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Retirement Funds Tax
What is retirement funds tax?
Retirement fund tax is tax levied on the gross interest, net rental and foreign dividend income of retirement funds – in other words, pension, provident, retirement annuity funds.
This tax is also levied on the untaxed policyholder funds of long-term assurance companies in respect of their retirement business.
Section 10(1)(d) of the Income Tax Act 58 of 1962 exempts the receipts and accruals of any pension fund, provident fund or retirement fund from tax. However, the Tax on Retirement Funds Act 38 of 1996 - which came into effect on 1 March 1996 - subjects the interest, net rental and foreign dividends of these funds to tax at the rate of 18%.
The untaxed policyholder funds of insurance companies are also included in the scope of this Act, to cover situations where retirement funds invest with insurance companies but do not receive income allocations in any particular period.
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