Harbour & Associates

Instead of declaring your drawings as salary, rather fix a monthly salary of, say R40 000, above what your start-up company can afford to pay you right now. Pay the PAYE on that fixed amount and credit the balance to your loan account. Then deduct any drawings from the loan account. When the company can pay you a good salary of, say, R70 000 per month, declare only R40 000 for PAYE purposes and take out the rest as repayments of the loan account. It works like this – How does it work? By paying a consistent amount of…

Everywhere you look, even on SARS’ website, you will see that you can make a third (voluntary) provisional tax payment by 30 September for February year end entities and six months after the tax year end for other entities. Why would you want to do this? The tax for the previous year ending February falls due on 30 September even though the tax return does not have to be submitted until after that (end February the following year for companies). Any tax not paid by 30 September is subject to interest charges, currently at 7%, until paid. This…

I’m getting a lot of calls lately, because SARS is hitting more and more dormant companies with monthly administrative penalties for each annual tax return outstanding. Here’s a summary of my response – It is the company that becomes liable to SARS for the penalty The directors cannot be held liable The shareholders cannot be held liable The public officer cannot be held liable The only time that SARS can recover the penalties is if the company starts to trade If your company is not trading, I suggest that you ignore all correspondence from SARS relating to the penalties If…

Oh wow! Company Tax down from 28% to 27%. Isn’t that lovely? But what does it mean exactly? If your company is doing OK, then it probably makes about 7% net profit on turnover before tax. Then, until this exciting announcement, it paid 28% x 7% tax, that’s 1,96% of turnover. Now however, you must be really happy, because it will only pay 1,89%, a massive saving of .07% of turnover. So the next time you think of increasing your selling prices, be sure to pass at least some of the benefit on to your customers. They will love you…

I have deliberately used the exact headline that appeared under Businesstech on my Google news feed. This kind of sensationalist rubbish is shameful and has to be exposed as just that – sensationalist (and, I suspect, advertorial) rubbish. Although written by a staff reporter, the (mis)information is attributed to Mohamed Kamdar a “tax specialist” at the South African Institute of Professional Accountants. Now that, in itself, is a falsehood, because the SAIPA do not employ tax specialists. The reality is that he only belongs to SAIPA. Given that SAIPA is a poor man’s substitute for SAICA, the South African…

I have been assisting two companies with their tax affairs. They are both in the same group. The first one’s 2019 tax return did not reflect the rental expense, despite the fact that the bookkeeping, financial statements and tax return had all been prepared by the same firm of “Professional Accountants (SA)”. No one had bothered to check the tax calculation against the one at the back of the financial statements which showed a tax liability of a mere R8 000, so the company had been hit with a tax assessment of R144 000! We submitted a revised tax return…

So many people who come to see me fail to understand the extent of their risk as shareholders and directors. Few of them ask about their being the Public Officer, but that’s because they have probably no knowledge of their appointment.
Most of their fears are the result of SARS’ low level staff believing that they have powers far beyond the law. So let’s deal with each of them in turn.

With times as tough as they are right now, several clients have had to approach SARS to see if they can get their tax liability reduced.
Whether it is Income Tax, VAT or PAYE that is owing, SARS will look at the taxpayer’s ability (or not) to pay, and will come to whatever arrangement gives SARS the best achievable result. In other words, they would rather have half a loaf than no bread at all.

In common law, a trust is neither a legal entity nor a juristic person. The trust is actually the Trustees acting in their capacity as such. However, there are exceptions to this basic legal concept, and these are brought about by specific Acts.
I know of two such Acts –

There are two principal taxes that kick in when you die. The first derives from the fact that you are deemed to have sold your assets to your deceased estate at the moment of death at market value. That means that the gain in value of growth assets, such as shares in any companies, fixed property, investment cars, works of art etc, will be subject to Capital Gains Tax, usually at 18%. The first R300 000 is not taxed and your primary residence only gets taxed if the gain exceeds R2m, but these allowances don’t count for much if, for…

SARS are already hitting dormant companies with monthly penalties for failing to submit Income Tax returns. They are now gearing up to do the same to dormant companies that are registered as employers and have not submitted PAYE returns. They have started, as before, by sending out hundreds of demands for EMP201 and EMP501 returns warning that failure to submit can lead to penalties and legal action. So, don’t think that just because you haven’t traded or you don’t employ anybody, you’re off the hook. Yours is exactly the kind of company that they are going after. You can submit…

There’s no option if your VATable turnover exceeds R1m per annum. If it is less, then you can voluntarily register if it is expected to exceed R50 000 per annum. Let’s take a look at the pros and cons of voluntary registration. But first we need to establish whether , given that your turnover exceeds R1m, you need to register. If the R1m is made up of items not included below as exempt, then they are VATable. Exempt items/services include – Public road and rail transport Rental of residential property Approved educational services Salaries Certain financial services, such as…

