Some questions you may have about getting money out of South Africa may include:

1. What are the tax implications of sending money out of South Africa as gifts?
2. How can I send investment out of South Africa?
3. What does a Single Discretionary Allowance mean? Does this cover gifts and investments send to a country outside South Africa?
4. What are the tax implications for me receiving dividends from a country outside the Republic?

Let us now look at each of these questions:

What are the tax implications of sending money out of South Africa as gifts?

Gifts will be deemed as donations. But, he normal rules regarding donations and what is exempt will apply. Where exemptions do not apply, donations will attract 20% tax up to an amount of R30 million and 25% to an amount above R30 million. However, individuals will get an annual exemption of R100 000. This R100 000 will form part of the discretionary allowance.

If you are planning to send gifts, you may do so up to R100 000 before you can get taxed on it. We will discus the discretionary allowance later on in this article.

How can I send investment out of South Africa?

There are two ways through which you can send money out of South Africa for investment purposes.

1. The single discretionary allowance – R1 million (does not require tax clearance)
2. The foreign investment allowance – R10 million (requires prior tax clearance) With this one you can transfer R10 million per year. But you will need to get a tax clearance before making the transfers.

You can use these vehicles to send money for:

1. Gifts
2. Investments
3. Fees
4. Loaning people outside the country
5. Child or spousal support support
6. Travel purposes

What does a Single Discretionary Allowance mean? Does this cover gifts and investments send to a country outside South Africa?

Single discretionary allowance means you can send R1 million per calendar year without getting a tax clearance to do so. You can use this to send gifts but remember you are exempted from donations tax up to R100 000.

You can use the discretionary allowance to send gifts and investments out of South Africa. But, if you are using the single discretionary allowance, it means the money you send in a single year cannot exceed R1 million.

What are the tax implications for me receiving dividends from a country outside the Republic?

1. Most foreign dividends are exempt if the South African resident holds at least 10% of the equity in the entity paying the dividend. – 100% of the dividends will be exempted.
2. Otherwise, dividends are taxable in SA at a rate of 20% for equity less than 10%
3. The resident can claim tax credits for foreign taxes levied on the dividends where applicable.

Do you need more help? Get in touch with us here or visit our website here.

Can you charge VAT on residential property?

Let’s get straight into it. There is no VAT on residential property. This is an exempt supply in terms of the VAT Act. However, one needs to be careful and correctly distinguish between residential and commercial letting.

The distinction between residential and commercial property is important because while residential accommodation is exempt, commercial accommodation attracts VAT at the standard rates. Also, certain rules apply where commercial accommodation is supplied for less or 28 days and where is supplied for more than 28 days. We will look at this later. First, let us define and distinguish between residential and commercial accommodation.

Residential accommodation:

Simply put, this is where you own a residential house that you let out, predominately used as a place of residence or abode of a natural person but excludes the supply of “commercial accommodation.” Where this is the case, there is no VAT applicable to your rental income. Also, you cannot claim input tax.

Commercial Accommodation:

This is the supply of such accommodation such as hotel, B&B, guest house, retirement home, frail care homes etc. It is clear that excludes a dwelling as defined under residential accommodation.

This kind of accommodation attracts VAT at the standard rates.

The 28-days rule:

It gets a bit interesting when the commercial stay is a bit longer.

Under commercial accommodation, if the stay is 28 days or less, then the full amount chargeable to the client is vatable at the full standard rate. In other words, the VAT charge is the standard rate multiplied by the full charge before VAT. For example, assuming that the full charge before VAT is R100 and the standard rate is 15% then the VAT charge would be equal to R100 x 15% and the full price plus VAT would be equal to R115.

If the stay is of an unbroken period of longer than 28days, then only 60% of the amount charged is deemed to be vatable. Using the example above, this would be R60 of the full price charges. This effectively means that the VAT rate drops to 9% (15% x 0.6)

Practicality:

You may need to get your accounting system to have this additional VAT rate for stays longer than 28 days (but of course, you need to remember that this is for an unbroken period of stay.)

Secondly, your VAT201 return will need to disclose the 60% and 40% separately because they are using a different tax rate. One needs to be careful with the 40% because it is not an exempt supply, which means it may not have a place on the VAT return.

This will now mean that reconciliations should be done and kept because an IT14SD reconciliation may be issued because the 40% may not necessarily be disclosed on the VAT return.

We must also point out that you will be able to still claim 100% on the input side because the 40% is not treated as an exempt supply.

Do you need more help regarding the VAT treatments of your business? Get in touch with us here or visit our website here.