... 8.03 % ...

Interest rates

Swiss Financial Consulting offers the following rates as of 31^st August 2009:

Bank Deposits:

Please contact our office for more information. Conditions apply.

Insurance Plans:

"Guaranteed income plans" (5 year term):

"Guaranteed growth plans" (5 year term):

Tax-free interest income - max. investment amounts:

R 895'000 each for taxpayer under the age of 65

R 1'360'000 each for taxpayer over the age of 65

Underlying assumptions: 8.4% effective interest. Couples married in community of property can apply double these amounts.

Comment: Money market rates have fallen approx. 4% over the last 12 months.

However, the fixed rate for tax-free growth insurance plans is still very attractive at 8.75%. These rates are guaranteed and there is no stock market or interest rate risk - certainly a good time to lock in an attractive interest rate!

Please contact our office for more details or quotes.

We have received numerous questions after our last newsletter and the recent seminar in Zürich (see point 7). We would like to illustrate the application of the structure with actual applications:

Scenario:

Our client is a German foreigner who has taken up residency in South Africa and consequently became a tax resident without being aware of it (Definition "ordinary resident").

She has recently become a widow and has inherited substantial assets in Germany and SA from her late husband. There are tax liabilities in Germany due to rental income and pension fund contributions.

She needed an overall tax optimization for both countries, in which she is liable for tax (Germany and SA).

Solution:

We instructed her chartered accountant in Germany to apply for a limited tax liability in Germany, as she is no longer resident but still liable for tax on passive income in her country of origin.

Her liquid assets were transferred to Switzerland and incorporated in the SwissChoices structure. Therefore, no more tax is payable on interest, dividend income and capital gains in Germany.

The structure gives her maximum tax efficiency in SA as well: She needs to draw approx. R 40'000 p.m., to cover her local living expenses. There is no tax liability incurred due to the withdrawal in South Africa.

Her children have been nominated as beneficiaries of the SwissChoices assets, which made the necessity of a will in Switzerland redundant.

This question - or rather an observation - was recently passed by one of our clients. Looking at the tax rate of 40% in for income in excess of R 525'000 p.a., one certainly tends to disagree with the above statement?

However, foreign pensions, regardless if they are paid by a foreign State or company, are exempt in South Africa. Those foreigners who have got liquid assets and make use of the correct tax planning tools available, can live free of tax in South Africa or will have a maximum tax liability of 10%.

Compared to tax rates of Western European countries such as Scandinavia and Germany, where the tax rate easily surpasses 50%, South Africa can indeed be described as a tax heaven for foreigners, provided the asset allocation is properly planned!

The submission of your 2009 tax return started on 1^st July 2009. SARS posted over 2 Mio forms at the beginning of July so that taxpayers can request a customised return form.

You can either submit your return via SARS e-filing or you can ask for a printed return. The deadline for manual tax returns is September 18 and November 20 for e-filing taxpayers.

You are welcome to contact us should you need assistance with your return.

SARS released the following statement of the 6^th July:

"We will increase our focus on detecting and punishing non-compliance. We will intensify our risk management and audit capacity, including the employment of 1000 additional auditors with specialised skills in areas such as finance, banking and other key sectors. We will expand and enhance our use of third party data from employers, financial institutions, medical and pension funds and others to ensure taxpayers pay their dues. We will intensify our focus on high-net worth individuals and their tax behaviour and will unravel tax schemes aimed at aggressive tax avoidance. This is only the beginning of a zero-tolerance approach to those who deliberately seek to pass their obligations onto the rest of us."

The SA government is currently negotiating with many tax havens in a bid to track down on criminals and tax evaders. White-collar crime costs South Africa about R 150 billion a year. New cooperation agreements mean that former tax havens will assist SA in cases involving tax and exchange-control evasions. Numerous cases of seized assets (Davin King, Bobby Boekhoud, Barry Tannenbaum and others) show how fast SARS moves in on such cases. Last week it was announced that more than 40 countries would open their books to foreign tax inspectors. One of them is Mauritius, where South African individuals and corporate have legally moved more than R 35 billion by December 2007.

Comment: Similar to other countries, SARS' revenue is falling by Billions of Rands this year due to the recessionary environment. The government is on a collection mission and we would like to advise all our clients to get their tax affairs in order and make use of tax compliant structures.

