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Claiming for share management fees

Oct 01 2015 07:57

Cape Town - To help make the filing process as seamless as possible Fin24 has joined forces with the SA Institute of Tax Professionals (SAIT), to answer users' tax questions as far as possible.

User question: I have a share portfolio which is totally managed for me by a Finance house. I am charged a monthly management fee for their services.

My question is: Am I allowed to claim the management fee as a tax deduction from income made (interest earned from the trading account) from this investment? If so how do I show it?

Piet Nel, SA Institute of Tax Professionals responds:

The correct application of the law in this regard is that in order for a taxpayer to deduct any expense it is required that a trade is carried on. The “interest earned from the trading account” do not constitute accruals from a trade and, in our view, no deduction can therefore be made in respect of the management fees.

SARS, in their Practice Note 37 provides that "in the case of a pensioner whose financial affairs (pensions, annuities, investment income, etc.) are administered by a banking institution, board of executors or similar institution the administration fees, including any fees for the completion of tax returns, paid to the institution will qualify for deduction."

This note still appears on the SARS website as a note that is still valid – we don’t express an opinion on the validity or not of the note.  We understand that some taxpayers are finding that SARS disallows the expense and hence our answer that it can't be made in terms of the law.

SARS states on the following on their website 9 (and in their guide):

ALLOWABLE ACCOUNTANCY/ADMINISTRATION EXPENSE FEES

These amounts must be completed next to source code 4043.

Top Tip: The amount allowed will be determined by SARS.

This creates the impression that there is a practice that the cost will be allowed. We fear that it may well also no meet the "in production of income" (the interest) requirement.

* Have a question? Send it to us and we will find an expert to answer.

PLEASE NOTE: The important deadline dates in the 2015 tax season are:

September 30 2015: Manual/postal submissions
November 27 2015: At a SARS branch (non-provisional)
November 27 2015: eFiling (non-provisional)
January 29 2016: Provisional taxpayers via eFiling

ALSO SEE previous tax questions from users:

Can interns claim for travel expenses?

Home care and medical rebates

What to do when tax docs burn

Expat receiving pension from SA: Do I pay tax?

What are the limits on claiming travel expenses?

Can I claim for using my own car for work?

Temp teaching for 6 months, must she pay tax?

Working in Saudi, do I also pay tax in SA?

Can I claim for travel expenses?

Tax filing: No financial records yet, what now?

Filing returns for an education trust

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

sait  |  tax filing season 2015  |  money clinic  |  tax
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