Dear Readers,

Welcome to the winter edition of our Newsletter.

Whilst we are enjoying an unusually warm winter in Cape Town, clouds are covering South Africa's economic fortunes. Weak growth and the debt crisis in the US, fears of sovereign debt default of some of the Eurozone's members and slower growth in China are threatening to derail the international recovery. This will have an impact on South Africa too which we experienced with the recent volatility in the Rand exchange rate.

You will find further information on various matters, especially on short-term insurance issued. And it's this time of the year again - don't forget to submit your income tax return!

Enjoy the reading, with best regards,

Your SwissFin - Team

CONTENTS

1. INVESTMENTS

• 1.1. Interest rates: Bank deposits, insurance plans, tax-free investment amounts and our offshore model portfolios

2. SWISS BANKING

• 2.1. Switzerland signs tax agreement with the UK and Germany

3. TAXES

• 3.1. Filing season for your 2011 tax return now open
• 3.2. Changes to the Income Tax Act
• 3.3. The clock is ticking for the 2011 tax amnesty

4. SHORT-TERM INSURANCE

• 4.1. SwissFin refers dispute successfully to Ombudsman
• 4.2. Are damages to my car due to potholes covered?
• 4.3. Jamming devices - make sure your car is locked before you walk away
• 4.4. Am I covered although I have not yet paid my premium?
• 4.5. Building insurance is not a maintenance contract
• 4.6. Discovery enters the short-term market
• 4.7. Insurance fraud: Santam pulls the plug

5. HEALTH CARE COVER

• 5.1. New proposal regarding tax deductibility of medical expenses

6. IMMIGRATION

• 6.1. Changes to the Immigration Act approved
• 6.2. Status quo of your application

7. LIFE INSURANCE

• 7.1. World first product from Discovery Life

8. OTHER

• 8.1. All of SwissFin's staff pass regulatory examinations

1. INVESTMENTS

1.1 Interest rates

SwissFin offers the following rates as of August 2011

Bank Deposits:

Please contact our office for more information. Conditions apply.

Insurance Plans: "Guaranteed growth plans" (5 year term):

Tax-free interest income - maximum investment amounts:

• R 1'367'000 each for taxpayer under the age of 65
• R 2'103'000 each for taxpayer between the age of 65 and 75
• R 2'287'000 each for taxpayer over the age of 75

Underlying assumptions: 6.0% effective interest. Couples married in community of property can double these amounts.

SwissFin offshore model portfolios

The annualized performance (before costs) of our balanced portfolios is as follows:

Comment

Local interest rates are not likely to rise soon as demonstrated by the recent meeting of the Monetary Portfolio Committee (MPC) of the Reserve Bank.

Our repo rate is at a 30-year low of 5.5% since November last year and our mortgage rates are the lowest since 1974.

It is well possible that inflation will breach the ceiling of 6% towards the end of the year, which could lead to higher interest rates. More clues will be given when the MPC meets next month.

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2. SWISS BANKING

2.1. Switzerland signs tax agreement with the UK and Germany

The Alpen-Country will collect taxes on behalf of the UK tax authorities, just a few weeks after a similar agreement was signed with the German authorities.

Swiss Banks will in future deduct a withholding tax on interest, dividends and capital gains, earned of British citizens, that are not domiciled in Switzerland and that have not declared such assets towards the UK tax authorities. The tax is between 27% and 48%. The agreement with Germany resulted in a withholding tax of just over 26%.

People with non-declared assets can make use of an amnesty process with a fixed penalty tax. For German citizens the once-off tax will be between 19% and 34% and depends on the term and the growth of the funds that were held illegally offshore.

The Swiss Banks have agreed to pay CHF 500 Mio. to the UK tax authorities to settle taxes the UK has lost over the past. The amount payable to Germany is CHF 2 Bio.

In order to avoid the flow of future illegal funds to Switzerland, the UK authorities are allowed to place 500 enquiries on account holders every year. For Germany, the amount of enquiries is capped at 750 in the first and 999 in the next year.

Whilst the agreement with Germany has been signed, it is expected that the Governments of the UK and Switzerland will finalize it within the next few weeks. Thereafter, both Parliaments need to agree to the deal.

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3. TAXES

3.1. Filing season for your 2011 tax return now open

The filing season of your 2011 tax return was opened on 1^st July. You have until 30^th September for manual returns, 25^th November for submissions via e-filing and provisional tax payers have until 31^st January 2012.

