Harbour & Associates

So many of you have companies that are completely dormant. From 7 December 2018, if you have not submitted their company tax returns you can get hit with R250 per month or more administrative penalties! This will go back to 2009 and subsequent years. The adminitstrative penalties are actually R250 to R16 000 per month depending upon taxable income or assessed loss, so we can safely assume that the R250 will apply to dormant companies only as SARS specifically mentions that dormant companies must also submit returns. They first have to issue a final demand, but since they can post…

The Companies Act of 2008 had one little requirement that everybody ignored. Now CIPC is coming down hard! The Act s33 and the Regulation 30 say that if you are not required to submit your Annual Financial Statements with your Annual Return to CIPC then you must submit a CoR30.2 Financial Accountability Supplement simultaneously with you Annual Return. You have to submit these returns during the month following every anniversary of the date of registration of your company, even if it has never traded. Failure to do so will lead to de-registration and, once de-registered,…

Most of you use a car on company business. Should you own it or should your company or trust? There are two ways that you can be taxed depending upon whether you (or a trust of which you are a beneficiary) owns the car. If the employer company owns the car, then you will pay PAYE plus VAT on the private use of the car. The amount payable is determined by your tax bracket, whether you or the company pays the fuel and maintenance cost, how much business travel was done compared to private…

In a nutshell, there aren’t any, despite what SARS imply when they talk to us. SARS love to make out that the Public Officer can be held liable for the tax sins of the company, but there’s nothing in the legislation to support this. What is important is that all companies must appoint a Public Officer and that failure to do so can lead to penalties of R25 per day, which can amount to quite a lot of money over, say, 365 days. I’ve never known SARS to impose this penalty, but there’s always a first time. So what is…

The idea of Tax Clearances was a master stroke by SARS. If you have traded, you can’t get one unless you’ve done your bookkeeping and your tax returns. Many creditors will not pay unless the supplier produces a tax clearance certificate. Whether or not that is just a ruse to delay payment, the effect is that we often get people coming to us for an urgent tax clearance so that they can get a payment from a debtor. That’s when they learn that we’ll first have to do their bookkeeping (usually for three or four years), then their Provisional Tax…

We do the books for a lot of small companies and so often the boss expects the company to pay for his Big Mac. Not good. He is expected to feed himself, so the quick bites are not considered to be in the production of income and are therefore not tax deductible. From our point of view, we quote to do the company’s books, not the private account of the owner, so, if he (or she, though less commonly) eats almost daily from a filling station, Nando’s, MacDonalds or the like, we have to process the purchase to his loan…

There’s no VAT charge on letting of residential property, but be careful if you own a residential hotel, frail care facility, retirement home or similar long term accommodation So, you own a house or a residential unit and rent it out. That is not a vatable supply. If you own commercial property for rental, then that is vatable at the current rate of 15%. It gets interesting if someone stays in your guest house, B&B, hotel, retirement home, frail care home or the like. If the person stays for 28 days or less, then the full amount of charges attracts…

So, you’ve read Company Basics and Trust Basics. Now here are some Tax Basics for companies. 1) There are three tax returns each year. The first and second provisional returns which must be submitted in August and February of the company’s tax year if the company year end is February, then the Annual Tax Return which is also submitted in February, but a year later. 2) The first and second provisional returns are based on the last assessed income, so until the company has…

Many people continue to believe that it is better to provide their personal services, typically consulting, through a company rather than as individuals. Not so. A Personal Service Company is one which provides services such as consulting, bookkeeping, designing etc which are actually services provided by a person rather than product supplied or non personal services, such as rental property. In order for it to be classified as a Personal Service Company a number of tests are applied. You can research more deeply if you are unsure whether these tests are satisfied in your case or not. Remuneration. Does it…

Despite the negative perceptions of auditors following the KPMG blow out, the Institute of Chartered Accountants (SAICA) is the professional body that I respect most (I am governed by three – auditing, SAICA and engineering). They recently published an article by Bowman Gilfillan on the growing trend towards resistance to paying taxes – follow the link, go to Current Issue and click on Article 2642. If you feel the way I do, you’ll enjoy reading it, so I decided to share it with you. They mentioned “Civil disobedience”. We’ve seen that working against e-tolls, so we know that South Africans can pull…

Dividends withholding tax is now 20%, but when is it charged or not charged? In principle, DWT is withheld by the company paying the dividend, then paid over to SARS by the end of the month following that in which the dividend was declared or paid. So if the dividend was R100 000, the shareholder gets R80 000 and SARS gets R20 000. If the shareholder is not a South Afrcian resident (and provided his/her share certificate was stamped “Non-resident”), then we have to go to the Double Taxation Agreement between the shareholder’s country of residence and South Africa. Depending…

