Category: South Africa (3)

currency_pexels-photo-315788.width-800Have you joined, or been tempted to join in, the “Bitcoin frenzy”? If so, read on.

Bitcoin and Ethereum are probably the best known of the cryptocurrencies, but (as at 10 April 2018) there were over 1,565 of them, and that number is growing.

Whether Bitcoin and its cousins are good investments is a matter for you and your financial advisers to puzzle over but let’s have a look at a few legal aspects –

Expect grey areas and big changes

Governments, Tax Authorities, and Central Banks around the world are struggling to get to grips with cryptocurrencies and how to treat them. Some countries allow them; some have banned or restricted them. Expect ongoing uncertainty and a lot of future change in these official positions, including attempts to regulate alternative currencies in general.

Are cryptocurrencies legal?

The short answer seems to be yes, there’s nothing to stop you buying, holding, using or selling them. The Reserve Bank’s official position is that they can be traded and used as “a medium of exchange, a unit of account and/or a store of value”, but they aren’t “legal tender” (“bank notes and coins in RSA which can be legally offered in payment of an obligation and that a creditor is obliged to accept”). What that means is that Joe Plumber is free to accept payment from you in Bitcoin if he wants to. He just can’t insist on it, nor can you.

SARS’ view (see “Income Tax and VAT” below) is probably going to be your greater area of concern for the moment.

What if you need help from a court?

The Reserve Bank warns that you acquire cryptocurrencies at your own risk and that you “have no recourse to South African authorities”.

What that means in practice remains to be seen (would SAPS really refuse to investigate a theft of Bitcoin?), and whilst there is no precedent to confirm that our courts will indeed help you if you have to sue over, for example, a Bitcoin transaction gone wrong, the majority view seems to be that they will.

Must you pay Income Tax and register for VAT?

From the horse’s mouth so to speak, this is some of what SARS says (all highlighting is ours) –

  • It will “continue to apply normal income tax rules to cryptocurrencies and will expect affected taxpayers to declare cryptocurrency gains or losses as part of their taxable income.”
  • “The onus is on taxpayers to declare all cryptocurrency-related taxable income in the tax year in which it is received or accrued. Failure to do so could result in interest and penalties.”
  • “…cryptocurrencies are not regarded by SARS as a currency for income tax purposes or Capital Gains Tax (CGT). Instead, cryptocurrencies are regarded by SARS as assets of an intangible nature.”
  • “Determination of whether an accrual or receipt is revenue or capital in nature is tested under existing jurisprudence (of which there is no shortage).”
  • “Taxpayers are also entitled to claim expenses associated with cryptocurrency accruals or receipts, provided such expenditure is incurred in the production of the taxpayer’s income and for purposes of trade. Base cost adjustments can also be made if falling within the CGT paradigm.”
  • “…VAT treatment of cryptocurrencies will be reviewed. Pending policy clarity in this regard, SARS will not require VAT registration as a vendor for purposes of the supply of cryptocurrencies.”

There’s more, and you don’t want to take any chances here, so consult an expert in need.

The Endgame: Leaving Bitcoin in your Will

Your cryptocurrency holdings are assets in your estate and you will want your heirs to get them. Your executor must deal with them together with all your other assets (both physical and digital).

Remember however that your holdings will be lost forever if your heirs/executors don’t know about them or can’t access your digital cryptocurrency wallet. They will need all your digital keys – both “public” (wallet address) and “private”.

In whatever manner you plan to leave your heirs/executor a record of these keys on your death, avoid disaster with these tips –

  1. Do it now – no one knows when they’ll die.
  2. Do it securely – anyone with your private key can clear your wallet out, and criminals know that.

This article is for general information purposes and should not be used or relied on as legal or other professional advice.

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2594“I have established a family trust for estate planning purposes to make sure my children are looked after when I pass away. I was wondering though if the trust can be terminated after my death, and if so, when? I wouldn’t like all my planning to be for nothing because the trust just ended.”

In South African law one must distinguish between two general types of trusts, namely a testamentary trust (established in your will) and an inter vivos trust, established in terms of a trust deed. The latter type includes your family trust.

