What are tax free accounts?
In November 2014 the National Treasury published the draft Notice and Regulations required for tax free savings accounts. The implementation date of this product class is 1 March 2015 and the primary aim is to encourage South Africans to save. Tax free savings accounts allow for flexible contributions (i.e. no need to commit to recurring contributions) that can be withdrawn at any time. The main advantage is that no tax is paid on any income, dividends or capital gains earned on the money invested. There is a limit (cap) on the amounts that can be invested into these accounts however, with an annual limit of R30,000 and a lifetime limit of R500,000. The limits apply to deposits into the account as opposed to the balance. For example (assuming no interest or other account balance changes), investing R15,000, withdrawing it a few days later and then investing it again means that the cap of R30,000 for the year has been reached, even though the balance in the account is only R15,000. Stiff penalties apply if the amounts invested exceed the prescribed caps.
SARS has introduced a new submission type called IT3(s). As with IT3(b) and most other SARS submission types, IT3(s) reports can be submitted via Connect Direct or the Https portal.
Any institution that offers tax free savings accounts as a product will need to comply. Currently, this is limited to licensed banks, long-term insurance companies, managers of registered collective investment schemes, authorised users, linked investment service providers, and the national government.
The information to be reported on includes the account holder’s demographic data (e.g. address, name, tax reference number), account holder’s partner’s demographic data, the account details (e.g. account number, balance, return on investment) and transactional data for each account (payments/receipts along with their values).
The IT3(s) reporting cycle will be similar to the cycle for IT3(b), with half-yearly reports due at the end of October each year (for the period 1 February to 31 August), and yearly reports due on 31 May each year (for the period 1 March to 28/29 February). The first IT3(s) reports were due at the end of October 2015.
Synthesis provides full support for IT3(s) reporting in its txstream Suite
Contact [email protected] for any queries as to how we can assist you with your IT3(s) reporting.