The local tax authority has issued a tax ruling on our structure on their website. For more information, please go to

http://www.sars.gov.za/home.asp?pid=4265

and look up the ruling under BRP038. The ruling confirms that no taxes are payable as long as the assets are within the structure and therefore no reporting is required.

Please note that all free-standing homes do require an alarm system WITH an armed response service. Residents in security estates and flats above ground floors do not necessarily have such restrictions.

If you have an alarm system with no armed response, a burglary will not be covered. Please check your policy with regard to the alarm prescriptions or consult our office if you are not certain.

We have found in all instances that premium rates charged by banks for buildings are too high, compared to like-for-like policies with other insurers. In some instances, banks were charging up to 25% more!

Please note that you do not have to have your building insured with your bank, even if the bank is the bondholder. In terms of the Law, you have free choice where you want to place your insurance.

Please contact our office if your building is insured through your bank and we will assist you in obtaining a better insurance policy.

The Government fund that covers damages from political unrest, the South African Special Risk Insurance Association - SASRIA, is increasing their insurance rates as of 1 September 2009.

SASRIA cover is automatically included in your domestic policy. Commercial clients have to request it. The increase is about 10%. However, because of the very low premium for SASRIA, you will find a marginally higher premium, ranging from a few cents to a few Rands, as from September this year.

A tracking company has recently released statistics on vehicle theft.

You can find the list on our website under

http://www.swissfin.co.za/en/insurance/short-term-insurance/contents-and-public-liability.html

and go to the bottom of the page - where you will also find recommendations on how to prevent hijacking.

You might find it useful to look at the list next time before you buy a new vehicle....

There seems to be some hope for those foreigners who have not converted their foreign drivers licence to a local one. Regulations state that you have to do this within 12 months of receiving your permanent residence permit.

The Department of Transport and Public Works has sent the following letter: "According to Regulation 110(5) of the National Road Traffic Act, 1996 (Act 93 of 1996) a foreign licence or an international driving permit may, at any time during the validity thereof, and after the holder thereof has obtained permanent residence in the Republic or resumed residency, be exchanged for a South African driving licence."

Should you struggle to convert your foreign drivers licence, we recommend that you contact the Department on 021-4832078. Ask for the Executive Manager who can issue a written confirmation which you can present to the Traffic Department when converting your licence.

As from July, the new "Worldwide Health Options Product" is available. The coverage consists of flexible modules that the member can choose from. Bupa has managed to present extremely low premiums by excluding cover for North America which most policyholders do not require.

Please go to

http://www.swissfin.co.za/en/bupa-client-documents.html

for further information on the product, premiums etc.

Existing IHI policyholders can convert their policies only at renewal date to Bupa. We have found that young members can achieve premium savings of up to 50%! You can request a quote for the new product 6 weeks prior to the expiry of your current IHI policy.

IHI members with a health loading on their premiums cannot change at this stage, as Bupa's new product does not make provisions for loadings. The company is looking at such conversion options from next year.

In a nutshell, Bupa has created a flexible and inexpensive product that provides cover where it is needed. For many members, the premium rates are even below those of local health insurance plans!

The Department of Home Affairs has recently approved many Permanent Residence Permits. Applicants who were on a temporary permit before must not forget to claim their repatriation fees from the Department. The following documents are required:

• Passport
• Proof of permanent residence (certificate)
• Original repatriation fee slip
• A signed letter addressed to the Department, asking for the refund, mentioning all family members, your banking and your contact details.

These forms are forwarded to the Head Office in Pretoria and it can take a few months until the fee is reimbursed.

The newly appointed Minister is Mrs. Nkosazana Dlamini-Zuma. You might remember her as controversial Minister of Health and she is also a former wife of our President, Mr. Jacob Zuma.

She has vowed to take a hard line on corruption within the department and is setting up a special unit that will deal with all tip-offs. She further wants to turn the department around and remove lazy officials.

All officials now have to wear name badges so that they can be reported to a toll-free complaint line. A further upgrade over the next three years of the main offices is envisaged to create a better impression to the public.

Please note that some offices will first want to verify your permanent residence permit before you can lodge the application for an ID book. This means that you will have to go back to the Department after about two weeks to lodge your final application.

