Wishing you all a peaceful, relaxing month of April from the Graemor Team!

Secondary Tax on Companies (STC) was introduced in 1992 and will be replaced by a Dividend Withholding Tax (DWT) with effect from 1 April 2012. The difference between STC and DWT is that STC is a tax payable by the company paying the dividend, whereas DWT is a tax payable by the Shareholder, withheld by the company and paid to SARS on behalf of the shareholder. STC is currently levied at 10% of the dividend declared by a Company and is payable within 30 days after the end of the month in which the dividend is declared. The budget announcement was that DWT will be levied at 15% on any dividends declared by a Company on or after 1 April 2012. This represents a 50% increase in the rate payable compared to STC, which is levied at 10%.

Shareholders of Listed Investment Products, i.e. shares on the JSE and investments in Collective Investment Schemes will have been receiving a notice from their Brokers or Investment Houses requiring them to complete a Mandate Form indicating the identity of the beneficial shareholder. This requirement is extremely important as there are certain exemptions provided for in the Income Tax Act with regard to the imposition of DWT. This is based on the nature or status of the beneficial shareholder. The current listed exemptions in terms of Section 64F of the Income Tax are :-

Directors of Unlisted Companies have an obligation to withhold and pay over the DWT to SARS on behalf of the shareholders on the declaration of a dividend by the company, unless the dividend is paid by the Company to a regulated intermediary or another Company or an exempt entity as listed above. It is, therefore, extremely important for the Directors to be absolutely clear who the Shareholders of their Company are, as DWT will be payable by the Company declaring the dividend for any Shareholder, who is a natural person, or a discretionary family Trust with natural persons as beneficiaries. The DWT will also be payable within 30 days after the end of the month in which the dividend is declared and SARS will be issuing a new Form which is expected to be similar to the present IT 56 Form for STC payable to SARS.

At the end of February of each year, each company that has paid a dividend will need to issue a tax certificate similar to the present IT 3(b) certificates issued by the financial institutions for the financial year for interest earned indicating the amount of the dividend paid and the amount of the DWT paid on behalf of the shareholder. This will place a further administrative burden on companies at the end of February of each year.

The opportunity exists for Companies to declare extraordinary dividends in March 2012 and pay STC at a 10% rate if the Company is in the position of having substantial retained income and cash reserves to make use of this opportunity.

Any dividend declared in March 2012 will be subject to STC at 10% and is payable by 30th April 2012. Directors would need to consider the Cash Flow implications of declaring an extraordinary dividend due to the requirement of STC being payable 30 days later.

In addition, Directors need to be mindful of the new Companies Act Requirement of Solvency and Liquidity and the two elements in the Solvency and Liquidity Test are :

A Company considering declaring an extraordinary dividend would need to have working papers on record indicating that they have considered both the above elements before the dividend can be declared. Section 4 (1) of the Companies Act 2008 (which includes Close Corporations) spells out the Solvency and Liquidity Test. The Solvency Test must consider the Company’s Assets as fairly valued will equal or exceed liabilities as fairly valued, i.e. the Company must have a positive net asset value at the time the dividend is declared. The Liquidity Test considers that the Company will be able to pay debts as they become due in the ordinary course of business for a period of 12 months after the date on which this test is considered, or a dividend is declared. In addition, the personal liability of Directors needs to be considered if an extraordinary dividend is declared and the company runs into cash flow problems within 12 months of the dividend having been declared and paid.

Contact us now so that we may assist you with these details.

With huge excitement and inspiration, it seems the realities the National Budget brings to us all have been summarised and simplified by the National Treasury, along with many other companies out there.  So instead of typing exceptionally wordy explanations, what we want to share is the two key areas that we all need to pay attention to:  the income section (where government gets the money from) and the expenses section (where government is spending the money).

Simple highlights of the 2012/2013 Budget Speech are listed below:

ADDITIONS TO SPENDING PLANS OVER THE NEXT 3 YEARS

• R9.5 billion for the Economic Competitiveness and Support Package, including R2.3 billion for dedicated special economic zones;
• R6.2 billion for job creation;
• R3 billion for equalisation of subsidies to no fee schools and expansion of access to Grade R;
• R1 billion for National Health Insurance Pilot project;
• R1.4 billion for Early Childhood Development;
• R4 billion for Passenger Rail Agency of South Africa for coaches, as the start of a programme to replace the current fleet;
• R1 billion for Signalling and depot infrastructure related to this new rail transport programme;
• R4.7 billion for Electricity demand side management grant: Eskom for the installation of solar water geysers;
• R1.8 billion for municipal water infrastructure;
• R3.9 billion for upgrading informal settlements.

TAX PROPOSALS

• Personal income tax relief of R9.5 billion;
• Tax incentive to encourage savings;
• Reforms to medical scheme contributions andretirement savings deductions;
• Tax relief for micro and small businesses;
• Dividend withholding tax increased to 15 per cent;
• Capital gains tax increased;
• A packet of 20 cigarettes will cost 58 cents more;
• A 750 ml bottle of liquor (spirits) will cost 6 rands more;
• A 340 ml can of beer will cost 9 cents more and a 340 ml can of cider will cost 8.84 cents more;
• A litre of wine will cost 18 cents more;
• General fuel levy increases by 20c a litre, and the Road Accident Fund levy increases by 8c a litre;
• Electricity levy increased by 1 cent / kWh.

