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Tax certificates

Tax certificates

Frequently asked questions

Disclaimer
This document does not constitute financial, tax or investment advice or services. The document has been prepared to assist you with questions you may have regarding your tax certificate and other tax related questions. We will not be liable for any loss or damage which you may suffer as a result of relying on information in this document. You must consult your own tax practitioner in this regard.


Questions related to the re-issuing of IRP5/IT3(a) certificates

1. My IRP5/IT3(a) has been re-issued but I haven’t submitted my return yet. What process do I follow to ensure that the latest data is used in my assessment?

If you use eFiling, login as usual to submit your return. Take care to refresh the IRP5 data before completing your return. Refresh your IRP5 data by selecting the Refresh IRP5 Data button as indicated below.

Refresh IT3(a) before

The eFiling system will confirm if the IRP5 data was refreshed successfully.

Refresh IT3(a)

Thereafter, complete your return as you would normally.

2. My IRP5/IT3(a) was re-issued, however I already submitted my return. What must I do now?

You will need to correct the return with SARS by following the prescribed SARS process published on the SARS website.


General questions

1. Who needs to register for income tax?
SARS requires everyone who receives taxable income above the tax threshold (i.e. the amount above which income tax becomes payable – see 5 below) to register for income tax.

2. When does the tax season for 2017 start/when can I submit my tax return?
Tax season usually starts in July and closes during November every year (depending on whether you are registered for eFiling or not). During this period, you will need to submit an income tax return to SARS. If you are a provisional taxpayer registered on eFiling, the tax seasons usually ends in January of the following year.

3. What is PSG’s reporting obligation to SARS as a financial institution?

In terms of the SARS requirements, financial institutions (such as PSG Wealth and PSG Asset Management) are required to submit third-party data on taxable income to SARS.

We report the following information to SARS:
  • local and offshore investment income (e.g. dividends, interest and other income) from funds and securities
  • capital gains or losses from the sale of local and offshore investments (funds and securities)
  • living annuity income
  • retirement annuity fund contributions
  • tax free investment plan information (see 13 below)
4. Do I need to pay tax?
You have an obligation to pay tax and submit a tax return to SARS if you earn taxable income above the tax threshold in most circumstances (see 7 below). More information is available on the SARS website.

Examples of amounts an individual may receive, and from which the taxable income is determined, include the following:

  • remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
  • profits or losses from a business or trade
  • income or profits arising from an individual being a beneficiary of a trust
  • director’s fees
  • investment income, such as interest and foreign dividends
  • rental income or losses
  • income from royalties
  • annuities
  • pension income
  • certain capital gains

Source: SARS



5. What are the tax thresholds?
For the 2017 year of assessment (1 March 2016 to 28 February 2017) the tax thresholds are as follows:
  • R75 000 if you are younger than 65 years
  • R116 150 if you are 65 years of age or older (and younger than 75)
  • R129 850 if you are 75 years and older
6. What is an income tax return?
An individual’s income tax return is a declaration of all the income earned, capital gains or losses realised, and all allowable deductions claimed in a tax year. SARS calls it an ITR12 return.

7. Do I need to submit an income tax return?
If your total salary before tax from your only employer is less than R350 000 for a full year, you have no other sources of income (for example, interest or rental income) and no deductions that you want to claim (for example medical expenses, travel or retirement annuities), then you don’t need to submit a return. More information is available on the SARS website.

8. How do I submit a tax return?
You have to register as a taxpayer first by visiting your closest SARS branch. Once you are registered, you can submit your tax return via eFiling or by visiting your closest SARS branch. Please take note of the documents you will require to register as a taxpayer. Refer to the SARS website to determine if you should submit a tax return.

9. Where do I source information for completing the investment information in my tax return?
Each financial provider you are invested with should provide you with tax certificates if relevant. You may use this information in conjunction with the information provided in the tax certificates issued by us. SARS may require you to submit the tax certificates as supporting documents to your tax return.

