SwissFin Newsletter March 2014

Dear Readers,

Our focus in this edition is on the recent Budget Speech, held on 26 February 2014 by our Finance Minister, Mr. Pravin Gordhan.

Despite the 5th national election to be held on the 7th May 2014, our Finance Minister avoided populist measures and it was a “no drama” budget. Next year’s budget deficit is predicted to be lower and the government wants to reduce unemployment and increase competitiveness. The middle class is getting a small inflationary reduction in taxes.

We have also included information across the board regarding investments, insurance and other related topics.

As usual, this newsletter can be viewed under https://www.swissfin.co.za/newsletters/swissfin-newsletter-march-2014/.

Enjoy the reading, with best regards,

Your SwissFin – Team

 

1. INVESTMENTS

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

2. SWISS BANKING

• Tribute to Rudolf Wiser
• UK fines Standard Bank millions of Pounds
• Credit Suisse and UBS launch the Swiss Finance Council

3. TAXATION

• Budget Speech highlights

4. SHORT-TERM INSURANCE

• What exactly does third party, fire and theft cover for cars mean?
• Most housebreakings are in rich areas
• Please remember to get a police case number for your motor claim
• Do you have problems drawing an accident sketch?
• SA has the world’s fifth worst road safety
• Do you own a Jaguar or Land Rover?

5. HEALTH CARE COVER

• Are contributions to foreign health insurance schemes tax deductable?
• Watch the gap when it comes to medical cost reimbursements

6. IMMIGRATION

[checklist]

• New Immigration Regulations published for comment

7. OTHER

• SwissFin at Captain’s Day at Arabella Golf Estate
• Overview of New Employment Tax Incentives
• SA by numbers
• China’s the world’s largest consumer of red wine
• Personnel changes at SwissFin
• We value your comment

Interest rates

SwissFin offers the following rates as of March 2014:

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 1.57 Mio for taxpayers under the age of 65
R 2.23 Mio for taxpayers between the age of 65 and 75
R 2.63 Mio for taxpayers over the age of 75

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

Comment: At the beginning of February this year, the Reserve Bank has increased its key lending rate for the first time in 5 years by 50 basis points to 5.5%. Money market and long-term interest rates are on the upward move and higher interest rates can be expected.

SwissFin offshore model portfolios ››

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

 

Tribute to Rudolf Wiser ››

It is with great sadness to inform our clients that our long standing business associate has passed away in January this year.

The company affairs are being conducted by Mr Mark van Deelen and Rolf Iten. The investment strategy will still be defined by Mr Grant Woods.

Mr van Deelen and Mrs Christiane Wiser-Baumgart, the President of the Board, will be in South Africa for two weeks in March 2014 to visit clients.

UK fines Standard Bank millions of Pounds ››

The British Regulator has fined the UK arm of the South African bank GBP 7.6 Mio for insufficient anti-money laundering controls of corporate customers holding prominent public positions.

It is the first time a commercial bank has been fined to this extent for insufficient control mechanism in place.

The FCA conducted an investigation into 48 Standard Bank clients between December 2007 and July 2011 and found serious weaknesses. Standard Bank has since improved its compliance controls.

Credit Suisse and UBS launch the Swiss Finance Council ››

The two banks launched the Council in Brussels in November last year to become more actively engaged in European policy matters.

The organization will represent the interests of internationally active Swiss financial institutions and provide a platform to share experience, expertise and knowledge through a permanent representative office in Brussels, according to a press release on Thursday.

It would support the work of the Swiss Bankers Association (SBA) in EU-related matters.

Summary of Budget Speech: ››

Taxable income rates of tax for the 2015 tax year

R 0 – R 174550 18% of taxable income
R 174551 – R 272700 R 31419 + 25% of the amount over R 174550
R 272701 – R 377450 R 55957 + 30% of the amount over R 272700
R 377451 – R 528000 R 87382 + 35% of the amount over R 377450
R 528001 – R 673100 R140074 + 38% of the amount over R 528000
R 673101 + R 195212 + 40% of the amount over R 673100

These adjustments are in line with inflation (approx 6%) for those earning less than R 150’000 p.a. For those earning more, the real effect is actually an increase in taxes payable!

Tax rebates for individuals

Primary rebate increased from R 12080 to R 12726
Secondary rebate (age 65 – 74) increased from R 6750 to R 7110
Tertiary rebate (age 75+) increased from R 2250 to R 2367

Tax thresholds

Under 65 years – R 70700
Over 65 years – R 110200
Over 75 years – R 123350

Medical tax credits

There is an increase from R 242 to R 257 for the first two dependants, thereafter R 172 (was R 162) for each additional beneficiary.

Interest income exemption

It was very disappointing to see that these limits remained unchanged.
However, government wants to present an alternative savings plan this year which will be tax beneficial up to amounts of R 500’000.

Retirement fund withdrawals

The retirement fund lump sum withdrawal tax-free portion has increased marginally to R 25’000. The retirement funds lump sum benefits and severance benefits’ tax-free portion has increased to R 500’000.

