Crowe Horwath
TM
Horwath Taxation (Cape) (Pty) Ltd
March 2015
Tax Free Savings and Investment Accounts (TFSA's)
We set out hereunder a brief overview of this new class of investments which are available
from 1 March 2015.
Tax Free Income
Section 12T of the Income Tax Act and the related regulations provide that the total earnings
(by way of interest and dividends) as well as any growth (by way of capital gains) will not
attract income tax, dividends tax or capital gains tax in respect of these investments owned by
a natural person or the estate of such person.
How much can I invest?
Contributions to all TFSA's will be limited to R30 000 during any tax year and R500 000 over
the life of an individual. Investments can also be made in the name of minors. It is accepted
however that the balance in these accounts may exceed the R500 000 limit due to
accumulated earnings and capital gains.
Service providers are not allowed to accept amounts in excess of these contribution limits. It is
however the responsibility of the investor to ensure that these limits are not breached failing
which penalties apply.
If any person contributes in excess of the R30 000 in a year or R500 000 in aggregate in tax
free investments, an amount equal to 40% of such excess shall be deemed to be normal tax
payable in respect of the year in which the excess is contributed.
Crowe Horwath
TM
Who can I invest with?
TFSA's may only be issued by and
managed by registered banks, long-term
insurers, collective investment scheme
managers, the government (e.g. retail
savings bond scheme), mutual banks and
co-operative banks. In addition, an
authorized stockbroking firm and linked
investment service providers may also
administer TFSA's.
The investments must be simple to
understand and transparent e.g. bank
savings accounts, fixed deposits, unit
trusts, retail savings bonds, certain
endowment policies, linked investment
products and Exchange Traded Funds
(ETF's) that are classified as unit trusts
(e.g. Satrix 40).
It is anticipated that the type of products
available for this incentive could be
widened in the future.
How can I access my money?
All savings and investment products that
have a term of maturity must be
accessible within 32 business days from
the time the money is requested, while in
the case of other products, it must be paid
out within 7 business days.
Horwath Taxation (Cape) (Pty) Ltd
Can I transfer my existing
investments into the new TFSA’s?
In general, existing investment products
may not be converted into TFSA's. This
implies that TFSA's must be originated
with new contributions from the investor
so as to encourage new savings.
Transfers of TFSA's during the first year
until 1 March 2016 will not be allowed.
Thereafter it is intended that transfers
from one institution to another or from
one product provider to another will be
allowed. Transfers between investors
will however NOT be allowed.
What charges will there be?
Performance fees payable to service
providers will not be allowed. Fees
charged must be reasonable and must
not be linked to the length of time of the
investment (investment period). In
respect of repetitive investments
(e.g. monthly payment into a fund
investment), no fee can be charged for
the investor failing to pay or ceasing to
pay.
Fees charged in respect of withdrawals
are also controlled by way of regulation.
Should you have further questions,
please contact us.
Debit orders, stop orders, ATM
transactions and transactional accounts
will not be permitted nor will payments be
able to be made with a debit or credit
card.
Can I invest in the share market?
TFSA's will allow investors to choose to
be exposed to the equity markets but
such products need to be adequately
diversified. Accordingly, direct investment
in particular shares will NOT be allowed.
Horwath Taxation (Cape) (Pty) Ltd
7th Floor, 5 St. Georges,
St. Georges Mall, Cape Town,
8001, South Africa
+27 21 481 7000 Tel
+27 21 481 7081 Fax
www.crowehorwath.co.za
tax@crowehorwath.co.za
Directors: KG Karro, YW Rybnikar, CI Jonkers, EI Hamman
www.crowehorwath.co.za
Horwath Taxation (Cape) (Pty) Ltd is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and
independent legal entity. Horwath Taxation (Cape) (Pty) Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe
Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member.
©2015 Horwath Taxation (Cape) (Pty) Ltd