Tax

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…

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…

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…

Don’t hold your breath! The drop was first announced in the 2021 National budget and again in that of 2022. But, guess what, it only comes into effect for companies whose financial year commences on or after 1 April 2022. And since most companies have a 28 February year end, that meant that from the first announcement in February 2021, the benefit will only be felt in September 2024, when the Feb 2024 taxes are due for payment. That’s three and a half years later. And we’re supposed to get excited?…

It was, I think, about two years ago that SARS started hitting random dormant companies with administrative penalties of R200 each month for each annual tax return that was overdue. I still get well over 100 SMSs and emails from SARS advising me that another penalty has been imposed. In the early days, we sent emails to each of the companies to advise them of the penalties, but they generally did not respond, so now I just delete all those messages from SARS. However, last month, they announced that they are going to start hitting individuals and I have just…

It is a very common misunderstanding that a dormant company does not have to submit returns. Quite simply, all companies must submit tax returns and CIPC returns, albeit Nils. So what happens if they don’t? Tax returns Your company will not be able to obtain a Tax Clearance if there are any provisional or annual tax returns outstanding. But if it’s dormant, then this is not likely to bother you. SARS is hitting dormant companies with a penalty of R250 per return, each month that the return is outstanding. This will not bother you until you start…