The simple answer is that you can’t. SARS no longer issues Tax Clearance Certificates (TCC) and the reason is pretty obvious. They were valid for 12 months provided you kept your tax affairs up to date. If you didn’t, then you would be sitting with a document that looked fine but was invalid. So now, what you get is a PIN, which you pass on to the customer who asked for a TCC. They can then go on to efiling, enter your Tax reference number and the PIN and see whether your tax affairs are up to date. Your tax…

In principle all companies are taxed at 28% on their first R1 of taxable profit, but there are three exceptions where a tax threshold applies depending upon the classification of the company. Turnover Tax. This option was introduced for so-called micro-companies several years ago. It never caught on, mainly because a company could end up paying tax even if it traded at a loss. However, any company that adopted this tax system is only taxed on turnover exceeding R335 000. thereafter the turnover is taxed at 1% up to R500 000, 2% up to R750 000…

Now that SARS has established their monthly penalties on outstanding Annual Tax Returns, they have moved on to VAT returns. They are still only imposing monthly penalties on what appear to be randomly selected dormant (and of course, active) companies. They are now moving on to impose administrative penalties on outstanding VAT returns. This is upping the ante hugely as VAT returns are due every one or two months and the minimum penalty is R250 per month per outstanding return. So if there are say, 6 returns outstanding, the penalty will be R1 500 each month until they are…

Yes! And hurry! On 29 November 2019, SARS changed the game for dormant and shelf companies. After the flurry of uncertaintly, we are now fairly sure of SARS’ intentions, although they have only been applied erratically. 29 November 2018 SARS issues a statement to the effect that they will be imposing administrative penalties on all companies, with outstanding tax returns, including those that have not traded. 26 January 2019 SARS posts final demands on some companies (but not others) efiling profiles to submit their outstanding returns up to 2017, giving 21 business days to do so.

We have got to the point where we are reluctant to tell our clients about the SARS penalties because SARS themselves are being totally inconsistent. This is where we are at today 7 April 2019… On 29 November last year, SARS sent out a notice to the effect that they planned to implement administrative penalties against all companies with outstanding tax returns, including dormant companies. In early March 2019, we received about 400 emails and SMSs from SARS directed at clients stating that they had until March 29…

Today 4 April 2019, the South African Revenue Service (SARS), started imposing recurring monthly penalties (minimum R250 per return, maximum R13 000). This includes dormant companies! We are in posession of hundreds of identical emails and SMSs which simply state the following… Dear Taxpayer, A recurring penalty has been imposed to you. For more information please contact SARS Contact Centre on 0800 00 7277. Regards SARS We have no way of knowing to which client any of them refer as they do not mention the name or tax number. We have notified SAICA (the South African Institute…

So, SARS finally did it. On November 29 2018, they sent out a notice that they would start implementing administrative penalties against all companies (including dormant ones) which had outstanding tax returns. In March 2019, they sent emails and SMSs to those companies (we received over 400 on behalf of clients) advising that all outstanding returns had to be submitted by 29 March to avoid penalties, so it seems like March 30 is the BIG DAY! The penalties are likely to be at the lower end of the R250 to R16 000 range that they announced, but these penalties will…

If your company was registered before 28 February 2018, then an Annual Tax Return for the year or part year ended February 2018 is due at the end of February 2019 (assuming a February financial year end). Failure to submit it, even if the company did no trade, makes it liable for administrative penalties of R250 to R16 000 for each month that it is in arrears. If the company did trade, then an Income statement and a Balance Sheet must be submitted with the return. That means somebody has to do the bookkeeping and there are only 4 weeks…

Tax

How a new company can save PAYE

How to submit a third provisional tax return

SARS’ Administrative Penalties have no teeth

Impact of reduced company tax rates

How SARS will use new technology to nail tax dodgers: expert

Beware the cowboy accountants

Can SARS attack you as a shareholder, director or public officer of your company?

Is a compromise with SARS taxable?

Is a trust a legal entity or a juristic person?

How am I taxed when I die?

Penalties for not submitting PAYE returns even if dormant

Should I register for VAT?

How do I get a Tax Clearance Certificate?

Is there a tax threshold for companies?

SARS now imposing monthly penalties on late VAT returns

Must my dormant or shelf company submit tax returns?

What is going on regarding the SARS administrative penalties?

SARS imposes recurring penalties on all non-compliant companies

SARS hits all companies with administrative penalties

Your company has two tax returns due at the end of February

Do you want to leave your cart?