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Tax Question

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Not applicable
I have a tax question, I trade shares and I hold positions between 2 weeks and 2 months. What is the best option from a tax perspective to shelter my profits and enjoy the lowest tax rate? Should I trade as a trust? A company? or as an individual? My tax consultant seems to be clueless..any suggestions?
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11 REPLIES 11
Not applicable
Its best to see these tax guys and take advise from here with a pinch of salt (incld my own), but from the work Ive done its best to just trade through your own name.
From my understanding is that, yes its cheaper to trade through a company (not a trust), but getting the money out from the company requries a tax again (so it gets taxed twice).
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Not applicable
Thanks BC01
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Vagabond
Contributor
Depends on the amount of profit you make in a year, companies and trust needs to audited/reviewed and there are loads of red tape. The companies profit will get taxed or you will be taxed on the dividends. No simple answer to this question.
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Vagabond
Contributor
Depends on the amount of profit you make in a year, companies and trust needs to audited/reviewed and there are loads of red tape. The companies profit will get taxed or you will be taxed on the dividends. No simple answer to this question.
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kawcha
Contributor
Not gonna do a detail one Company: Fix tax rate. Probably better for big portfolio trader. CGT is higher than individual. But your main operation is trading, so all trade profit will be normal gross income. Dividend declared attracts dividend withholding tax. (at drawing of the profit from the company) Individual: Escalated tax rate. but better for small portfolio trader. CGT is lower, also has annual exemption, also tax rebates. (you will use that if you take private trading as your career) Remember all SA dividends received all exempt from tax as they were taxed at declaration (so taxes are not double accounted for) My suggestion, make a trust, then trust owns the company and trade. Or use the trust to trade without making a company. Of course the beneficiaries should be whoever you want to favour. Make an independant person as a member of the trustees to avoid legal issue if you or your trading company went busted. (That is too long to explain in detail)
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Not applicable
Just note that owning a trust account has costly expenses attached to it (from what Ive heard R40k per annum with reviews and audits) as well as admin hassles.
Could be something to double check before opening a trust.
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THRESHOLD
Super Contributor
If you are planning to leave the portfolio to your kids(one day) - the trust is a very important aspect of estate planning. If you are an investor - you should concern yourself less with distribution aspects re tax. To take care of the living needs distributions you could cede the dividend stream, charge interest on the loan account etc. Anyway - I have no intention of being drawn on the profound merits of this vehicle - you must take professional advice.
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THRESHOLD
Super Contributor
If you are planning to leave the portfolio to your kids(one day) - the trust is a very important aspect of estate planning. If you are an investor - you should concern yourself less with distribution aspects re tax. To take care of the living needs distributions you could cede the dividend stream, charge interest on the loan account etc. Anyway - I have no intention of being drawn on the profound merits of this vehicle - you must take professional advice.
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partridge
Super Contributor
NADM. General suggestion. Read the just published draft taxation laws amendment Bill and explanatory memorandum -plus see what SAICA and FISA and others have to say on trusts and taxation of investments. Its possibly "all change" in some important areas. There is always the option to find a professional to guide you through this minefield. What amuses me no end with this recurring question is that some of you are looking to fix your building 's foundations after you have put the roof on...or am I being harsh?
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THRESHOLD
Super Contributor
There is no alternative to a trust (or structured investment company)at this point. The proposed changes will be subject to the legal principal that they will not be retrospectively applicable. I have some background here and have taken advice on my own family stuff. At the end of the day - it depends on (a) your objectives and (b) the scale of your assets. If you leave the country - these vehicles can potentially become even more interesting. While a trust is not an entity per se - its treatment has been settled through centuries of precedent. If the authorities tear into them without regard for this - it really becomes a case of rather not being invested in anything in South Africa. Quite honestly - it may just be - that that is the most prudent approach anyway
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Preston
Super Contributor
boris2, best advise ever, ask your mother in law(unemployed) to open a OST share trading account. Split your trading between the 2 accounts. Make sure all her gains is offsetted by her primary rebate.
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