Sin taxes

The yearly boring increases were announced this year again: A bottle of spirits increases by R 4.80, a bottle of wine by 13 cents, a can of beer by 9 cents and cigarettes by 68 cents per packet. The government is increasing these taxes every year but they certainly have no influence over the habits of smokers and drinkers.

Other taxes

The road accident fund levy is going up 8 cents and the fuel levy by 12 cents per litre to R 2.25.

Comment

The table below gives an indication of how government revenue and expenditure has developed over the last few years (in R Bio):

Rating agencies will be closely watching these figures as SA’s borrowing costs have increased over the years. Another rating downgrade would add more pressure on an already badly battered Rand.

Unfortunately, there were no groundbreaking initiatives in the budget to address the real inhibitors of growth, such as labour strikes, poor education, apparent incompetence in the public sector and corruption.

What exactly does third party, fire and theft cover for cars mean? ››

We recently had to compare the local cover to the “Teilkasko” insurance that is found in Germany, Switzerland and Austria. Please note that the local cover is restricted to the three events mentioned above and does not include damage to windscreen unlike in Europe.

Most housebreakings are in rich areas ››

The Western Cape Police released its annual report with the following details:

• There were 49’599 burglaries last year, an average of 135 a day.
• 70% of burglaries occur in wealthy areas.
• R 28 Mio of goods was stolen alone in Durbanville.
• Mitchells Plain, a low income area, has the highest number of housebreakings, attributable to drug addicted residents.
• Areas, where building construction is pending, have an increased level of burglaries.

Please remember to get a police case number for your motor claim››

All insurance companies do require a case number when a motor vehicle is damaged or stolen. This applies even if a vehicle has been damaged whilst parked, and the party who caused the damage is not known.

Please assist our claims department in handling your claim swiftly by providing the required information.

Do you have problems drawing an accident sketch? ››

There is an excellent software that can assist you with drawing an accident scene. Go to
http://draw.accidentsketch.com for further help.

SA has the world’s fifth worst road safety ››

Based on a WHO report that measures road safety by the number of motor-vehicle related deaths per 100’000 people, South Africa follows the Dominican Republic, Thailand, Venezuela, Iran and Nigeria having the most dangerous roads in the world.

The risk of dying as a result of a road accident is regionally the highest in Africa, with 24.1 deaths per 100’000 people, whilst Europe is the safest with 10.3 deaths per 100’000.

The safest roads are in Northern Europe, with Iceland followed by Sweden, the Palestinian territories, Britain, Netherlands, Norway and Switzerland.

Do you own a Jaguar or Land Rover? ››

Jaguar- Land Rover South Africa published a statement in December 2013 that their vehicles may only be repaired by an approved body repair centre. Non-adherence might render the vehicles warranty and/or motorplan void.

Please contact our claims department should you require assistance in this regard.

Are contributions to foreign health insurance schemes tax deductable? ››

The SA income tax act says the following:

“For contributions to qualify for a deduction they must be made to a medical scheme registered in terms of Section 24(1) of the Medical Schemes Act” and “if a taxpayer contributes to a foreign medical scheme registered under similar provisions contained in the laws of the foreign country, these contributions may also be taken into account”.

This means that contributions to Bupa, IHI and similar schemes are tax deductable in South Africa.

Watch the gap when it comes to medical cost reimbursements ››

Looking at the 2014 medical aid benefits, it appears that the difference between what medical practitioners charge and what health schemes reimburse is going to further increase.

Comparing figures from 2012 to 2013, the following diseases show the following cover shortfalls:

• Musculoskeletal system: 32%
• Digestive system: 12%
• Pregnancy and childbirth: 10%
• Respiratory system: 5%
• Other (including cancer): 22%

Please consider the possibility of gap cover if you are locally insured, provided your medical history is good and you are not over the age of 65 yet.

New Immigration Regulations published for comment››

The Department has issued the long awaited draft regulations with the public comment that can be submitted until the 7th March 2014. The proposed implementation date is the 1st April 2014.

Herewith a summary of the most important changes:

