sars.gov.za Tax Free Investments : South African Revenue Service

Organisation : South African Revenue Service [SARS]
Facility Name : Tax Free Investments
Applicable For : Taxpayer
Country : South Africa
Website : https://www.sars.gov.za/types-of-tax/personal-income-tax/tax-free-investments/

What is SARS Tax Free Investments?

Tax Free Investments were introduced as an incentive to encourage household savings. This incentive is available from 1 March 2015. You don’t have to pay income tax, dividends tax or capital gains tax on the returns from these investments. A person is limited to an annual limit as well as a lifetime.

Related / Similar Facility : SARS Electronic Data Interchange (EDI)

How Will Tax Free Investments Work?

The tax free investments may only be provided by a licenced bank, long-term insurers, a manager of registered collective schemes (with certain exceptions), the National Government, a mutual bank a co-operative bank, the South African Postbank, and administrative financial services provider and a person authorised by a licensed exchange to perform one or more securities services in terms of the exchange rules. Service providers must be designated by the Minister in the Gazette. As per the current Regulation, only the above are designated.

Note that any portion of unused annual limit is forfeited (that is, it is not carried forward to the subsequent year of assessment).

Example 1:
2020 Year of Assessment:
** Annual limit is R33 000
** Taxpayer X invested R27 000.
** The unused portion of R6000 is NOT roll-over to the subsequent year of assessment

Example 2:
2021 Year of Assessment:
** Annual limit is R36 000
** Where the taxpayer invested R40 000
** There will be a penalty of 40% on the excess amount above R36 000
** Therefore, R40 000 less R36 000 = R4 000 x 40% = R1 600 penalty will be payable to SARS.
** This penalty is added to the normal tax payable on the notice of assessment.
** Any person (including minor children) can have more than one tax free investment, however, the annual limitation is an aggregation per every year of assessment. For example you can invest R11 000 (Old Mutual), R11 000 (Investec) and R14 000 (Absa).
** There is also a life time limit of R500 000 per person.

Which Accounts Will Qualify As Tax Free Investments?

Following Accounts Will Qualify As Tax Free Investments
** Fixed deposits
** Unit trusts (collective investment schemes)
** Retail savings bonds
** Certain endowment policies issued by long-term insurers
** Linked investment products
** Exchange traded funds (ETFs) that are classified as collective investment schemes.

What Must I Do Next?

Enquire from a service provider about investing in a tax free investment.

Service providers will provide SARS, twice a year, with the following info:
** Total contributions per tax year;
** Total amounts withdrawn per tax year;
** Total amounts transferred per tax year;
** Total returns on investment for example: interest, dividends, capital losses and capital gains.

The service providers will provide these taxpayers with this information by issuing an IT3(s) Tax Free Investment certificate annually.

Contact

** Call the SARS Contact Centre on 0800 00 SARS (7277)
** Visit your nearest SARS branch.