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How will the VAT hike affect property sales?

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Fin 24 – A question raised about the 1% value-added tax (VAT) increase to 15% as from April 1 2018, as announced in Budget 2018, is how it will affect fixed property sales currently in progress or under negotiation.

Leonard Willemse, senior tax consultant at Mazars, explains this question stems specifically from the application of the time of supply rules regarding the sale of fixed property.

If a VAT vendor – for example a property developer – has signed a sales agreement on January 1 2018, but both the payment of the sale price and the transfer of the fixed property is done on or after April 1 2018, it raises the question of which VAT rate applies to the transaction: 14% or 15%?

The VAT Act states that fixed property is supplied under a sale at the earlier of the dates on which registration of the transfer of the fixed property at the Deeds Office takes place or when any payment in respect of the sale price for such “supply” is made by the purch


He gives as an example a situation where a VAT-registered property developer enters into a sales agreement with a purchaser on January 1 2018 for the sale of a unit with a price of R10m (inclusive of VAT). Both parties sign the agreement on January 1 2018, construction starts before April 1 2018, is completed after that date and the registration of the transfer of the property in the Deeds Office is after April 1 2018. Payment is made on the transfer date.

In terms of the fixed property time of supply rules, the time of the supply takes place after April 1 2018, effectively resulting in the transaction being subject to VAT at 15%. The seller ends up receiving less from the sale or, conversely, the purchaser ends up paying more.

Knight in shining armour

“Luckily, there is a knight in shining armour, namely section 67A(4) of the VAT Act. Almost hidden away at the end of the act, the section has not often been looked to for relief considering that the VAT rate has remained at 14% since 1993,” explains Willemse.

“In short, the section provides that, subject to certain conditions, the VAT rate that is effective on the date that a written sales agreement is entered into will apply.”

In terms of this interpretation, the 14% VAT rate would apply to the supply of fixed property where, before the date on which an increase in the VAT rate becomes effective (April 1 2018), a written agreement is concluded subject to certain conditions.

These conditions would be that it is a sale of a residential property (not a commercial property); that the price paid was determined and stated in the written agreement before the VAT increase date; that the agreement was signed by the parties before the increase date; and that the supply of the property is deemed to take place on or after the increase date.



Something to know about cryptocurrency

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I would like to share with you what I read in a news letter …..

  • Volatility: The volatility of cryptocurrencies is much higher than any traditional market and can be attributed to various factors like news, publication of algorithms, updating of technology, technical analyses and much more.
  • No regulation: Cryptocurrencies are currently unregulated in South Africa. Thus they pose a number of risks for those who choose to transact with them, such as the lack of guarantee of security, convertibility or value.
  • Irreversibility of transactions: Unlike traditional trades, if you deposit money into an incorrect address, there is no way of reversing that transaction. Your money will be lost – and there is no governing body that can assist in getting the money back.
  • Hacking: Cryptos are generally stored in a virtual wallet called a “software wallet”. These wallets are susceptible to hacks. Using a “hardware wallet” is presumed to be a safer wallet option, but even this doesn’t mitigate the risk of hacking.
  • Government rejection: If you invest in cryptos and the government decides to reject them, you risk having your wallet shut down and being unable to migrate your money.
  • Tax implications: In some countries, including South Africa, tax laws are retrospective, meaning that they can apply to money you have earned in the past – leaving you with large tax obligations.
  • Legal tender: The South African Reserve Bank governs the management of currency and has the sole right to issue coins and notes, which constitute legal tender. Bitcoin, for example, falls outside of the definition of legal tender. Consequently, payments made via Bitcoin in South Africa may not discharge a debtor of a monetary obligation and purchasers run the risk that their Bitcoin payments are not recognised by South African law.
  • Money laundering: Bitcoin users remain largely anonymous. This makes it ideal for money laundering and for use in illicit activities such as purchasing illegal substances.

In September 2014, National Treasury issued a user alert advising investors in virtual currencies to exercise extreme caution. In line with this guidance and taking into account the significant risks and uncertainties posed by these cryptocurrencies, the unregulated environment and the speculative behaviour observed in markets, Liberty financial advisers should steer clear of advising clients to invest in any cryptocurrency.

Virtual currencies currently have no legal status and are neither defined as securities in terms of the Financial Markets Act nor as financial products in terms of the Financial Advisory and Intermediary Services Act. They are therefore not subject to the regulatory standards that apply to the trading of securities or the regulatory standards that apply to the provision of intermediary services and advice.

