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Buyers Of Land Beware - Tax Trap Ahead!
Late Tax Returns And Quadruple Whammys
Danger Danger - Don't Think The NCA Doesn't Apply To You, It Does
The New Age Of Majority - Time To Look At Your Wills, Trusts And Maintenance Agreements
Penalty! But Is It Fair?
Rights Of Passage: Not A Matter Of Convenience
A Prospector's Rights - And The Blow Slightly Softened
Website Of The Month: Free Network Marketing On Facebook, But Get In Fast (Particularly Estate Agents)
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| AUGUST 2007 |
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BUYERS OF LAND BEWARE - TAX TRAP AHEAD!
From 1 September 2007, buyers of immovable property are required to withhold "advance taxes" (for CGT) where the seller is a non-resident.
ALL buyers where the purchase price is R2m or more should now establish whether the seller is a resident or non-resident - not doing so could land you with a hefty liability to SARS.
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 (the scale varies according to whether the seller is a person, company or trust) will be extremely painful.
It can also be hard to determine whether or not a seller is a "resident" for tax purposes, so you would be well advised to have the sale agreement professionally checked to ensure that it contains clauses to safeguard your position, including- - The seller's written warranty as to his/her/its residence status, and
- Authority for your attorneys to withhold the applicable percentage if there is doubt as to what that residence status is, etc.
Estate Agents must also be alert to this danger - they are at risk, not only of losing their commission, but also possibly of incurring liability to the parties.
LATE TAX RETURNS AND QUADRUPLE WHAMMYS
Not filing tax returns is a statutory offence, but paying your fine/s for that doesn't get you off the hook. You also of course have to pay the tax due for the period/s in question - plus you're in for "additional tax" of twice that again. That's effectively four payments you make to the State's coffers (plus any interest due).
And, the Tax Court held recently, your Constitutional protections against "double jeopardy" don't apply here. Better get those returns in (or get extensions) - right now!
DANGER DANGER - DON'T THINK THE NCA DOESN'T APPLY TO YOU, IT DOES
The media has been awash with stories about how the new National Credit Act is causing delay and disappointment with applications for bond and asset finance - leading a lot of people to associate the Act only with banks and the like.
In fact however the Act applies to everyone, and you urgently need to take legal advice on how it affects you if you give credit to anyone, for anything.
Even if you don't need to register as a credit provider, you still need to comply with the rules applying to "incidental credit agreements".
Failure to comply with the Act carries huge risk. For example, if you end up with invalid credit agreements, you will lose both "the money and the box" - having for example to refund customers for payments made without being able to recover goods sold. If you have to register as a credit provider and don't (for example if you lend over R500.000) you run the risk of your rights of recovery being forfeited to the State.
If you haven't already done so, check compliance in these and related areas: -- Credit application procedures, and related record keeping
- Credit agreements
- Credit enforcement procedures and documentation
- Sale agreements for land (particularly the "bond clause", to take into account new bank procedures and likely delays)
THE NEW AGE OF MAJORITY - TIME TO LOOK AT YOUR WILLS, TRUSTS AND MAINTENANCE AGREEMENTS
Now that your children attain majority at age 18, you need to check your wills, trusts, etc. to make sure that they are still worded correctly to give effect to your wishes.
If, for example, your will specifies that your heirs will only gain control over their inheritances when they reach "the age of majority", be sure that you are happy for them to do so at 18.
Maintenance agreements need to be worded carefully to take into account the fact that 18 to 21 year olds are often still dependant on their parents for support and educational costs.
There are also tax implications - particularly when planning to make distributions from any family trusts.
Most importantly, make sure that your teenagers fully understand the dangers of entering into any form of contract or agreement (written or verbal) until they fully understand all the implications.
PENALTY! BUT IS IT FAIR?
Contracts often provide for substantial penalties to be paid by a defaulting party. If you are on the receiving end of such a provision, take advice before paying - although in general our law holds you to your contracts, it also protects you from any penalty if you can prove that it is out of proportion to the creditor's loss.
What will be considered fair will depend on the facts - in a recent case, the renter of two photocopiers was sued for not just all arrear rentals, but also for all future (accelerated) rentals plus interest and costs. The Court reduced the penalty by the income earned from sale of one copier and the lease of the other.
RIGHTS OF PASSAGE: NOT A MATTER OF CONVENIENCE
Before buying property that you can only access over a neighbour's land, check that a servitude has been registered in your favour. Otherwise you could be at the neighbour's mercy - as happened in a recent High Court case.
The owner of a weekend fisherman's cottage was suddenly denied access to his piece of coastal paradise when the neighbour blocked his access to the road running over her property.
The law allows you to claim a permanent right of way over another person's land, but only when it is "necessary" - and that, held the Court, means that the right of way "must be the only reasonably sufficient means of gaining access to landlocked property, and not merely the most convenient access to that property".
The fisherman's application for a right of way to the road was refused - he was, held the Court, able to build an alternative track - not as convenient and not right up to his cottage, but it would give "reasonably sufficient access"- and that's all the law allows you.
A PROSPECTOR'S RIGHTS - AND THE BLOW SLIGHTLY SOFTENED
If you are a landowner and have any reason to think that you may be sitting on mineral rights, get a prospecting permit before someone else does.
Even if a prospector ultimately finds nothing, the result is that an outsider acquires significant rights over your land. These rights include of course access for the prospector (with, probably, a retinue of employees), but you may also be faced with such unhappy intrusions into your property rights as: -- Creation of "infrastructure" - new roads, buildings etc
- Setting up of heavy machinery
- Removal of fences
- Disruption of croplands
- Depletion of water resources
The law does however balance the competing rights of prospector and landowner to an extent - so, for example, the High Court recently held that a diamond prospector had to consult with the landowner before demanding access - giving the landowner an opportunity of "softening the blow" to some extent. If it happens to you, take advice on how best to negotiate some form of compensation.
WEBSITE OF THE MONTH: FREE NETWORK MARKETING ON FACEBOOK, BUT GET IN FAST (PARTICULARLY ESTATE AGENTS)
If you haven't already heard of the social networking site Facebook (www.facebook.com), you soon will.
Worldwide there are now 30 million users (growing at an amazing 100.000 every day), and it is no surprise that a growing number of businesses are now using Facebook to market their services and products.
You can pay to advertise on the site, but the real opportunity (and the free one!) must be in building networks that will get you interacting with your potential clients. You might for example start up a new Group or two, and you should certainly look for existing ones to join.
For a few ideas on how to do it, have a look at http://www.futureofrealestatemarketing.com/marketing-real-estate-on-facebook-and-other-social-networks. The article is written for estate agents (and it makes sense for them to be major beneficiaries of this type of networking) but the general principles will apply to most businesses.
In its early days, Facebook was mostly used by students - so only businesses targeting the 18 to 25 year old market really stood to benefit. But that is changing fast - suddenly there is a sharp and ongoing jump in use by older age groups, and that market is still largely untouched.
And there is a particularly unique opportunity for South African businesses, because we have a disproportionately high usership here - we are now 6th in the world.
It really is going to be a case of the Early Bird Getting The Worm here, so get going on using Facebook now!
(A word of caution - you must protect yourself from identity thieves, scammers etc. Have a look at the advice on the eHow website at http://www.ehow.com/how_2039872_networking-sites-haven-identity-thieves.html).
Have a great August!
Note: Copyright in this publication and its contents vests in LawDotNews(law.news)
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