NEWSLETTER APRIL 2016

SERVICES WE OFFER:

· Auditing and Independent Reviews

· Tax planning

· Due diligence

· Special investigations

· Accounting and bookkeeping

· Registration of trusts, companies and taxes

· Management and financial advisory services

· Planning and installation of information systems

1

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Incentive for employers to provide bursaries – no effective date of implementation

“To support skills development, government proposes to

increase the fringe benefit tax exemption thresholds for

bursaries provided to employees or their relatives. The income

eligibility threshold for employees to access the relief will be

increased from R250 000 to R400 000. The value of qualifying

bursaries will be increased from R10 000 to R15 000 for National

Qualifications Framework levels 1 to 4, and from R30 000 to R40

000 for levels 5 to 10.”

Accordingly, the existing thresholds remain in force until such time as the proposals

are given effect by the appropriate legislation. We will keep you informed of any

developments in this regard.

The bulk of the proposals made in Minister Gordhan’s budget speech have been

"ratified" in the relative legislation. The legislation does not contain any amendments

to the exemption relative to the fringe benefit tax exemption thresholds for bursaries.

As such the proposal is not dealt with in the legislation on the table and can

therefore only be dealt with the Taxation Laws Amendment Bill that will be released

probably in September or October this year. In this Bill SARS/ National Treasury can

decide on the effective date, probably 1 March 2017 or they can potentially

backdate to 1 March 2016. There is also the third possibility that they might drop the

proposal and not legislate it at all.

2

Barclays gets ‘Out of Africa’

Africa’s economy faced another blow on 1 March 2016, when global banking

group, Barclays announced plans to cut its majority stake in Barclays Africa Group.

Barclays Plc will be reducing its 62.3% holding in JSE-listed Barclays Africa Group to a

non-controlling stake of less than 20% over the next two to three years.

Barclays has been operating in Africa for around a century and so this

announcement has set alarm bells ringing. Rating agencies Standard & Poor’s (S&P)

and Fitch have both reacted by downgrading the credit rating of Barclays Africa,

further shaking investor confidence in the continent.

Barclays Chief Executive Officer, Jes Staley, emphasised that this decision resulted

from regulatory pressures, including the level of capital Barclays Plc is required to

hold in respect of their shareholding in Barclays Africa. With little control over

Barclays Africa’s liquidity risks, Barclays Africa is considered a high risk for the parent

company.

Maria Ramos, CEO of Barclays Africa, said the group was in safe hands and that it

would continue with African expansion plans.

Following a drastic drop in group profits, Barclays Plc is being radically restructured

to focus on two core divisions – Barclays UK and Barclays Corporate & International.

Barclays, together with several other banks, is recovering from heavy penalties

imposed for activities such as illegal forex trading and involvement in rigging the key

London inter-bank rate (Libor). These activities have led to stricter and costly

regulatory reforms which are impacting on the global investment climate.

It is important to note that Barclays restructuring is not just aimed at Africa: in

January 2016 Barclays announced that it was moving out of Russia and closing

offices across Asia.

The Barclays sell-off is not necessarily a reflection on Africa, but this announcement

does not send a positive message for investment in the continent . .

3

Electronic signatures

One of the final barriers to the paperless office is the ‘electronic signature’.

While South African law recognises electronic signatures, many people are worried

about whether an electronic signature is legally binding and whether it protects

them in the same way as a handwritten signature.

According to the Electronic Communications and Transactions (ECT) Act of 2012, an

electronic signature is a piece of data attached to an electronically transmitted

document as verification of the sender’s identity and his or her intent to sign the

document.

The ECT Act recognises a variety of digital formats as an ‘electronic signature’ as

long as they comply with the criteria of intention and relationship to the document.

Generally speaking, there are 2 main categories of electronic signature:

• A ‘normal’ electronic signature - used to sign agreements, letters, e-mails, and

other documents when there is no legal requirement for an advanced

electronic signature

• An advanced electronic signature – used where there is a legal requirement

that a document be signed. This digital signature has to be accredited by a

verification process which utilises a signing tool to provide an accredited

digital certificate

Advantages of electronically signed documents:

• Efficient - no need to search for important documents

• Secure - solid audit trail, documents are much less likely to go missing

• Prepare and send any document anytime, from any device and file securely

• Eliminates paper clutter and promotes ‘greener’ business

• Saves time and archiving costs and space

• Quicker internal and customer approval processes

• Cost saving – new contracts and quotes can be approved electronically

instead of faxing or couriering paperwork

• Streamlines internal approval processes – e.g. board meeting minutes can be

electronically signed by directors

Digital signatures are therefore more reliable than old fashioned physical signatures

where it is more difficult to identify authenticity of signatures or document

tampering.

4

Tax treatment of trusts

In his recent budget speech Minister Gordhan made the following proposal:

“An important role of the tax system is to reduce

inequality. Some taxpayers use trusts to avoid

paying estate duty and donations tax. For

example, if the founder of a trust sells his or her

assets to the trust, and grants the trust an interest-

free loan as payment, donations tax is not

triggered and the assets are not included in his or

her estate at death. To limit taxpayers’ ability to

transfer wealth without being taxed, government

proposes to ensure that the assets transferred

through a loan to a trust are included in the estate of the founder at death, and to

categorise interest-free loans to trusts as donations. Further measures to limit the use

of discretionary trusts for income-splitting and other tax benefits will also be

considered.”

There are a number of concerns around this proposal, primarily in that we cannot

see how the assets can be included in the founder's or even the donor's estate as

they could possibly have long predeceased the effective date of legislation. In all

probability this should be the "lenders estate". The entire proposal requires careful

consideration and we will keep you informed with updates.