10. Do I pay tax in South Africa even if I am non-resident?
As a general rule South Africa has a residence-based tax system, which means residents are, subject to certain exclusions, taxed on their worldwide income, irrespective of where their income was earned. By contrast, non-residents are taxed on their income from a South African source. Non-residents pay tax on their income from a South African source, which may further also be subject to the application of a double taxation treaty. Read more about double taxation agreements and protocols on the SARS website.

11. Is the tax return I submit the only record that SARS receives?
No. Certain financial institutions like us, submit a third-party data file on all your taxable income derived from products held with that financial institution directly to SARS. They provide you with a tax certificate containing the same information.

12. Can I compare my investment statement to my tax certificate?
You cannot compare your monthly or quarterly investment statement to your income tax certificate. The purpose of the monthly or quarterly investment statement is to report the market value of your investment, taking into consideration market movements, actual and pending transactions, and realised and unrealised (or accrued) income or returns from your investments (e.g. dividends and interest, capital gains and losses). The purpose of the tax certificate is to disclose to SARS the source and nature of the returns on your investment and for that reason it only discloses realised taxable income. You will not see any market movements or unrealised (or accrued) income on your tax certificate.

13. What is an IT3(s) certificate?
We provide SARS, twice a year, with the following information regarding your Tax Free Investment Plan:
  • total contributions for the tax year
  • total amounts withdrawn for the tax year
  • total amounts transferred per tax year
  • total net returns on investment, for example: realised gross return received for the period less costs and fees applicable for the period
We provide our investors with this information by issuing an IT3(s) Tax Free Investment Plan certificate annually.

14. Why do I receive a tax certificate for my Tax Free Investment Plan?
It is a SARS requirement to submit information in respect of Tax Free Investment Plans to enable SARS to collect data on these types of products to evaluate tax payers’ compliance with the tax benefit requirements.

15. What is the purpose of the IT3(a) tax certificate?
The IT3(a) is the same as an IRP5 and is the tax certificate relating to the earnings received from amongst others your living annuity investment with us. It is issued to you at the end of each tax year detailing all employer (e.g. PSG Wealth)/employee (you) related incomes, deductions and related taxes.

16. What is the purpose of the IT3(b) tax certificate?
The IT3(b) is a tax certificate that provides you with a summary of any interest and dividends - both local and foreign - that you have earned by having money invested with a financial institution.

17. What is the purpose of the IT3(c) tax certificate?
The IT3(c) is a tax certificate that provides you with a summary of any capital gains or losses realised from selling or otherwise disposing of holdings in investments with a financial institution.

18. What is the purpose of the IT3(f)?
Contributions to a retirement annuity must be disclosed to SARS in order to benefit from the allowable tax deduction. The IT3(f) certificate serves as proof of the amount you contributed during the applicable tax period.

19. What is dividend withholding tax (DWT)?
Dividend withholding tax is payable by you for dividends earned on investments held, but it is withheld from the dividend payment and paid to SARS by us. You, however, remain ultimately responsible to pay the tax should we or any other withholding agent, fail to or don’t withhold the correct amount of tax.

20. Are there any exemptions to DWT?
SARS does allow certain exemptions from DWT (e.g. a local resident South African company) however the exemptions do not apply automatically. If you qualify for an exemption you must first complete a declaration form which you can obtain from PSG Wealth, before you can claim the exemption.

21. Can you claim PSG fees as a deduction against capital gains tax or interest income?
In terms of Section 11(a), read together with section 23(g) of the Income Tax Act No. 58 of 1962, expenditure and losses of a capital nature and which are not incurred in the production of income and for the purposes of trade, may not be allowed as a deduction from a taxpayer’s income. Where your investment is of a capital nature and the expenditure is not incurred in the production of income (e.g. exempt divided income), it cannot be deducted from your taxable income (i.e. from capital gain or interest income).

22. I am only invested in the PSG Wealth Enhanced Interest Fund, how can I have a capital gain?
Capital gains are relevant to all instruments with a fluctuating unit price. The unit price for the PSG Wealth Enhanced Interest Fund is not fixed at R1 per unit as traditional money market funds and therefore, although very little, there can be a capital gain (or loss).