For our clients making use of our services, please send us all relevant documentation such as IRP5s, income tax certificates, all sources of other income, capital gains etc. etc. by no later than the end of September, so that we can file your return timeously.

If you fail to submit your return in time, SARS will levy a penalty of R 250 to R 16'000 p.m. (depending on your income) plus interest of 8.5%.

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3.2. Changes to the Income Tax Act

The Taxation Amendment Law Bill was recently published. The following changes are proposed:

• Dividends from Unit Trusts will no longer be exempt and are fully taxable. The introduction of this change is planned for April 2012.
• Contributions to a medical aid scheme are no longer tax deductable but will be converted to a tax credit. Please read more about it under the heading "Health Care Insurance".
• The taxation of risk policy payouts to beneficiaries will be included in the Act. If premiums were tax-deductable the proceeds will be taxable and vice-versa.
• Foreign dividends are no longer exempt, but will fall under the new tax on dividends of 10% as from April next year.
• Provident Funds will fall in line with pension funds - effectively phasing them out. One of the reasons is that provident fund members can withdraw the entire fund value at retirement. The government will put a stop to this and limit the maximum withdrawal to one-third, leaving the balance to buy a compulsory pension.
• Tax-deductable contributions to all different retirement funds will be treated in the same manner.
• Investment linked living annuities (illas) will be renamed retirement drawdown accounts (riddas). The government is concerned about the high costs of the products and wants more market competition. The overall structure and drawdown of these "riddas" will be examined and probably changed.

3.3. The clock is ticking for the 2011 tax amnesty

The voluntary disclosure program was opened on 1^st November 2010 and runs until the 31^st October 2011.

It applies to all taxes, including exchange control violations, PAYE, STC, customs and excise duties etc. Please refer to our article in the November 2010 newsletter for more information or visit http://www.sars.gov.za/home.asp?pid=63327.

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4. SHORT-TERM INSURANCE

4.1. SwissFin refers dispute successfully to Ombudsman

Not many policyholders are aware that they can make use of the Ombudsman for short-term insurance, should they feel that their claim has not been settled to their satisfaction.

We recently assisted a client with a declined burglary claim to the Ombudsman, which resulted in a full payout in favour of the policyholder.

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4.2. Are damages to my car due to potholes covered?

Some parts of our roads are not always well maintained and potholes do occur, especially in winter.

Please note that most insurance companies will not pay damage to tyres only, unless such damage is accompanied by damage to other parts of the vehicle, such as suspension, rims, bodywork etc.

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4.3. Jamming devices - make sure your car is locked before you walk away!

Thieves are getting smarter and we have seen an increase of theft from cars in the Johannesburg and Durban area. We recently had the first incident in Cape Town.

Whilst there is no absolute clarity on the matter, this is how it allegedly works: Normal gate remote control devices operate on the same frequency as car remotes and whilst both are being pressed, they cancel each other out. Thieves are using this tactic when you park your car and walk away.

So whilst you are doing your shopping, they have enough time to search your car for valuable items such as laptops, GPS units etc. The problem with claiming for such a loss is that there is no forcible entry into your car - an exclusion on most insurance policies.

So please make sure that your car is properly locked before you walk away! These extra two seconds of your time are well spent to save you a lot of trouble.

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4.4. Am I covered although I have not yet paid my premium?

Every insurance company, with the exception of most direct insurers, gives you a grace period of 15 to 30 days to pay any arrear premiums. Should a claim occur during such grace period, the premium needs to be paid immediately in order for the claim to be dealt with.

For more information, please refer to your policy wording (see general conditions) or contact our office.

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4.5. Building insurance is not a maintenance contract

Please note that all insurance companies in South Africa exclude damages that result from wear and tear. Typical examples are insufficient maintenance of a building, defective workmanship, rust, damp, gradual deterioration, fungus, damage by weeds/roots or your own pets. For more details please refer to your policy schedule.

Kindly make sure that you maintain your buildings and properties to sufficient standard so that claims can be settled promptly.

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4.6. Discovery enters the short-term market

We refer to our recent newsflash that was sent out in July 2011. Should you not have received it, please click here to read the article.