Pity you, the poor business owner who decides to voluntarily register his company for VAT. Here are the latest obstacles that you’ll have to overcome – You’ve heard somewhere that you can now register on-line. This was anounced with great fanfare about a year or so ago. Right, so you go on-line and yes, there’s an application form called a RAV01. You dutifully fill it in, but wait, the date first liable is critical as all transactions from that date are deemed to include VAT. So, make sure you get that right. So what next? You now have to take…

In his 2017 budget speech, Pravin Gordhan announced the “supertax” rate of 45% on individuals’ taxable income in excess of R1,5m per annum. This tax rate also applies to all taxable income earned by a trust (except a special trust). Should we be concerned? He also announced that Dividends Withholding Tax is increased from 15% to 20%. Again, should we be concerned? It all depends upon how you have structured your affairs. Let’s take Income Tax on trusts first. The effect of the change is that CGT on trusts also increases from 32.8% to 36%. None of this should matter to…

The following allowable write off periods are extracted from SARS Interpretation Note 47 of 2009 which replaced Practice Notes 15, 19 and 39. Any one asset (or set of assets, such as a set of chairs) with a cost of less than R7 000 may be immediately expensed rather than capitalised. There are special wear and tear rules for Small Business Corporations. Asset type Years Adding machines 6 Air conditioners: Window type 6 Mobile 5 Room unit 10 Air conditioning assets (excluding pipes, ducting and vents): Air handling units 20 Cooling…

Who must register as provisional tax payers – All companies and CCs All individuals over 65 who 1) are carrying on a business and whose taxable income exceeds the threshold or 2) whose income from interest, foreign dividends and retail exceeds R120 000 All individuals under 65 who 1) are carrying on a business and whose taxable income exceeds the threshold or 2) whose income from interest, foreign dividends and retail exceeds R20 000 1st Provisional Tax Payment (due 6 months into the tax year to which it applies) SARS determines the “basic…

Donations Tax is levied at 20% on all donations (except to Public Benefit Organisations) by companies totalling in excess of R10 000 per annum and by individuals totalling in excess of R100 000 per annum, but how is this declared to SARS? The reason this comes up is that although this is very relevant to trusts and estate planning, we have never, during our 45 years in practice, submitted a Donations Tax Return on behalf of a client, so I actually had to Google it to find out what the return looks like. It is called an IT144 and is…

When I recently checked our most read blog posts, I found that the explanation of Input and Output VAT was the most read at 8775, followed by an explanation of Exempt and Zero rated supplies at 8502. Clearly, there’s a big need for this sort of information so here’s a more complete guide – Output VAT VAT is charged by VAT registered vendors on most of their sales. They pay the VAT over to SARS as Output VAT (think of goods and services going OUT[put] from the vendor). Certain goods (particularly some foods) and services (such as interest…

I am often surprised to find how little our clients understand their company’s tax and CIPC obligations, so here’s a brief explanation – The terms company and Close Corporation are synonymous in the discussion below. 1) All companies must be registered as tax payers. 2) They are all provisional tax payers and that means they must submit three tax returns each tax year regardless of whether they have traded or not. 3) The 1st provisional tax return is due 6 months after the beginning of the relevant tax year (end August 2016 for a February year end company). This is…

There are massive benefits in having your company or CC classified as a Small Business Corporation – most particularly a potential tax saving of approximately R95,000 every year. Here is how you qualify – 1) All members (shareholders) must be natural persons (i.e. no trusts or other companies). 2) No members may hold shares in any other private companies except dormant companies with less than R5 000 assets. 3) Turnover of the company and its subsidiaries must not exceed R20m. 4) No more than 20% of the turnover and capital gains may consist of investment income (such as property rental) and…

Output VAT VAT is charged by VAT registered vendors on most of their sales. They pay the VAT over to SARS as Output VAT (think of goods and services going OUT from the vendor). Input VAT VAT is claimed back from SARS by registered vendors as Input VAT (think of it as the VAT on goods and services coming IN to the vendor). Input VAT cannot normally be claimed in respect of certain supplies including entertainment, staff welfare, motor cars including twin-cabs. The VAT in bad debts written off can be claimed back as input VAT.

Tax

SARS administrative penalties apply to dormant companies

CIPC Annual Returns. Critical changes that influence you!

Who or what should own your car?

The risks at SARS of being a Public Officer for your company

Tax clearances force companies to comply

Your junk food is not tax deductible

VAT on Residential letting

Tax basics

Tax law relating to Personal Service Provider Companies

Resistance to paying tax

How are dividends taxed?

The impossibility of registering for VAT

The new income and dividends tax rates introduced in the 2017 Budget

Wear and Tear Allowances

Provisional Tax Explained

Donations Tax Returns

VAT. How it works, whether to register and how to register

How Company Tax Returns and CIPC Returns Work

The benefits of being a Small Business Corporation

VAT and how it works

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