Mar 1, 2015 - In support of this government initiative a Tax-Free Call. Deposit in line with the requirements to qualify
Tax-Free Savings account
What is a Tax-Free Savings account? In an effort to encourage South Africans to save, and promote growth in the economy, the South African Government have introduced Tax-Free Savings accounts effective 1 March 2015. Tax-Free Savings accounts will allow individuals the following benefits: • Contribute up to R30 000 per year to Tax-Free Savings and investment products, with a lifetime contribution limit of R500 000. If this limit is exceeded, customer will be taxed at 40% in that tax year (1 March – 28 February). All returns on such products will be tax-free, this includes interest, dividends, capital gains or earnings on deposits made to the account. • You can open multiple Tax-Free Savings accounts annually however the R30 000 threshold per annum to these accounts (in total) will apply. The lifetime contribution limit will be capped at R500 000. Failure to remain within these limits will result in the excess amount being taxed at 40% in that year.
What will Standard Bank offer? In support of this government initiative a Tax-Free Call Deposit in line with the requirements to qualify for the tax exemption will be available through our branches. The product will only be available for customers in their personal capacity, therefore no business or commercial banking customers will not be allowed to open a TaxFree Savings account.
Product Requirements: • Minimum opening deposit of R250 • Minimum transaction amount of R250 • No cash or cheque deposit fees will be charged • No fees will be charged for inter account transfers into the account • A withdrawal fee will apply 1
• Transactional functionality is limited to branch withdrawals and inter account transfers • Functionality is limited to transfers and withdrawals, therefore no POS transactions or third party payments will be allowed from the account • Maximum balance contribution of R30 000 per annum and R500 000 over the lifetime of the investment • A tax penalty of 40% will be charged on the excess amount contributed in the respective tax year. • The product is only available for personal market customers.
Product Features and Benefits: • It is a simple, transparent product • Offers competitive interest rates • Investors will receive tax exemption amounts up to R30 000 per annum made into a Tax-Free Call Deposit account • The product is suitable for customers wanting to save for long-term goals • Investors will get easy access to funds • No fees apply for deposits into the account • No monthly management fees or commission applies.
Account Opening Documentation: • ID copy, proof of residence for South Africa applicants • Copy of valid passport and work permit or student visa for non-resident and foreign nationals.
2
Frequently asked questions (FAQ’s) 1. What happens to the current interest rate exemption?
The current exemption of R23 800 for individuals below 65 and R34 500 for individuals above 65 will still be applicable to interest earned on deposits outside the Tax-Free Savings account.
Any interest earned on deposits and investments within a Tax-Free Savings account will be completely tax-free.
2. Is my understanding correct that the maximum balance allowable, covering all the relevant accounts, may not exceed R500 000?
No. Your capital contributions over a lifetime may not exceed R500 000. All interest, dividends and capital gains in excess of R500 000 may stay in these accounts to accrue even more interest and dividends.
3. What happens if I contribute more than the R30 000 annual limit?
You will be liable for tax at a penalty of 40% on the excess amount contributed. This will also apply to contributions in excess of the lifetime contribution cap.
4. May I withdraw my money from these accounts at any time?
Yes. Investors will be allowed to withdraw money from these accounts as and when they see fit. However, in order to prevent withdrawals for impulse or unnecessary purchases amounts returned to the Tax-Free Savings account will be subject to the annual contribution limit.
For example: If an individual invests R30 000 in one of these accounts on 1 March 2015 and decides to withdraw R15 000 after six months, the individual has already reached the annual contribution limit for the year (1 March 2015 to 29 February 2016) and would only be able to “replace” the R15 000 in
3
the next year (from 1 March 2016 to 28 February 2017). If she decides to do so, she will have R15 000 of her annual cap “left” to contribute during that year (1 March 2016 to 28 February 2017). 5. Will my existing investment account automatically qualify as tax-free investments? No. If you would like your current investments to qualify, you will have to open a Tax-Free Savings account and transfer funds into the account. 6. How many accounts can I open? You may open as many accounts as you would like, as long as the combined value does not exceed R30 000 per annum and R500 000 over lifetime. 7. How do I retain my tax exemption? Investor must ensure that transfers out of one TaxFree account must go into another Tax-Free account to remain within the tax exemption threshold. 8. Can I open a Tax-Free account in the name of a minor? Yes, you can open an account in the name of a minor however all deposits in those accounts must remain in the name of the minor if withdrawn during the period.
4
Authorised financial services and registered credit provider (NCRCP15) The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA 200606-2/15
