In this newsletter, we update you on new Namfisa reporting requirements, on the new withholding tax regime, we provide a summary of the 2011 Retirement Reform Conference and there are a few links to very interesting articles that recently appeared in various media.
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Tilman Friedrich's Industry Forum
Benchtest Monthly 02.2012
In February our average prudential balanced portfolio returned 1.12% (January 2.92%). Top performer is Stanlib (1.68%), while Allan Gray (0.55%) takes bottom spot.
For Namibian funds, the weakening of the Rand vs the US$ by 6.9% over this 12 month period was more than offset by the poor performance of the MSCI World Free Index that produced -1.1% including dividends, in US$. Comparing the 12 month performance of managers with a high off-shore exposure, such as Investec (31.5%), Allan Gray (30.4%) and Prudential (29.7%), with that of managers with a low offshore/high local equity exposure such as Stanlib (18.4%/50.6%), OM Balanced Growth (23.5%/49.8%) and IS Balanced Growth (19.7%/46.8%), the latter group should have and have outperformed the former group with the exception of Allan Gray that in fact produced the 3rd best performance of these 6 managers, trailing IS Balanced Growth and Stanlib just slightly.
For further analyses and our views download the report, here...
News from Namfisa
Yet more reporting demanded
It appears that funds generally would find it extremely difficult to provide the information that Namfisa now requires. Much of the information is not available at all as there was never a requirement to maintain records of such information. Some of the information can be extracted from funds’ financial statements and actuarial reports with a major effort as this will also not be available electronically and would have to be extracted manually. However, funds’ year-ends often do not coincide with the envisaged reporting date of Namfisa which would render this task virtually impossible. For the past 3 years fund have also provided very detailed financial information as of 31 December of every year. This was in response to a new requirement of Namfisa and this information was input by funds on Namfisa’s Electronic Reporting System. This system should lend itself for extracting much of the financial information now required.
From feedback we have received so far, it appears that Namfisa is not sympathetic at all to the appeals and arguments of the industry.
Namfisa’s view is that the information requested is supposed to be available at all times for each fund and that it does not accept or entertain an attitude that the information is not available. At the same time Namfisa has invited constructive comments on that return but insists that it cannot explain itself to the industry and objects to requests to motivate the reasons for the new requirement.
As administrator of a significant number of Namibian retirement funds, we are certainly unaware of any requirement for funds to have maintained any information other than the annual financial statements and tri-annual actuarial valuations, as required in terms of the Pension Funds Act. We would indeed be very concerned about any failure on our part to have advised our clients incorrectly or that we have failed to administer funds as required in terms of the Pension Funds Act.
At this stage and not understanding how and for what purpose Namfisa intends to use this information, it is difficult to envisage that such a return will produce meaningful or useful information, but at a substantial additional cost to the members of each fund.
Since all administration systems used in Namibia are supported from South Africa, any special programming can be carried out much more efficiently if it is done to also meet the needs of the South African regulator who surely will have similar requirements as Namfisa may have and from where Namfisa often gets its clues. In other words, we suggest that Namibia ‘piggy backs’ off the FSB’s special reporting requirements rather than trying to invent its own requirements in the light of our small industry and the economies of scale one could achieve by applying this principal.
It would be very unfortunate for the Namibian retirement funds industry if each fund attempted to satisfy Namfisa’ requirements in its own right. It will undoubtedly be in the interests of each fund, its members and the industry if this matter was taken up with Namfisa through RFIN on behalf of all funds in Namibia so that the retirement funds industry speaks with one voice only.
RFS company news
Diversity at the RFS Cultural Day
Our social committee organised a cultural day for the afternoon of 20 March. Cultural groups represented were Owambos, Damara-Namas, Hereros, Basters and Germans. Does anyone need help identifying who is who?
...and finally, a 'lost tribe' was discovered, hanging around the braai.
News from the market
2011 Retirement Fund Reform Conference
For those who missed the 2011 Retirement Fund Reform Conference that was staged in Cape Town in October 2011, colleague Louis Theron compiled a summary of trends in the retirement funds industry that you may find interesting. Download the summary here...
Law and legal snippets
Income Tax Amendment Act –
Act 15 of 2011, Gazette 4864 of 30 December
Withholding Tax on Services Payments to Non-residents
- How will all of this work in practice though?
20 March was the due date for registration and for the submission of the first return in respect of withholding tax deducted and payment of the tax deducted in respect of certain taxable services provided by a foreign person and paid to such person since 1 January 2012.
A problem experienced by pension funds who want to register arose from the fact that pension funds are tax exempt and do not need to register for income tax purposes. Tax reference numbers for withholding tax purposes however, are linked to the entity’s tax registration number, exchanging the last digit by a ‘9’. This is something that seems not to have been thought about and still needs to be resolved by Inland Revenue.
In practice Namibians mostly have dealings with South Africans and in general the services provided by South African services providers would be subject to Namibia’s double taxation agreement with South Africa. This agreement prohibits the taxation by Namibia of any of the following income –
Income of a Namibian resident from immovable property, including agriculture or forestry situated in SA;
Business profits of an SA resident unless they were derived though a permanent establishment in Namibia;
Profits derived by an SA resident from the operation or rental of ships, aircraft or road transport vehicles and the rental of containers and related equipment in international traffic, unless the place of effective management of the business is situated in Namibia;
Participation by an SA resident in management, control or capital of a Namibian associated enterprise to the extent that they were earned on an ‘arms- length’ basis;
Capital gains of an SA resident from the alienation of immovable property unless the property was situated in Namibia;
Independent personal services derived by an SA resident individual unless that individual has a fixed base regularly available to him in Namibia;
Dependent personal services by an SA resident (salaries, wages and other similar remuneration), unless employment is exercised in Namibia;
Remuneration derived by a servant of the SA government in the discharge of governmental functions exercised in Namibia;
Teachers on a temporary visit of not more than 2 years to Namibia to teach at a Namibian education institution;
Payments received by an SA student, trainee or apprentice for the purpose of his training or education in Namibia;
Income not dealt with under any of the bullets above or below that did not arise in Namibia.
Income of a South African taxpayer that may specifically be taxed in Namibia is the following:
Dividends paid by a Namibian company;
Interest arising from Namibia;
Royalties arising from Namibia;
Directors’ fees in the capacity as director of a Namibian company;
Income derived by entertainers or sportspersons derived from activities in Namibia;
Any pension or annuity derived from a Namibian source by an individual where such income is taxed only in part in South Africa, to the extent that it is not taxed in South Africa;
Income not dealt with in any of the above bullets if it arose in Namibia.
Interesting media snippets
Criminal conviction insufficient for withholding withdrawal benefit
In a recent ruling, the South African Pension Funds Adjudicator concludes that only a compensatory order by a court – not a criminal conviction alone – can make a fund deduct from a withdrawal benefit of an employee. Download the article here... (Source unknown.)
Administration reports – what trustees need to know
In an article on governance and due diligence in September 2011 Pensions World, Jenifer Grefen, managing director of NMG Consultants and Actuaries provides some advice to trustees what questions to pose to their administrator and what reporting they should expect to receive. Download the article here...
Ensuring an equitable distribution of lump sum death benefits
In an article on governance and due diligence in September 2011 Pensions World, Cathy Mcclune, manager of ABSA Trust provides some guidance how to deal with a few typical scenarios in the distribution of lump sum death benefits. Download the article here...
Tilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner® practitioner, specialising in the pensions field. He is a member of the marketing committee of ICAN and a member of the legal and technical committee of RFIN. Tilman is co-founder, shareholder and managing director of RFS.