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Would an individual be able to buy a single premium RA with money received from shares?

Monday, 16 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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 Act.

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.



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