Tax Free Savings Accounts
Tax Free Savings Accounts (TFSA) were recently authorised to “go live” from 1 March 2015. The final regulations on the requirements for tax free investments were issued last week.
TFSAs allow investors and savers to earn "tax free" income and capital gains. This means that interest earned will be tax free, dividends will not be subject to dividends withholding tax and gains made on disposal of tax free investments won't attract capital gains tax. Instead of reporting income and gains on IT3B and 3C reports, new formats will be introduced to ring-fence tax reporting on these accounts.
Certain restrictions apply including an annual limit of R30 000 per taxpayer, and a lifetime contribution limit of R500 000. Existing investments may not be converted to tax free accounts.
As a result of the prohibition of the use of performance fees in TFSAs, Foord will only launch these accounts later in 2015. Investors will be able to benefit from the tax savings in the current tax year.