Monthly Archives: August 2016

The best deal on your personal cheque account

Bank charges are the bane of many customers.

The latest report by the Solidarity Research Institute shows that increased competition among the nation’s banks appears to be driving fees down. But increased financial pressure on consumers means charges, albeit lower, can still be a significant burden.

So, how do you get the best possible deal on your personal cheque account?

Negotiate your bank charges

There is no law or code regulating the negotiation of bank charges. But Advocate Clive Pillay, the Ombudsman for Banking Services, says the charges levied on ordinary cheque accounts can be fully negotiated.

“In the case of a ‘big account’ with much activity and a reasonable balance, a bank would be more likely to negotiate a reduced rate, to retain the customer, than it would in the case of ‘a small account’, with little activity, such as a salary deposit each month and a number of withdrawals during the course of the month with a very low balance,” he told Moneyweb.

However, it is important to note that the bank can refuse to negotiate lower rates by “exercising their commercial discretion,” says Pillay. In which cases, customers can do little but switch banks, provided the new bank offers lower rates.

If that fails, there are other relatively simple ways to save money on bank charges.

Make sure your account suits your needs

Some banks offer two types of basic cheque accounts: bundles and pay-as you-transact accounts. Depending on the amount of activity on your account, one option may prove more cost-effective than the other.

Bundles, offered by the big four banks, comprise fixed monthly fees for a package of transactions including finite cash deposits and withdrawals, and oftentimes unlimited electronic transactions and notifications. Any transactions which breach the bundle limits are typically charged on as pay-as-you-transact (PAYT) basis.

The PAYT charges – offered by Absa and Standard Bank – include a minimum monthly service and additional fees per transaction. Capitec’s sole account option, the Global One Account is a PAYT account.

Taxation questions answered

Q: My son has been working in Hong Kong for the last nine years. He remitted R3 million to South Africa over a few years to build a property here. He has not emigrated formally and has not submitted any tax returns to the South African Revenue Service (Sars) for nine years.

In 2008, my son requested that his tax practitioner contact Sars to terminate his tax number as he was going overseas. He was under the impression that all was in order. He has a bank loan of R3 million in South Africa, secured by a property worth R6 million. He tried to repatriate some of the funds back to Hong Kong but Sars would not issue a clearance certificate. He also tried to apply for a clearance certificate to invest the R2 million offshore but Sars insisted on him submitting tax returns for the last nine years. He has since applied for and been granted a Hong Kong passport and has relinquished his South African residency and citizenship.

As he is no longer a South African resident or citizen, we would like to know how his property investment in South Africa will be treated, i.e. will this investment and his funds be blocked in South Africa forever, or will he be permitted to move some funds out the country in future without having to submit tax returns to Sars for the past 9 years?

A: South African taxes are based on residency, which becomes extremely important when determining what taxes are due. Although your son has relinquished his South African passport and citizenship in favour of Hong Kong and no longer resides in SA, he has a property in SA and remains a registered taxpayer with the South African Revenue Service and has not formally emigrated. Sars views this as “world-wide wanderings” with the intention to return to South Africa at some stage. The fact your son purchased a property in South Africa whilst in Hong Kong reaffirms this.

Your son would need to look at the South African residency test  –“ordinarily resident” which must be interpreted under our common law and suggests that you are “ordinarily resident” in the place you would regard as your permanent “home” … the place you would tend to return to after your world-wide wanderings. Therefore if you left SA with the intention to come back after a period of time, you would still be “ordinarily resident” in South Africa and subject to world-wide tax in South Africa, no matter how long you lived “temporarily abroad”.

Fortunately foreign earnings from employment will be exempt from taxation in SA provided you are out of the country in aggregate of more than 183 days, of which more than 60 days were continuous. However, all your other income and any capital gains would be subject to taxation in South Africa, even if taxed in the country where you are living. You will get some relief from double taxation only if the country in which you live has a Double Tax Agreement with South Africa.

Therein lies the issue and why Sars will not issue a tax clearance certificate, especially as his tax returns for the last nine years have not been submitted.

Although your son has been working in Hong Kong for the last nine years, earning an income and paying his taxes in Hong Kong, he was at the same time still registered as a taxpayer at Sars. As long as he remains a registered taxpayer with Sars he is still obliged to submit tax returns annually irrespective of the fact that he was not earning an income in SA, and would only become a non-resident taxpayer once he formally emigrates.

However, as he has an asset in SA being the property he purchased, and due to SA exchange controls, I suggest he remains a taxpayer to allow flexibility to move these assets at a later stage should he wish to do so.

South Africa’s current exchange controls allow for individual taxpayers to transfer up to R10 million per annum offshore with a tax clearance certificate and R1 million per annum without tax clearance as part of your annual travel allowance or gifts and entertainment.

This in effect means that your son can move R1 million out of the country every calendar year without any tax clearance required.

However, any amount above R1 million would require an application to Sars for tax clearance. Assuming your son was not earning any income from the property or any other source of income in SA over the last nine years, he could simply submit nil tax returns for every year, bringing his tax returns up to date which in turn should solve his problem and to ensure Sars issues the required tax clearance certificate for his offshore investment.