23. How is my investment in a unit trust taxed?
Generally, where the unit trust distributes the income earned (e.g. interest, dividends and rebates paid by investment managers that are used to buy additional units in the funds) to the investor within a period of 12 months, you will be taxed on such income (subject to applicable exemptions) as well as on gains or profits made when you sell units.

24. Why didn’t I receive a tax statement for my endowment?
The endowment is underwritten by PSG Life. That means that when you invested into the endowment, you forfeited your assets to the life company and in return got a claim against the life company for the market value of your investment. As a result, the life company is taxed on the return on the investment and the return you received from the life company is net of taxes. The life company has to submit a tax return and pay the tax on the endowment, not you.

25. Can I increase/decrease my tax payable on the ELLA product?
Taxpayers would need to apply to SARS for a tax directive which SARS may grant in certain circumstances. We suggest you consult a tax practitioner for advice and assistance on this application.

26. Does PSG Wealth submit my IRP5 on my behalf directly to SARS?
We do submit IRP5 information to SARS electronically. However, you are still required to complete and submit an income tax return with the same information to SARS.

27. Does switching between different fund fee classes of the same unit trust trigger capital gains tax (CGT)?
When you switch between fund fee classes of the same unit trust you are not disposing of your units in the unit trust. The switch occurs underlying in the unit trust itself and no CGT is triggered.

28. Does selling units to pay advice fees trigger CGT?
Any disposal of units in a unit trust triggers CGT, even if the sale of units is used to fund advice or platform fees.

29. Why would my proceeds look overstated or do not agree to the amount I sold during the tax period?
Capital gains tax could be triggered by two events namely ’unit sells’ and ’unit switches’. When units are sold, a capital gain/loss is realised. With unit switches, should you have switched from one asset into another asset (i.e. exchanged one asset for another) it also constitutes a disposal for capital gains purposes, even though no money was paid to you in the process.

30. Why are the tax implications of the natural person investing directly into offshore securities via the asset swap structure of PSG Securities different from investing into unit trusts by means of the PSG Life asset swap structure?
In the case of an offshore investment through the PSG Life asset swap structure, the underlying assets are held in a wrapper. This means that PSG Life becomes the registered owner of the underlying assets and the individual has a claim against PSG Life for the value of the underlying assets.

In the case of the asset swap structure facilitated through PSG Securities, no wrapper exists. The asset swap share investment facilitated through PSG Securities is held in the name of the investor, although the nominee structure prevents access to the foreign assets as per SARB requirements. As a result, the asset swap structure of PSG Securities will result in the same tax implications for natural persons, trusts and companies (bearing in mind the different ‘conversion’ to rand treatment). We recommend you consult a tax practitioner to better understand the impact it may have on you.

31. What foreign currency conversion method is used to calculate the taxable capital gain or loss for direct offshore investments?
In the instance of an individual and a non-trading trust, the capital gain or loss on the disposal of the investment is calculated in the relevant foreign currency and thereafter translated to rand by applying the official closing rate as published by Iress (previously BFA MacGregor) on the date of disposal.

In the instance of a company, the expenditure (base cost) and proceeds are converted into rand at the official closing rate as published by Iress (previously BFA MacGregor) on the date of disposal and the capital gain determined once it has been converted into rand. If the currency depreciates while the investment is held, this will result in a higher tax payable.

We strongly urge you to consult a tax practitioner in determining your taxable income.

32. Is there a CGT exemption? If so, how does it apply?
Each individual has an annual R40 000 (2016: R 30 000) CGT exemption. It applies automatically when the individual submits his/her return. It however increases to R300 000 in the year of the individual’s death.

33. How do I query the values on my tax reporting if I think they may be incorrect?
Please contact us at PSGWealth.tax@psg.co.za and inform us of your concern. We will investigate and take steps to correct the information with SARS if it is necessary. Keep in mind that tax treatment may differ from one person to the next due to differing personal tax circumstances. We suggest you always consult your tax practitioner.

34. If I have any other questions on my tax certificates, who do I contact?
You can email PSGWealth.tax@psg.co.za if you have any technical tax-related questions. We remind you that we cannot provide you with any tax advice and recommend that you consult a tax practitioner for assistance in completing your tax returns.
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