Both types of trust do not ‘die’ or terminate because of disuse. In general a trust will continue to exist in perpetuity. This is supported by the fact that our Trust Property Control Act 57 of 1988 (“the Act”) which governs the operation of trusts in South Africa, does not explicitly provide for when and how a trust is terminated. This said, it does not mean that a trust can never be terminated, as there are a number of events that can occur during the lifetime of the founder, the trustees or the beneficiaries of a trust which could provide for grounds for the termination of a trust.

When considering the termination of an inter vivos family trust, the first step will always be to turn to the provisions of the trust deed. Often the trust deed will govern when the trust will or could be terminated. Some of the most common provisions to this effect encountered in trust deeds are:

• It may terminate once all of the trust assets have been distributed to the beneficiaries.
• It may terminate after a certain period of time or upon the happening of a specific event.
• It may terminate at the discretion of the trustees and/or through a resolution passed by the beneficiaries.
• It may terminate once its primary objective has been achieved.
• It may terminate in the event that it becomes impossible to achieve its main objective.

In the event that the trustees and/or beneficiaries wish to terminate a trust pursuant to circumstances that are not provided for in the trust deed itself, another option available would be to approach the High Court with a request to terminate the trust in terms of the Act.

There could be a number of reasons why the termination of a trust may be justified, such as that it has become uneconomical to continue to manage the trust on behalf of the beneficiaries or there is not sufficient value left in the trust, or even that the relationship between the beneficiaries and the trustees have deteriorated to the point where the management of the trust has become impossible. Each situation would however have to be considered on its own merits by the court.

For the termination of a trust, it is important that the assets be formally distributed to the beneficiaries in accordance with the trust deed. Once all liabilities have been settled and trust assets distributed to the beneficiaries, the trust can be considered terminated. Importantly though, the trust is not upon termination simultaneously deregistered as well. Deregistration has to be applied for separately at the Master’s office where the trust was first registered. The Master will require a list of documentation to verify that the trust has indeed been terminated, such as proof that the trust bank account has been closed and all of the assets have been distributed after which the deregistration of the trust will be approved.

In general however, if you have a well drafted trust deed that clearly provides for the grounds when the trust may be terminated, there should not be cause for concern about a random termination of your trust which leaves your beneficiaries unprotected. If you are unsure about your trust deed’s current termination provisions, consult your attorney or estate planner and discuss your trust deed and any concerns you may have.

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articles-South_Africa_523234102South Africa’s economy will get a boost from perkier commodity prices, a benign inflation outlook, and better rains for the agriculture sector this year, a Reuters poll found on Thursday last week.
The 27 economists in the poll suggested growth in SA would accelerate to 1.1% this year and 1.6% next year. The South African Reserve Bank (SARB) estimated GDP expanded 0.4% last year.

“Higher commodity prices in combination with lower inflation, stable interest rates and a recovery in the agricultural sector should drive 2017 growth somewhat stronger than in 2016,” said Elize Kruger at NKC African Economics. Twelve of 14 economists believed that growth in SA has left the slow expansion trap seen in previous quarters.

SA’s growth has been choppy in the past two years, with negative quarterly performances three different times on an annualised basis since 2014. However, KPMG’s Christie Viljoen says positive growth is expected, though it will be very low.

Economists back their claims with the annualised growth rate in the SARB’s leading indicator, which has turned positive, but they caution about the risks that lie ahead.
SA’s economy relies heavily on the wellbeing of the eurozone, its biggest trading partner as a single region, and China, its biggest trading partner as a single country.
South African Reserve Bank keeps repo rate at 7%
Meanwhile, SA’s Reserve Bank (Sarb) governor Lesetja Kganyago announced on Tuesday that the repo rate will remain unchanged at 7%.

The prime lending rate, which is the figure charged by banks to customers, will remain at 10.5%.
The central bank’s Monetary Policy Committee (MPC) has left rates unchanged at 7% since March last year.

“The MPC remains focused on the medium to long-term inflation outlook, but the deterioration of the shorter term outlook requires increased vigilance,” says Kganyago.

He says the bank is concerned about climbing inflation, but expects it to stabilise later this year and return to the target range of between 3 and 6%.

Kganyago also says growth remains a concern.

“While some improvement is anticipated over the forecast period, growth is expected to remain below potential.”

By: SA Commercial