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4.7. Insurance fraud: Santam pulls the plug

The insurer followed up on every tip-off they received last year, as well as every dubious or over-inflated claim. As a result of the 418 tip-offs, 58 were reported to the police, representing more than R 11 Mio. in fraudulent claims. These policyholders will face criminal charges.

Other insurance companies have also expressed their intention to protect the interest of honest policyholders.

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5. HEALTH CARE COVER

5.1. New proposal regarding tax deductibility of medical expenses

The National Treasury has recently released a discussion paper which could make membership to a medical scheme more affordable to people earning less than R 200'000 p.a.

The proposal wants to change the tax deductions for medical expenses, namely the costs for out-of-hospital expenses, and introduce a tax credit.

We will not go into details of the discussion paper, as the deadline for public comment was the 22^nd July 2011 and a revised paper will be published soon.

The proposal mentions that the shift to tax credits will facilitate the transition of medical schemes into a national health insurance (NHI) framework.

We will keep you informed on further developments.

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6. IMMIGRATION

6.1. Changes to the Immigration Act approved

As mentioned in our last newsletter, the National Council has approved the Bill. The next step is the drafting of the regulations, which still could take a few months.

The following is a summary of the major changes:

• All temporary permits will be called Visas under the new bill. Only a permanent residence is considered a "permit".

• Foreigners may no longer change their visa status whilst in South Africa: They have to return to their home country and lodge the application abroad. There are some exceptions but we have not sufficient clarity at this stage. An application for a Permanent Residence permit though, can still be lodged in South Africa.

• Immigration practitioners and attorneys may no longer submit applications on behalf of their clients: The form "power of attorney" is no longer valid: This is in breach of anybody's right of representation as defined in our Constitution. The Department has already stopped giving us appropriate feedback on pending applications, although the new Bill is not valid yet. The follow-up has to be done by the applicant directly. Please refer to the next article for more information.

• Applications must be made in person: Every applicant must appear him/herself at the counter of the Department. Anyone who has been to the Department knows how unpleasant the experience is. Long queues and arguments with officials are just some of the usual complaints.

• Business permits: The minimum investment amount of R 2.5 Mio. for a business permit can no longer  be waived. The requirement to employ at least 5 South African citizens or permanent residence holders has to be fulfilled within 12 and not 24 months.

• Accompanying family members will be given a tourist visa for up to 2 years.

• Exceptional skills permit and quota work permit: They are being replaced by a critical skills permit. The minister still needs to publish a list of skills which the economy requires.

There is still a lot of confusion regarding the new bill and how certain changes will be applied in practice. More clarity will only be available once the Regulations have been published. Should you currently be in South Africa, we recommend that you lodge your application before the new bill comes into force. It might save you an unnecessary trip to your country of origin.

We will continue to assist you with the preparation and submission of applications. Expert consultation is essential for any foreigner that will have to go to the Department. Please contact Mr. Hug for further information.

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6.2. Status quo of your application

The Department has introduced a call centre where applicants can follow up on the status of their applications. Please note that immigration consultants may not contact the centre and the applicant has to make contact him/herself.

The details are as follows:

Telephone number 0800 60 11 90 (available Monday to Friday from 08:00 until 19:00 and Saturday from 08:00 until 17:00).

You need the following information:

1. Date when your application was handed in
2. Place of application (Cape Town, Johannesburg, Durban etc.)
3. Your passport number

Should you be uncertain of the above date please contact Mr. Tony R. Hug This e-mail address is being protected from spambots. You need JavaScript enabled to view it for assistance.

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7. LIFE INSURANCE

7.1. World first product from Discovery Life

Discovery Life has launched what is believed to be a world-first product to give clients access to their life cover in cash if they are sick.

The feature of "AccessCover" has been incorporated on all life plans, including current policies, providing additional flexibility of benefits in the event of life-changing event.

There are severity levels that determine the payout for the sickness, such as cancer, heart disease, Parkinson's, Alzheimer etc.

For more information please contact Mr. Kenny Williamson This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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8. OTHER

8.1. All of SwissFin's staff pass regulatory examinations

New legislation published by the Financial Services Board (FSB) requires that all financial advisors, representatives, key-individuals etc. who are employed in the financial services industry, have to write an exam by no later than mid 2012.

It is estimated that 150'000 advisors are employed in the industry, of which only 12% have written the exam to date. The current pass rate is approx. 30%.

We are delighted to announce that all relevant staff at SwissFin have passed the exams.

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