• The word permit has been replaced with the word visa.
• First time applicants have to submit their application in person in their home country abroad at the SA Consulates or Embassies abroad. Passports need to be of biometric standard.
• Extensions of visa are allowed within South Africa.
• The employer of applicants for general work visa will have more difficulty in providing proof that he could not find a South African for the position. More responsibility is given to the Department of Labour and every application has to be accompanied by a certificate of recommendation. This requirement will certainly delay the issuing of work permits by a few months.
• The quota work permit and exceptional skills permit no longer exist and have been replaced by the Critical Skills Work Visa. This is for applicants whose skills are much needed in the country. No list of such skills has been published yet. There is no need for a formal job offer.
• Life partner are only recognized if they can prove that they have been in a relationship for a minimum of 5 years. This applies for temporary and permanent residence applications.
• All applicants awaiting an outcome of a temporary visa application must remain in South Africa until the decision has been made and the visa received. This can cause problems if the Department does not improve their processing times.
• People overstaying the validity of their permit will face harsh penalties. Even overstaying one day, can already result in being not allowed to return to SA for at least 2 years. Repeated offences can result in a ban of up to 10 years!
• Every applicant has to appear in person when submitting the application. This applies to temporary and permanent visa applications. Follow-ups etc. can be done by an immigration practitioner.
• The Department has appointed an international company (VFS) with its head office in India, to collect all applications worldwide on behalf of the Department.
• The right of representation has been removed. This does not mean that attorneys and immigration practitioners are no longer allowed to consult with clients. It makes the immigration industry unregulated and will open the door for non-experts and create problems.
• Unfortunately, details such as fees, fines, minimum investment amounts, minimum pension requirements etc. have been left out and we are awaiting further details.
• All foreigners must keep the Department informed regarding their address and contact details at all times.
• Single parents travelling with children will have to show birth certificates of the children and a consent letter from the other spouse.
• You cannot submit an extension late – if it is not done before 30 days prior to expiry, you will have to leave the country.
• Investors and business visa holders have to create and maintain a staff complement of at least 60% permanently employed SA citizens or permanent residents.
• Persons having held corporate worker permits, visas or certificates for at least 5 years will no longer qualify for permanent residence.
• Guesthouses, hotels etc. will have to keep a register of their foreign guests showing passport and visa copies, address and signature, for 2 years.

There are some positive changes:

• There are no more repatriation fees payable for temporary visas.
• One will be able to apply for permanent residence in South Africa, even as a holder of a visitor’s visa.
• A retired person can now bring along his or her dependents by meeting lower financial requirements than before.

Some of the recommendations are welcome, whilst others will be challenged by the public. We will keep you informed on further developments.

SwissFin at Arabella’s Captain’s Day ››

We recently attended the Golf Day at Arabella Golf Estate in Kleinmond. MUA Insurance Company was also present and sponsored a lucky draw which included a tour to a wine estate in a chauffeur driven 1957 Bentley. Congratulations to Mrs Stefanie Rohrbach, who was the lucky winner of this fantastic prize!

Overview of New Employment Tax Incentives ››

The Employment Tax Incentive Act has recently been promulgated. The period of the benefits is from 1 January 2014 to 31 December 2016.

Employers will now be entitled to claim the incentive benefit for each employee by way of a reduction in tax if the following conditions apply:

• The employer must be registered as an employer for PAYE purposes.
• The employee must be not less than 18 years old and not more than 29 years old at the end of the relevant month of the claim (this restriction does not apply if the business is situated in a Special Economic Zone).
• The employee must be a South African citizen or permanent resident in possession of a South African identity document and must not be a domestic worker.
• The employee must not be a connected person in relation to the employer e.g. the son of the member of the employer Close Corporation.
• The employee must not have been employed by the employer or an associated person prior to 1 October 2013.
• The salary payable to the employee must be above the sector determined minimum wage (or R2 000 if there is no wage determination) and be less than R6 000 per month.
• The tax affairs of the employer must be up to date i.e. all tax returns in respect of all taxes have been filed and all payments due have been paid or appropriate arrangements made with SARS.

The monthly incentive benefit is based on the remuneration of the employee according to the following table. The benefit is for only 2 years and in the second year, the benefit is 50% of the amount in the first year. If employed for part of a month, the incentive is proportionately reduced for that month.

If your company qualifies for the refunds, we suggest that you contact your accountant to assist you with the application.

SA by numbers ››

• 154’000: The amount of people (2.4% of all taxpayers) with an income in excess of R 1.0 Mio. p.a. accounting for 30% of the income tax paid.
• 69%: The number of taxpayers who earn less than R 250’000 p.a. and contribute 36% of all income tax revenue.
• 17.6%: Last year’s devaluation of the Rand versus the US Dollar.
• 15 Mio: The number of people with jobs in the country.
• 800: The number of police officer killed during 2005 to 2013.
• 3 Mio: The number of housing units delivered by the government since 1994.
• 2.4 Mio: The number of people on anti-retroviral drugs.
• 5000: The number of farms, compromising of 4.2 Mio hectares, transferred to black farmers since 1994, benefiting 200’000 families.
• 13 Mio: The number of tourists that visited South Africa in 2012, compared to 3 Mio in 1993.
• 20 Bio: Amount of money in tax revenue paid to the state by the mining sector.

?: Do you know the number of wives our president Jacob Zuma has? Send us your guess and we will publish the correct result in the next newsletter.

China’s the world’s largest consumer of red wine ››

The country has overtaken France and Italy in consuming the most red wine in the world.
They drank 1.86 Bio bottles of red wine last year! Chinese have a preference over red colour. Red symbolizes luck and good fortune, whereas white stands for death.

Our SA red wine exporters to China must be smiling, especially with the added weakness of the Rand!

Personnel changes at SwissFin ››

We are pleased to announce that Mrs. Carola Kurz has joined our short-term insurance department since the beginning of March. She is originally from Austria and has lived in South Africa for over 10 years after having worked in the US. She will be replacing Mrs. Monica Bieri, who is leaving us at the end of the month.

Mrs. Aileen Schippers will be returning on the 1st April from her maternity leave.

We value your comment ››

Do you want to know about something, share something with us or comment? Please feel free to send us an e-mail so that we can assist.