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FOREIGN LAND OWNERSHIP: CHECK THE RESIDENCE STATUS OF THE SELLER!
When buying a house or other immovable property, you should always establish whether the Seller is a resident or non-resident - not doing so could land you with a hefty liability to SARS. Once an amendment to the Income Tax Act comes into force (and that could happen any day now), you will be obliged, as purchaser, to withhold a percentage of the purchase price from any non-resident Seller, and to pay it to SARS. This is to enable SARS to enforce the Seller's possible liability for CGT (it is up to the Seller to claim it back from SARS if appropriate).
The Estate Agent and Conveyancer are also at risk - to the extent of their remuneration - if they knew (or ought to have known) of the Seller's non-resident status and failed to inform you.
If you fail to withhold the tax, you become personally liable for it. Having to double pay between 5% and 10% of the purchase price will be extremely painful; so you would be well advised to get written confirmation of the Seller's residence status for any transaction of substance (at present this provision will not apply to sales under R2m).
RAF: BUCKLE UP...... AND CHECK YOUR DISABILITY COVER
The Road Accident Fund ("RAF") Amendment Act has been signed into law. Whilst regulations are only likely to be promulgated later this year, and although various interest groups have indicated that they may challenge the validity of the Act in the Constitutional Court, you need to be aware that you face a drastic reduction in your ability to recover your losses if you are the victim of a traffic accident. You (or your dependents if you are killed) will be limited to whatever you can get from the RAF, and will lose the right to claim from negligent drivers for any shortfall. This is not a happy prospect.
A first concern is that only "serious" injuries will attract compensation for general damages such as pain and suffering, and there is a concern that only the very worst of injuries will fall into this definition. In addition, medical costs are limited to public health tariffs.
But the critical issue is that your risk of being killed or injured in a motor accident is a real one (South Africa has one of the highest road accident rates in the world); moreover your chances of coming out of a serious accident alive but partially or totally disabled are rising as rescue and medical techniques improve. And if you are killed or disabled, your or your dependents' claim for loss of income or support will be limited to R160.000 p.a., regardless of your current earnings. For many, this will be woefully inadequate.
Disability insurance cover is not cheap, but you need to check that your top-up cover is adequate. You should have such cover anyway to cater for non-traffic related accidents, and for losses arising from traffic accidents where the other driver is not at fault.
DUAL CITIZENS BE WARNED
If you have dual citizenship, be aware that you are obliged to enter and exit the country on a South African passport. Home Affairs will supposedly (for an interim period) allow departure and arrival on your foreign passport with nothing more serious than a three month warning to obtain an SA passport; but there is no guarantee that the official on duty at Arrivals/Departures at 5 a.m. on Sunday morning will actually let you through. There have been unhappy reports of point-blank refusal of both entry and exit. In a recently reported incident, the would-be traveller had the trauma of an added threat of arrest (the attempted use of a foreign passport in this situation is a criminal offence). Don't take a chance - if you haven't got a South African passport, apply for one now.
MORE PYRAMID PAIN
In the February edition of law.news we looked at the dangers of investing in a pyramid scheme, even at an early stage. But what if you were induced to invest by representations made to you by another party? In a recent High Court Appeal judgement, two investors were able to recover their losses from the co-managers of a syndicate through which they made the investments. The success of their claim rested on two warranties given to them in their investment contracts, namely: -
- That the "lending activities" allegedly underlying the scheme were legitimate (in fact there were no lending activities - the whole scheme was a fraud), and
- That "all prudent measures" had been taken to "reduce the risk to an acceptable level for all the members of the syndicate".
The lesson - if you decide to take the risk of investing in a scheme with suspiciously high investment returns, at least insist on a written contract with suitable warranties from whoever introduces you (and make sure the introducer has attachable assets!).
The lesson on the other side of the coin is not to introduce others to any scheme you are not absolutely sure of; the introducers in this case were at risk of liability not only on the basis of the contract, but also in the alternative for misrepresentation and non-disclosure, whether intentional or just negligent.
ARE YOU COVERED? GET IT IN WRITING
Not having insurance, or having inadequate cover, can be financial suicide. In a recent case, an insured corporation risked losing out on a substantial claim when a dispute arose as to whether a telephonic request to its broker (as the insurer's agent) to increase levels of cover was or was not unconditionally accepted. So when you ask your broker to arrange insurance cover, or change it, make sure that you get written confirmation that your instruction has been actioned.
WHEN IS A SEQUESTRATION "FRIENDLY"?
Where a debtor is unable to settle all his/her debts in full, the law provides for a procedure - sequestration of the debtor's estate - to ensure the orderly realisation of assets and the fair distribution of the proceeds to creditors in their various rankings.
The Courts have made it clear that they will not allow sequestration unless it is to the benefit of the general body of creditors. For this reason they tend to scrutinise the "friendly sequestration" application with a somewhat sharper eye than usual.
But what is a "friendly" sequestration and how does a creditor know when to oppose an attempt by a debtor to have a "friendly" creditor apply for sequestration? An application for final sequestration was recently refused by the High Court, and the following quoted with approval from a 1996 judgment: "Friendly sequestrations seem to share certain characteristics. Although, like pornography, they may be hard to define, they are easy to recognise". Pointers to a "friendly" might include such factors as the claim relied on being a small loan, unsecured, and often not recorded in writing, with the creditor and debtor being closely related.
Even when the creditor applying for sequestration is clearly "friendly", it may still be in the interests of creditors for the estate to be sequestrated. Many factors come into play in this regard - each case should be treated on its own merits, and on the basis of proper legal advice.
MAJOR DECISIONS - 21 IS STILL THE KEY
The age of majority in South Africa is still 21. There has been some confusion over this issue since the Children's Bill, which lowers the age of majority to 18, was passed by the National Assembly last year. The Bill however is not law yet; it is still with the National Council of Provinces, where proposals to amend several controversial clauses in the Bill are under consideration. In the interim, a minor may apply to the High Court for an order declaring him/her to be a major.
WEBSITE OF THE MONTH
Health is wealth in every area of life - monetary in the business, priceless in the personal.
With your Internet connection you can explore an Aladdin's cave of information relating to all aspects of health; some to be treated with a degree of caution, but much of it reliable and instructive. Whether you are looking for advice on coping with stress, losing weight, kicking the nicotine habit, or just healthy living, it is out there for the finding.
Whilst many of the foreign websites are well worth a visit, there is much merit in starting your search locally; we have our own challenges and resources that only a South African site will focus on. Health 24 at www.health24.com is such a site, with sections on common ailments, First Aid, diet, fitness, medical schemes, medications, natural health, psychology A-Z, stress management, a symptom checker, food as medicine, allergies, life stages (for both men and women), discussion forums, how to stop smoking, and a whole lot more. Even Pet Health is covered. When self-help is appropriate, use it.
Be Healthy, and Be Happy!
Note: Copyright in this publication and its contents vests in LawDotNews(law.news)
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