With thanks to the National Treasury, please find the link to a well-summarised, simple People’s Guide to the Budget:  http://www.treasury.gov.za/documents/national%20budget/2012/guides/People%27s%20Guide%202012%20-%20English.pdf

And further thanks to Sanlam for putting together an exceptional video clip translating it simply:  http://www.sanlam.co.za/wps/wcm/connect/sanlam_en/Sanlam/Online/National+budget+2012

“The work done last year indicates that if we continue to grow reasonably well, we will begin to write a new story about South Africa—the story of how, working together, we drove back unemployment and reduced economic inequality and poverty.
It is beginning to look possible.
We must not lose this momentum.”

- President Jacob Zuma, State of the Nation Address (2012)

Do you remember the start of your business?  What started with just an idea?  The pure excitement and initiative that kept you focused and driven to grow a business beyond all other businesses?  Is that excitement still flowing and does it flow throughout your business?  Why not take a moment and put some thought back into those beginning moments and plans:

• You only planned for success – nothing else would do!  Time and energy was spent on business plans, marketing plans, budgets and strategies
• The groundwork was laid out – your product or service was finalised; your vision, mission and value statement drawn up; your location considered
• Your capital was raised to get your business taking off
• Your image was decided on, from the look and feel of your business logo right down to the printing of your business cards
• You started taking on customers to whom you would only give the absolute best products/service to and build relationships with
• As your business grew, you took on staff, partners and/or associates who saw what you saw, felt what you felt and helped provide the very best products/services to your customers

Do you still feel invigorated and driven in your business?  Are your staff and customers still filled with pride, energy and confidence?

The simple definition of a successful business:  happy customers, great products/services and a bottom line that reflects the top-level, positive work everyone in your team puts in.

Here’s to wishing you all a successful new financial year!

“A business that makes nothing but money is a poor business” – Henry Ford

The old cliché of ‘doing what you love allows for money to follow’ has been heard numerous times.  But have you actually thought about this seriously and considered working on it?   If you love what you do, then it doesn’t feel like work does it? And if the average person spends eight hours a day, five days a week working (and in today’s world, this tends to veer toward seven days a week more so than five!), how can you truly put your best focus and optimal energy into your work if you are not at least remotely passionate about it?

Starting with baby steps – begin by engaging in the tasks and projects at work that are your strength, which you will naturally find easy and gain greater fulfillment from by accomplishing them efficiently.  For those tasks and projects that hover on your To Do list repeatedly and turn you into an MP (“Master Procrastinator”), hand them over to those that are passionate about them and are specialists in what they do.  The tasks you love will make you persevere, but the tasks you don’t will make it much harder for you to succeed and may see you giving up after the first hiccup. 

Dislike balancing books?  Find a Bookkeeper.  Instantly bored by tax returns?  Speak to your Accountant.  Switch off when trying to figure out the difference between megabytes and gigabytes?  Call your IT Specialist.  And spend your energy and time on what you love.

When you’re fulfilled and energised by doing what you are passionate about, it will roll into every aspect of your life and inspire those around you.  The smallest change can start the biggest ripple effect!

As a firm, Graemor has a passion for creating opportunities and providing support to clients to maximise their business and personal objectives.

What is your or your business’ passion? Share it with us.  Write it down.  Start focusing on it and living it.

Graemor wishes you a February filled with passion-finding and success!

Contact us now for further information on the new dividends tax.

Until 1 May 2013, if there is conflict between the Act and a provision of the old Memorandum and Articles, the latter will prevail. This in effect means that the old Articles (where all companies required an audit) will prevail until 1 May 2013. All companies that have not amended their old Memorandum and Articles will thus require a compulsory audit until 1 May 2013.

Thereafter the new Act will automatically apply, and compliance notices will be issued by CIPC where a company has not yet filed its amendment to the MOI.
Should a company wish to align with the new Act and potentially not require a compulsory audit for 2012, an amendment will need to be filed amendment with CIPC before 28 February 2012. This will entail registering a special resolution adopted at a general meeting of shareholders, amending the compulsory provisions of the old Articles or replacing it with a new MOI that does not require an annual audit.

The company would then have to refer to the provisions of the 2008 Act to ascertain whether an audit would be compulsory or not under the new system.

• Cleaning out paper files – now’s the time to clean out, clear out, shred and recycle!
• Organise your surroundings at work and home, and work on your budget for next year
• Clear out your computer – make space for all that 2012 will bring!
• Donate unused items and put some thought into ways to help people or assist with projects in 2012
• Focus on you and what you would like to achieve in the coming year.

We’d like to share some humorous advice shared about a ‘Holiday Survival Kit’ to carry in order to get through the ‘silly season’:

Year-end survival Kit

• A Roll of Sticky Tape – to fix things that will not work
• A Band-Aid – for when things get a little rough
• A Crayon – to keep your day cheerful
• A Paper Clip – to help keep things together when they seem to be out of control
• A Stick of Gum – to remind you to stick to your commitments
• A Candle – to remind you to shine brightly
• A Match – to light a fire under you when you feel burnt out
• A Stick of Biltong – to remind you not to bite off more than you can chew
• A Pin - to remind you to stay sharp
• A Smartie – to help you on those days you don’t feel so smart
• A Super C - to give you a burst of energy
• A Battery – to keep you going, going, going
• A Tea Bag – to enjoy a quick break
• A Marble – for when you lose yours
• A Tub of Confetti – to remind you to have fun
• A Panado – if all else fails!

Wishing everyone a peaceful, hopeful & joyful end to the year!