Financial Intelligence Centre Amendment Bill Signed into Law


Following a long delay, President Zuma finally signed the Financial Intelligence Centre Amendment Bill into law at the end of April 2017. The bill is required for South Africa to meet its international commitments with the Financial Action Task Force (FATF).The amendments to the Financial Intelligence Centre Act (FICA) 2001 are important because they allow for the Financial Intelligence Centre (FIC) to perform its watchdog role more efficiently and effectively.  The amendments enhance the FIC’s ability to generate quality financial intelligence which can then be shared with a wider range of government departments and agencies, in an effort to combat financial crimes (such as money laundering and terrorist financing).The amendments are intended to make it more difficult for people involved in illegitimate activities or tax evasion to hide behind legal entities, such as shell companies and trusts.The amendments also bring about improved scrutiny and ease of reporting by introducing a risk-based approach towards money laundering activities. Banks are now obliged to implement and apply significant procedures to ensure compliance with international standards. The amendments are intended to:

  • make banking activity easier for ordinary people with regular banking transactions
  • give banks greater oversight so that they can identify suspicious activity promptly and report this to the Financial Intelligence Centre
  • give banks greater oversight of bank accounts held by politically influential people as well as ‘high risk’ accounts with large balances and lots of banking transactions

South Africa had been given until June 2017 to enact the legislation.  The signing of the FICA Amendment Act is important for South Africa’s continued membership of the FATF.  It is now up to Finance Minister Malusi Gigaba to implement the bill.

If you need any further information on FICA and how it affects you, please contact our offices.

 


Tax Clearance Certificates

A Tax Clearance Certificate is a document issued by the South African Revenue Service (SARS) which validates your status as taxpayer and confirms that your tax affairs are in order at the date of issue.

The TCC is required for:

  • applying for government tenders or advertised bids
  • listing as a supplier or service provider for large corporations / government institutions
  • verifying that someone is tax compliant (good standing)
  • transferring funds out of South Africa using the Foreign Investment Allowance (FIA)
  • emigration purposes

SARS will only issue a TCC if the following requirements are met:

  • taxpayer has registered for an Income Tax reference number and this number must be active and correct (all registered particulars must be up to date)
  • taxpayer has no outstanding tax returns
  • taxpayer has no outstanding tax debt (unless a payment arrangement or suspension of debt has been agreed) – this includes Secondary Tax on Companies (STC), Administrative Penalties and Employee Tax
  • taxpayer complies with all deferred tax arrangements
  • tax returns and/or declarations are to date or in the process of being assessed by SARS
  • the registration details on the TCC01 correspond with the information in the SARS system (if applicable)

The TCC has become very important for businesses and is generally required by suppliers when opening a new account.  For a company to receive a TCC, the tax affairs of all the directors must also be up to date.

In the case of a group of companies, all companies within the group are required to be tax compliant.  If any one of the sub-entities is non-complaint, the holding company will also be regarded as non-compliant and a TCC will not be issued.

Should you have any concerns about tax compliance certification, or need any further information, please contact our offices.


Financial Ratios

Every rand that you spend on your business should deliver returns so that you can grow your business, pay your employees and still make a profit.  Financial ratios are calculations based on the information provided in your financial statements which enable you to objectively measure the performance of your business.

Financial ratios can be used to:

  • evaluate profitability, efficiency and risk
  • assess liquidity
  • assess overall financial position (solvency)
  • determine capacity for growth
  • drive performance through informed business decisions
  • identify symptoms of underlying problems in a business

Financial ratios can also be used to compare the performance of your business against that of your competitors using industry benchmarks.

Here are just a few useful ratios:

Current ratio: Current assets / Current liabilities: indicates the surplus liquid funds that are available in your business, the higher the value the better

Quick ratio or acid test ratio: (Current assets – Inventory)/ Current Liabilities: shows the ability of your business to pay current liabilities out of assets which are either cash or quickly convertible into cash, the higher the value the better

Accounts receivable days: Accounts receivable x 365 / Yearly turnover: shows the average number of days it takes customers to pay their accounts, an increasing value indicates an inefficiency in collecting outstanding debt

Accounts payable days: Accounts payable x 365 / Yearly cost of sales: shows the average number of days it takes to pay suppliers, an increasing value indicates that it is taking longer to pay suppliers

Inventory days: Inventory x 365 / Yearly cost of sales: shows on average how many days an item is held in inventory prior to being sold, an increasing value suggests inefficient purchasing and / or too high inventory holding

Gross profit margin: Turnover – Cost of sales = Gross profit / Turnover: measures how efficiently a business uses its materials and labour to produce and sell products profitably

Should you require any further information about using financial ratios in your business, please contact our offices.


Naming Your Business

A well-chosen business name is simple, unique, search-friendly, memorable and easy to recognise.  Before deciding on a business name, it is wise to ensure that the name is not already in use.  Bearing in mind that you will probably want to set up a website, it is also worthwhile doing a search to make sure that the domain name is not already taken.

Prior to the Companies Act 71 of 2008 (Companies Act) and the Consumer Protection Act 68 of 2008 (CPA), many people simply bought a ‘shelf company’ or ‘close corporation’ with non-distinctive names and then traded under a different name. There were no requirements to register a trade name, and this often resulted in the infringement of third party trademarks.  This is no longer allowed.

Some important points to remember when registering a business name:

  • a business name may contain words in any language, certain symbols, any letters, numbers or punctuation either alone or in combination (certain restrictions apply)
  • any word, expression or symbol that constitutes propaganda for war, violence or hatred may not be used in a company name
  • the word “bank”, “deposit-taking institution” or “building society” in a business name is not allowed, unless the business is registered as a deposit-taking institution, or unless the business is incorporated under the Banks Act 94 of 1990 or any other relevant legislation
  • a business name must not falsely imply that the business is associated with other persons or entities, the state and its related bodies, or persons or bodies with an educational title
  • certain words must appear in/at the end of a business’s name
  • a business name must not be the same/confusingly like the name of another business entity or trademark

Also note that certain restrictions apply to the use of your business name in written communications.

If you need any help with naming or setting up your new business, please contact our offices.

 


Sincerely,