On behalf of the Taxlex / EB-Hub Group of Companies, I would like to use this opportunity to sincerely thank you for having entrusted your business with us during extremely challenging and uncertain times the past year.
We hope that we have met with your expectations, and are continuing to strive to better our value proposition to you by using the latest technology, providing above-average knowledge and service.
I am a firm believer that personal interaction with our clients, still forms the basis of our business relationship, and we undertake, notwithstanding global changes to continue to provide personal interaction on a regular basis.
May you and your family have a blessed and peaceful break this holiday period from the stress and challenges of 2020, and may the lessons which we have learnt, help us to conquer 2021 as a united force.
Taxlex is a multi-disciplined professional practise providing companies and their employees with a wide spectrum of services and solutions to address their Tax, Payroll, Labour, Human Resource, Accounting, Employee Benefits and Financial needs.
SA’s inflation rate rises to 3.3% in October
A surge in food and beverage prices pushed SA’s inflation rate to 3.3% in October from 3% in September, but there are no signs of sustained upward pressure.
SA leading business cycle indicator improves in September
The SA Reserve Bank’s composite leading business cycle indicator rose to 105.3 in September, its first increase on an annual basis since October 2018.
RMB/BER business confidence index surges in Q4
The RMB/BER business confidence indicator surged to 40 in Q4 from 24 in Q3, reflecting improved confidence in all sectors of the South African economy.
SA’s PPI exceeds expectations in October
In October, SA’s headline producer inflation rate rose to 2.7% y/y from 2.5% y/y in September, above forecasts that it would remain unchanged.
United States house prices rise 6.6% y/y
US house prices rose by an impressive 6.6% y/y in September, their highest rate of increase since March 2018.
TOTAL’S NEW MAJOR GAS DEPOSITS RESHAPE SA’S ENERGY MATRIX
French energy group, Total recently announced that it uncovered a new significant gas deposit about 175km off South Africa’s southern coast.
Known as the Luiperd-1X well, it lies within the Outeniqua Basin and together with Total’s 2019 discovery of an estimated one billion barrels of oil equivalent of gas and condensate at Brulpadda (off the Mossel Bay Coast), could help SA transition away from coal and place it on the global energy map. According to The Africa Report, the timing of both finds is good for the Mossel Bay gas-to-liquids refinery, which has been on the verge of closure over the last two years due to declining gas resources from the fields currently feeding refinery.
Furthermore, as pointed out in a Moneyweb article, the gas discoveries come at a time when Eskom is having to retire its older coal-fired power stations and reduce its carbon output. As a result, gas as a source of power generation is now a real option. In the article, NJ Ayuk, executive chair at the Africa Energy Chamber, says that the two discoveries place SA on the map as a global gas player. “Gas is the future, and is needed as we transition to renewables as a source of energy,” he says. He also cautions that government needs to act swiftly to reap the benefits and put the right incentives and policies in place. Ayuk estimates that an investment of US$40 billion - US$60 billion is required to extract the gas, of which US$35 billion would be spent in SA. “If we get it right, we could land gas onshore within two to three years,” he says.
However, while the discoveries represent a substantial opportunity for SA, gas is a fossil fuel and the global movement towards renewable energy sources such as wind and solar is gaining momentum. Government and Total will therefore need to determine if and how it will develop this gas while weighing up the environmental concerns.
Source: OLD MUTUAL WEALTH
The National Treasury recently published a number of bills that contain the amendments to the tax laws for the 2020 legislative cycle.
This article reviews two of the amendments that are likely to be of broad relevance to taxpayers and advisors. It is not intended to be a comprehensive review of all the amendments by any means. It is necessary to consult your regular tax advisor or Taxlex to consider the impact of all the relevant amendments in this legislative cycle to your particular circumstances.
Estate planning using Trusts and Preference Shares
Estate planning structures aim to limit the growth of wealth in the hands of a natural person where it would ultimately be subject to tax upon death. This is often done by housing the wealth in a trust structure. If the natural person is the source of the wealth or has already accumulated wealth in his or her personal capacity, this may be tricky. Estate planning involves that this wealth is transferred to a trust while simultaneously attempting to freeze growth in the hands of the transferor. In the past, this was generally achieved by transferring the wealth to a trust on an interest-free loan. During 2016, this practice was curbed by the introduction of section 7C into the Income Tax Act. This provision deems a taxpayer to have made a donation to the extent that a loan to a trust (or company owned by a trust) does not bear interest at the official rate of interest. Many planners resorted to using shares to try to achieve a similar outcome.
The scope of section 7C is broadened to also apply to preference shares issued by companies in which 20% or more of the equity shares are ultimately held by a trust that is a connected person to the preference shareholder. The amendment applies to dividends (or the lack thereof) that accrue during years of assessment commencing on or after 1 January 2021.
In recent years there have been a number of bursary schemes that involved a sacrifice of remuneration by employees for a bursary to cover studies of the employee’s relatives. This resulted in a portion of the employee’s income being exempt from tax. The exemption is only available for bona fide scholarships and bursaries. Some held the view that arrangements that involved an element of salary sacrifice may still represent bona fide bursaries. This position appear to have been based on the following views of the National Treasury in the explanatory memorandum to the 2006 amendments:
“To simplify matters, the proposed amendment provides that all bona fide scholarships and bursaries for employees will be tax-exempt regardless of whether or not elements of a salary sacrifice are present”.
For years of assessment commencing 1 March 2021, the explicit prohibition against salary sacrifice schemes is re-introduced. Any bursary or scholarship granted to enable a relative of an employee to study will not be exempt if the employee sacrificed any remuneration or future remuneration.
Consumers are increasingly taking to online shopping across developed markets, attracted by the efficiency and ability to save time. ‘Staying home’ in 2020 has seen online shopping increase further, entrenching behaviours that may not have shifted before the pandemic. As the real-life shopping experience is tainted by hygiene protocols, it’s become a better experience to shop from home!
South African online shopping growth may be constrained by digital access and delivery logistics, but has nevertheless shown significant growth over the last seven years, and 2020 has likely accelerated this trend.
Transactions are going paperless, too. From healthcare to banking, to investing in Unit Trusts, the shift from ‘paper to pixel’ is clearly a timesaver, with multiple other benefits.
Changes to ways of work are clearly shifting business operating models. The rapid and necessary move to ‘work from home’, and conduct online meetings and virtual events, may be a dramatic shift, but it’s likely to linger a little longer, even beyond the virus outbreak, due to cost-saving and efficiencies.
Global market news
Markets were relatively quiet given Thanksgiving in the USA.
Asia posted mixed results, markets being directionless over the week but with a phenomenal month in the bag.
Oil has risen 28% over the past 30 days.
Latest high frequency data shows EM bond fund inflow momentum surged to the highest level since Feb 2019
There is a growing bullish consensus for 2021 given continued policy stimulus and monetary regulators “guaranteeing” low rates for longer
The Treasury has suspended a Reserve Bank circular from late October that offered the prospect of SA investors being able to escape caps on offshore investments. The rand has climbed 10% against the dollar this quarter, making it the emerging world’s best performer after Mexico’s peso.
Standard Bank has reported a 23% rise in mortgage applications in the year to date due to a surge in demand in the R1m-R1.7m price bracket, spurred by first-time buyers, for whom owning has now become more affordable than renting on the back of record low interest rates.
SA inflation has come in higher than expected, at 3.3%, as a result of food inflation (particularly fresh products and meat).
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