed in July last year.
Authors: Ruan Jooste and Maarten Mittner (Financial Mail) The Davis Committees recommendations on the taxation of trusts and estate duties are punitive in their present form, say industry players, and could lead to new forms of legal avoidance. If the recommendations are implemented, all SA resident trusts and their beneficiaries or donors will be taxed as separate taxpayers. Trusts will be taxed at a flat income tax rate of 41% and an effective capital gains tax (CGT) rate of 27,31%.
True to its mandate, the Davis Tax Committee (DTC) has been hard at work reviewing the South African tax system. Since its formation in 2013, it has already issued reports on small and medium enterprises (SMMEs), Base Erosion and Profit Shifting (BEPS) and VAT. It also compiled a macro analysis of the South African tax system, a World Bank study on the effective tax burden in South Africa and presented carbon tax proposals. However, on 13 July the committee issued the Estate Duty Report which deals with a variety of topics sure to spark outcry and fierce debate, especially from more wealthy taxpayers. Whatever the outcome of the report may be following consultations, taxpayers will need to review their estate and tax plans to accommodate the impending changes.
Author: Anton Maskowitz (Moneyweb) Offshore trusts and companies could be essential. Although recent statistics have shown a steady decrease in the volume of offshore trusts and companies being established by South Africans for tax planning purposes, their value is just as relevant today for estate planning purposes as it had been in years gone by.