Struggle to secure home loans

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Fin 24 -Younger buyers are starting to struggle to get on to the first rung of the property ladder, said an industry analyst.

According to BetterLife home loans statistics, over the past 12 months, home loans granted for between R500 000 and R1m, declined from 40.2% to 38.6%.

However, this drop in percentage of home loans to younger people is not due to a decline in demand, said BetterLife Home Loans CEO Shaun Rademeyer.

“[T]he percentage of home loan applications being made by first-time buyers has actually increased over the past 12 months from 46.1% to 47.5%.

“But the banks are becoming increasingly cautious when it comes to approving new loans and are applying very strict credit qualification criteria,” said Rademeyer.

Statistics show banks currently decline almost two-thirds (66%) of home loan applications.

BetterLife’s data also showed that on average buyers over-50 are currently paying about twice as much for their homes, compared to buyers under-30. But over-50’s only pay about 30% more on their monthly bond repayments in relation to under-30’s.

“Buyers aged 50 to 60, are paying an average of R388 000 as a deposit, which takes their average bond down to R949 000 and monthly repayment to R9 475. The average deposit size for over-60s currently is R674 000, which puts their average bond at just over R1m and average monthly repayment at around R10 000,” said Rademeyer.

Statistics show that buyers aged 20 to 30 are currently paying an average deposit of around R90 000, which puts their average bond at R682 000 and their average monthly repayment at just over R6 800.

Fin24 previously reported that South Africans are turning to unsecured debt to service home loans. About 30% of homeowners borrowing short-term unsecured debt, DebtBusters CEO Ian Wason told Fin24. This is in order to keep home loan payments up to date.



Bitcoin/Ether tumbles as digital coins resume slide

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Fin 24 – Bitcoin slumped as much as 20%, giving more impetus to a January selloff in cryptocurrencies, after South Korea’s finance minister repeated that the country may ban trading in one of the world’s most active markets.

The largest digital coin was down 16% to $11 755 as of 11:15, the lowest level since late December, according to composite pricing on Bloomberg, bringing an end to its two-day rally. Rival cryptocurrencies also plunged, with Ripple diving as much as 33%.

“The finance minister made it clear they’re definitely considering banning crypto trading – and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”

Speculators across the globe are struggling to determine when or how market watchdogs may crack down on an industry that’s decentralised and derives much of its value from anonymous ownership. Many assertions that digital coins represent a bubble have triggered double-digit selloffs over the past year, often to be followed by rebounds.

In South Korea, shutting down cryptocurrency exchanges is still an option, Finance Minister Kim Dong-yeon said in an interview with TBS radio. But measures first needs “serious” discussion among ministries, Kim added, holding out hope for traders that the crackdown won’t go that far.

Kim said there’s irrational speculation and that rational regulation was needed.

Steven Maijoor, chairperson of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency. And it’s also not broadly accepted.”

The ESMA warned retail investors against initial coin offerings in November and is monitoring developments in cryptocurrencies, Maijoor said.

China, which first began targeting the industry last year, is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, according to people familiar with the matter.


The Importance of a Last Will and Testament


The Importance of a Last Will and Testament. A Last Will and Testament states what will happen to your assets after death. … The consequences of not having a will are quite serious; the government will divide your property, regardless of your intended wishes.

What happens to your investments when you die? Will they pass to your loved ones, as you would want? An uncomfortable topic to think about, but one that we all need to consider – especially if there are dependants involved.

Did you know?


The rate at which medicine and medical practices are advancing poses a problem if you want your dread disease policy to provide benefits that will still be relevant in many years’ time.

At least one life assurance company has introduced a benefit that provides for the payment of claims when the policy’s original criteria for a particular condition become outdated as a result of medical advancements.

Dread disease policies typically define the medical conditions and the level of severity for which claims will be paid.

The criteria used to establish the legitimacy of a claim often rely on a classification system, a procedure, or a test. The claims criteria will be appropriate when you take out the policy, but they may become outdated over time.

Company X has therefore introduced a new feature on its dread disease policies – Medical Advancement Protection. This benefit provides a set of rules for assessing claims where the original claim requirements have become outdated due to medical advancements.

Medical Advancement Protection ensures you will still be covered for a condition as long as your symptoms would have qualified you to be paid a benefit at the time you took out the policy, and appropriate medical literature shows that the new surgery or procedure is not experimental, is necessary and is superior to the procedure used before.

Contact Light-Insurance for more information on Company X.