Tax Archives - Harbour & Associates

A couple who booked a meeting with me were not sleeping at night because they had been doing more than R1m a year turnover from their two multi-unit AirBnB premises and they weren’t VAT registered. What does the law say about this? As soon as you exceed R1m a year VATable turnover, you must register as a VAT vendor. If you don’t, SARS may deem you to have done so and demand the VAT portion of all your invoices, even if you didn’t add VAT. This is what they were panicking about. The good news for them was, in my…

This question is only relevant when the liability date could fall either into the previous tax year or the new tax year of the seller. Let’s say that the seller’s tax year ends on 28 February. The Offer to Purchase was signed by both parties on 15 January 2023. The supensive clauses were satisfied on 5 February 2023. The transfer was registered at the Deeds Office on 25 March 2023. From a CGT point of view, when were the proceeds of the sale received by or accrued to the seller? (see 3(a) Eighth Schedule, Income Tax Act) My view, as…

Evidently about mid 2022 SARS posted a letter onto it’s website advising anybody that was lucky enough to stumble on it that it had set up a new platform for import and export licenses. It advised traders that they must migrate to the new platform (they called it “onboarding”) Of course, nobody saw the letter. Now we just got bombarded by SARS with SMSs advising us that our (clients’) licenses are about to be suspended, because they did not onboard to RLA. Thank you SARS. Brilliant communication. It took us the usual forever to navigate our way through the process,…

Well done SARS! They finally woke up. I’ve written on several occasions about taxes that SARS can’t hope to collect. Amongst them are – Transfer Duty on the sale of shares in a Residential Property Company. Securities Transfer Tax on the sale of shares in a company. CGT on the sale of shares in a company. Why was this? Because the only place where the shareholding of a company was recorded was on the share register on somebody’s computer. Now, however, there’s an addition to the Company Tax Return form IT14 which requires that the share register be disclosed. This…

Yes. The rules are the same as for any other person, partnership or company. That is. Compulsory if VATable turnover exceeds R1m Voluntary if Vatable turnover or purchases average at least R4 200 per month Here’s what the VAT Act has to say about it. s51. Bodies of persons, corporate or unincorporate (other than companies).—(1) Subject to the provisions of section 46, where any body of persons, whether corporate or unincorporate (other than a company), carries on or is to carry on any enterprise— (a) such body shall be deemed to carry on…

I can understand why this causes confusion. So let’s go through the entire story. All South African residents are taxed on their worldwide earnings. This is know as the residence based tax. Non-residents are taxed on earnings which come from a South African source. This is known as the source based tax. So, to test whether or not you are a resident of South Africa, there’s a step by step process. – Are you ordinarily resident in South Africa? Is this essentially your home? Various tests will be applied. Typically, it is your home if it is the place to…

I’m ready to give up! This is what the Lwazi Bot on SARS website says – “According to the law, a Company must submit tax returns annually and declare that the company is dormant, failure to do so may result in Administrative Penalties.” And they certainly are hitting dormant companies with a R250 penalty every month for every outstanding tax return. Here’s what their final demand says – Dear Taxpayer Trading Name: T TRADING PTY LTD FINAL DEMAND TO SUBMIT…

No. It is not a requirement. However, bear in mind that VAT is payable on all shipments that are imported into South Africa. This means that an importer will pay VAT but, if not VAT registered, will not be able to claim it back as input VAT. In order to maintain the same profits they will have to charge higher prices than their competitors. And what about exporters? They, also, are under no obligation to be VAT registered. Whether they are, or not, their customers will not pay VAT, because exports are zero rated. But, as with importers, they will…

It is a general rule in tax that transactions between connected persons are deemed to be at market value. Typically, this arises when someone sells their fixed property or shares in a private company to their trust. The question then arises “Who must do the valuation?” and the Income Tax Act and Transfer Duties Act are silent in that regard. They simply say that SARS may challenge any valuation. This means that the seller can determine the market value. And that raises the question “On what basis must the asset be valued?” Generally, companies are valued on their last signed…

I have been wrong all this time! The answer is yes, a trust must register as a taxpayer even though it will never receive taxable income. I dug this up while referencing my upcoming book 16 Steps to Tax Wisdom. Here’s why – s67 Registration as taxpayer.—(1)Every person who at any time becomes liable for any normal tax or who becomes liable to submit any return contemplated in section 66 must apply to the Commissioner to be registered as a taxpayer in accordance with Chapter 3 of the Tax Administration Act s66 Notice by Commissioner requiring returns for assessment…

I was caught really flat footed recently when, in a meeting, I was asked whether the client, who buys and sells residential property and is VAT registered, must charge VAT on each sale. I knew the answer was “No”, but an alarm bell rang in the back of my head, because I had accepted that as common knowledge and had never gone to source, the VAT Act, to confirm it. I promised to go to source and report back. Well, I had to report back that nowhere in the Act, does it state in simple terms that the trade of…

