Hi Guys, I am wondering if my idea is at all possible, for those accountants on the forum, please let me know if you know anything regarding this idea? Is it possible to create a structure/legal entity of some sort to allow a individual to make monthly contributions to a long term share portfolio and to have this seen (by SARS) as a 'retirement fund' and have these installments VAT deductable? If this is possible it will benefit ones portfolio over the long term. This is possible with RA's and Pension funds, but these don't make such good returns as a well managed long term portfolio of good shares? Any comments will be appriciated!
If this was at all possible the contributer would have to be a registered entity for VAT purposes. The fund would then have to report VAT Output, strippping 14/114 off the contributions received. Not plausible.
Unfortunately you would have to register the company/fund as a pension fund, and I think there are huge costs and compliances to do that. Also I think it can only be done via a Authorised Financial Service Provider, ie. a bank, insurance company etc. so only the big boys can do it.
There is no VAT levied on financial services, the only VAT will be on your administration/ service charge which will be negligible. Your best option is a personal Retirement Annuity Fund where your monthly contributions are tax-free and annual management fees tend to be competitive too...
Most personal financial planning institutions should be able to help. But I can recommend PPS. (Professional Provident Society). If you want further details let me know and I can leave you my details. (No I don't work for them or get any commission- I've had personal dealings through them). It's an effective and efficient way of saving on top of your monthly pension contributions and is entirely deductible for tax purposes. You also have a myriad of funds to choose from- it is unlikely that you could choose your shares yourself, this is something you'd have to speak to a representative about.
There is a Personal Share Portfolio administered by Momentum and Managed by TSec which may be an option for you? The costs are good here. Admin 0.45%pa, Management Fees between 0.0, 0.5 and 1.0%pa depending on your level of input, where the 1% is fully managed by TSec, the 0.5% is a 50/50 investment choice between yourself and TSec and lastly 0.0% is where you manage your own portfolio . AFAIK this is the cheapest option on the market at present? The Share Portfolio is made out in your name and all the Pension Rules still apply. You can be 100% in Equities or 100% in cash. Your Choice. I am in the process of moving my own Pension Fund away from the Company that has had it far too long and charges way too much and sends me no post whatsoever.
So it looks like my idea is possible after all. I am just thinking, if these services exist at Momentum and TSec, it is possibly some type of trust or something that has the tax benefits, is it not possible to use the relevant legal structure on other trading platforms, e.g. OST and my current portfolio by just creating the structures that apply?
I am working through a guy at Pioneer Financial Consultants. The way it works is they get half the brokerage from TSec. At least you know what your costs are with this Portfolio. But give them and a shout and ask them yourself. http://www.pioneer.co.za/