CAPE TWON: South Africa has a highly favourable tax environment for investors but a good awareness of the legislation is required in order to make the Tax Act work for you. This is according to Neill Hobbs, co-founder and director of Anuva Investments, who has highlighted a few key pieces of legislation that investors should consider. Any pension (government or non-government) accumulated for services rendered outside of South Africa will not be subject to tax in this country. This also relates to any lump sum, pension or annuity received by or accrued to a South African resident from a source outside of South Africa as consideration of past employment outside this country. Considering the growing number of corporate nomads who work in different jurisdictions, this is an important piece of legislation. RA contributions are tax-deductible and according to the Tax Act, investors can deduct up to 27.5% of their gross remuneration or taxable income (whichever is higher) in respect of total contributions to a pension, provident or RA fund. This is subject to an annual cap of R350,000 per tax year. A PBO is an entity that is created to carry out some form of public benefit activity, such as a trust or a not-for-profit organisation. PBOs who are registered and are able to provide you with an 18A certificate will allow you to deduct your donations made from your taxable income. Your deduction is capped at 10% of your taxable income.
A commonly used tax allowance for property investors is the ‘wear and tear’ allowance against the more standard assets such as furniture. In terms of furniture, a taxpayer may deduct 20% of the cost of the asset per year against income until the full cost of the asset has been claimed, adding up to 5 years.In March 2015, National Treasury introduced a tax-free investment product to encourage after-tax saving amongst South Africans. Contributions to the tax-free savings account are limited to R30,000 per individual per year, which works out to a monthly contribution of R2,500. A lifetime contribution limit of R500,000 applies, which in today’s value equates to just under 17 years. All returns including interest, dividends and capital gains are entirely tax-free.For less risk-averse investors, or investors who have reached the cap on their Retirement Annuity, Pension Fund and Tax-Free Savings Account contributions, a Section 12J Investment is a tool to maximise your tax deductions.