The 35^th edition of our book "South Africa - a guide for investors and immigrants" has been released. Should you be interested to order such, you can find more details on http://www.swissfin.co.za/en/immigration/order-immigration-brochure.html. The book is also available throughout many bookstores in Europe and is available in English and in German.

In contrast to many other countries, South Africa will not recognize a handwritten will as it is merely considered an expression of a wish and is not a binding document. Should a person with a handwritten will die, all possible heirs need to give their approval that they agree with the wishes of the deceased. In most cases, this will lead to uncertainty, frustration and aggravation for the heirs, combined with unnecessary high costs payable to the Master of the Court.

If you have minors and no valid will, the money for minor children will be paid into the government's Guardian Fund. Every time your children need money, they have to approach the Master of the Court - at additional costs again.

For a will to be valid, South African legislation requires the signature of the testator/testatrix to be witnessed by two persons and the nomination of an executor.

We therefore recommend that you follow the rules in place - should you need any assistance with the drafting of your will, you are welcome to contact us.

The presentation was organized by SwissLife on the 9^th of June and was attended by approx. 40 Private Bankers. Frank Suess from BFI Consulting introduced the SwissChoices structure while Tony R. Hug from Swiss Financial Consulting presented the local tax and immigration system to the participants.

The event was praised by the bankers who appreciated being informed on tax compliant structures that they can now offer their clients.

From the 1^st July 2009, a new paragraph of the "Regulation of Interception of Communications and Provision of Communications Related Information Act (RICA)" is in force. The new regulation is aimed at criminals who use mobile phones to execute crimes. Investigators can now tap into conversations without a prior approval of a judge.

This means that all mobile phone companies must record the names, ID numbers and addresses of SIM card holders, whether these are existing ones or new numbers. There is a grace period of 18 months after which the provider has to deactivate the SIM cards of people who could not be identified. Large fines of R 100'000 per day have been implemented.

You need to go to your service provider with your ID book or passport as well as proof of residential address (document may not be older than 3 months) to link these details to your phone number(s). For more information, you can visit your service provider's website or phone their call centre.

We are pleased to announce the appointment of Ms Amanda Rasch, who is a Swiss citizen. She did commence work mid August and will be handling the short-term claims portfolio. Ms. Aileen Lawrence will be taking over from Ms. Tiffany Haefeli, who is leaving us to go to the US. We would like to thank Ms Haefeli for her hard and dedicated work and wish her all the best with her future plans.

We receive some amazing statements from clients on a regular basis. We hope to shed some light on the following questions:

Statement: I don't have to pay taxes, because I only have a temporary permit in South Africa.
Answer: The definition of a tax resident is not relevant to your residence permit. The definition of a tax resident is firstly based on the ordinary residence and secondly on the physical presence test.

Statement: I will not apply for permanent residence because I will become liable for tax.
Answer: See the previous question.

Statement: I don't need an international or local driver's licence as my foreign one is sufficient. Car rental agencies never ask me for my driver's licence anyway.
Answer: Car rental agencies are self-insured and are not really worried whether you have a valid driver's licence in SA, as all personal damages are covered via the Road Accident Fund. The Road Traffic Act however states that you either need an international or local driver's licence. Your foreign one is not necessarily valid in SA.

Statement: I automatically receive an ID book when my permanent residence is issued.
Answer: You have to apply separately for an ID book and we urge you to do this immediately after our permanent residence is issued, as you need it to apply for the local driver's licence no later than 12 months after you received your permanent residence.

Statement: My funds in South Africa are blocked and I cannot transfer them abroad once I have received a permanent residence permit.
Answer: There is a concessionary period of 5 years after having received your residence permit within which all funds can be transferred abroad. Thereafter there is a limit of R 2.0 Mio per taxpayer. Further funds can be sent abroad with a 10% penalty. Some of our clients have obtained approval by the Reserve Bank, to have all their funds approved for transfer abroad prior to accepting the permanent residence permit.

Statement: If you don't have a valid will, the South African government will confiscate your assets when you die.
Answer: The government does not confiscate your assets. You should have a local will to make sure that your estate can be passed onto your heirs.

Comment:

We would like to urge all our clients to seek professional and reliable advice before acting on unconfirmed rumours. All the answers above can be found in our Immigration & Investment Book, which was mentioned under point 5.