Q: We have a client
who has been paid out R12 million in shares from a company he worked at and has
since left. The client currently earns R1.2million and would like to buy a
single premium RA to offset on the capital gains of the shares paid out to him.
Would the client be able to buy a single premium RA with the share money or is
it seen as capital?
A: Nothing in our view prevents the taxpayer using the proceeds from the
share sale to purchase a RA. When done in the same year the RA contribution may
be deductible in terms of section 11(n) of the Income Tax Act, however section 11(n)(i)
imposes limits to the deduction and the taxpayer may not necessarily be able to
claim the whole premium in that year. Proviso (cc) to section 11(n) however
allows the amounts not claimable as a deduction to be rolled forward and be
deemed current RA contributions in the following year, however only to the
extent that the amount was not already set off against a retirement compulsory
annuity from a pension, provident or other RA as contemplated in s10C Income Tax
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.
MINIMUM REQUIREMENTS TO REGISTER
The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.