Does anyone have an opinion on holding their private share portfolio in a company. The one benefit (??) is that an RSA-resident company is exempt from DWT, until, or if that company ever pays out a dividend. If you decide not to pay dividends from your share company, then the share company gets the 15% growth. Additionally if you loan the share company the start-up capital, then you can claim interest on that loan.
.....or thereabouts. Any opinions. Anyone doing this? Am just curious.
I have a cc where I put some of my shares-I also set up a provident fund for myself and the bookkeeper-been in this arrangement for the last 19 years-obviously I claim allowable expenses to offset any profit.The biggest bonus in my personal opinion is the loan account that I have as this will help me enormously in my retirement-being tax free is a big attraction.Before I hit retirement I will transfer my remaining individual shares into the cc.My children will take over the cc gradually in the next 20 years and I will pass it to them in an orderely manner-if your portfolio is big enough and can justify the accountancy fees this approach is worthy of consideration imo.
Corporate tax rate is 28%. Dividend income is exempt from tax ,section 10(1)k, thus no tax deductions will be allowed under section 11(a) as dividends is of a capital nature. So to get deductions for expenses you have to trade in shares to produce taxable income. Companies have various compliance cost and if every shareholder is not also a director the cost can increase quite a bit. Interest that you earn, if any, will be included in you taxable income, if it is above the R23 800 threshold. The interest that is paid by the company might not deductible, but one third may be capitalised to the cost of the share. Transferring shares will result in capital gains tax. Companies do not qualify for the capital gain exclusion of R30 000 pa. Death and taxes - keep it simple - every situation is unique - get professional advice.
This is a minefield - and as you know you only know its a minefield when your foot gets blown off. People are always looking for silver bullets - like they used to when they used to hold and transfer houses via companies and CC's to avoid transfer duties.....sigh. So golden rule number one - which is the same as golden rule no's 2- 10 .Consider your situation, your family circumstances - what you actually ( repeat actually) trying to avoid / minimize etc., and then if a cap fits...first consult a professional. And while this is generally a financial planning issue revolving around tax and you need an accountant or tax specialist - also please, please consult with your brain and/or financial planner/adviser ( even your wife or partner!!) as well - does this arrangement suit me and my family or is it just good old me banging on again?? Reason I say all this? - personal and professional experience...
As always I value your opinion. Its just a consideration that a few of us are thinking about. We are seeking professional opinion as well, and if I find out anything I'll report back. From my personal point of view, I am not going to sell out to put back into a CC - that would be silly. But I might start a share company and see how it goes.
I have invested for the last 19 years as an individual,as founding member of a cc and as a Trustee of a family trust-all have their pros and cons and there is no magic bullet.I would add that all three methods worked for me and I believe that this gave me more options -its been a great ride and I am very blessed.
My experience at least from a trust point of view is that the added complications are hardly worth the effort / headache / sleepless nights. I watch people all the time having significant issues with trusts. Unless you are very wealthy or a practicing CA don't bother.
touche. What you save in taxes is really not worth the effort of having to generate audited financials, corporate provisionals, complex tax deductions, blah - blah. Take the tax hit and keep it simple.
trusts are very different to companies, different requirements. Trusts are the hardest hit and have the highest administrative burdens.
Everything does come down to "it depends". If you buy and sell often then, dont go company, If you looking at dividends then company works If your simply trying to avoid estate duty with a buy and hold strategy then a company has its place.
There is no simple answer to this, it really depends on what your planning on doing