SARS seems to be trying everything in the book to squeeze more out of those who pay tax. Now it’s all about assessed losses. If your company had an assessed loss at the beginning of any year, it could carry it forward as a deduction against future taxable income provided it traded in that year. This remains the case for companies whose taxable income is less than R1m. However, for those whose taxable income exceeds R1m the set-off is limited to 80% of the taxable income. Evidently, although s20 is not absolutely clear on this, the balance of the assessed…

Now I’m disgusted. A new client whose personal tax return was due in November 2022 didn’t submit until January 2023. It was a perfectly straightforward return and his tax came to R75 000. He had paid R68 000 in PAYE so there was R7 000 still to pay. All well and good. But SARS had hit him with R2 000 per month, R6 000 in total, Administrative Penalties for late submission! Now, I know SARS has the authority to impose these penalties, but the punishment is so excessive in relation to the crime, that I can’t help thinking that there’s…

So, what is the real tax cost of the salary that you draw from your own company? You, and many like you, may be pleasantly surprised. What most people forget is that when they draw salary from their company, this is a tax deductible expense, so the company saves 27% tax (currently 28%, but coming down). So, let’s say you’re under 65 and that the only income that you receive is from your company. Your company owes you some start-up money and you charge R23 800 interest per annum on that loan. The first R23 800 interest received is tax…

There is no threshold for normal company tax. The first Rand of taxable income is taxed at 28%. However, there’s an exception to this. If the company is a Small Business Corporation (SBC) then the first R91 250 profit is free of tax. The tax rate then steps up to 7%, then 21% and finally 28% above R550 000 taxable income. The main qualification is that all shareholder must be natural persons and may not be shareholders in any other active company or CC. It may also not be a rental company or a personal services company. There are other…

No. Only shareholders which are companies are exempt. Having said that, if company A is a beneficiary of a trust which owns company B and company B declares a dividend, can the dividend flow through the trust to company A using the Conduit Principle thereby avoiding the DWT? An interesting question. I’m not a tax specialist, but by the way I read s41 and then s1 of the Income Tax Act, in order to be exempt the dividends have to be received by a company which is, either directly or indirectly, a 70% or more shareholder in the company…

The guy I was talking to on Zoom lives in Cape Town, works remotely for a Dubai company and earns a good income. He and his wife are thinking of living in Dubai for half of every year so that they will not be deemed to be South African residents. They figured they would save 45% tax because he’s on the maximum marginal tax rate. It seemed like a good idea as Income Tax in Dubai is zero. There are a number of factors that he missed. I didn’t ask what his income is, so let’s work on R2m a…

It seems there’s a need for further clarity, particularly regarding Donations Tax, Exempt Institutions and PBOs (Public Benefit Organisations). You will have read in another article that certain non-profit entities may register at SARS both as an Exempt Institution (EI) and as a PBO. So what is the difference and how does that affect taxes? Exempt Institutions do not pay Income Tax. They may still have to pay Donations Tax as well as PAYE, VAT etc., depending upon their nature. Public Benefit Organisations are exempt from Donations Tax. Also a donor to a PBO does not pay Donations Tax…

Transactions, such as the sale of shares or fixed property between related parties are deemed for tax purposes to have been at market value, regardless of the documented transaction value. It often happens that you will want to sell assets into your trust structure and you are a connected person in relation to the trust. So, how are the assets valued? The value of listed shares are published daily, so that one is easy, but what about shares in a private company, or in an investment property? All tax acts are silent on who may perform the valuation, so you…

I was chatting to a client on Zoom and trying to do some quick arithmetic at the same time. I didn’t do too well! She had R35m which she wanted to lend to an investment company that would be owned by a new trust. The question was. How much tax would she pay as a result of s7C of the Income Tax Act. s7C says that she would have to charge the company interest on the loan at least at the official rate which is currently 5,25%. Because the company deducts the interest from its taxable income, that’s a negative…

Tax

If I earn over R1m a year from AirBnB, must I register for VAT?

On what date does the seller become liable for CGT on the sale of fixed property.

All Import Export licenses suspended

A profound change to Company Tax returns

Can a JV register for VAT?

Tax residence – the full picture

SARS Administrative penalties on dormant companies

Must an importer or an exporter be VAT registered?

Market value for connected transactions

Must a trust register as a taxpayer?

If I trade in residential property must I charge VAT?

Assessed losses that won’t carry forward

SARS penalties now R2 000 per month for late personal tax returns

How entrepreneurs save tax

How to minimise company tax

Are trusts exempt from Dividends Withholding Tax?

Should I live in Dubai to save tax?

Donations Tax, PBOs and Exempt Institutions

How is an asset valued for tax purposes?

Tax on s7C interest

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