Tax

  How CGT taxes inflation Did it ever occur to you that CGT is not a capital gains tax? It is a tax on inflation! Let’s say that in 2003 you bought a property for R1m. You sold it in 2015 for R2m and average inflation over that time was 6%. Those of you who have read my post on the Rule of 72 will be able to calculate that you made zero profit because over the 12 years, the value of money halved from R2m to an effective (buying power) R1m which is what you bought…

So you don’t want to pay tax? That’s easy – don’t make any money! I love paying tax, because the more tax I pay, the more money I made. Of course, that’s after we have worked our magic and saved us as much tax as we legally can. And then we still pay a lot of tax? What a pleasure! One of our clients accidentally made a bad mistake with one of their companies. The accounts they submitted to us only included 9 months’ profit and their tax return was submitted on that basis. SARS issued the dreaded IT14SD. Following correct procedures, we…

SARS is smart. Smarter than you! There’s hardly a business or business person that has not slipped up in some way at some time with their tax affairs. After all you cannot be expected to know all of the taxation laws in detail and even if you did, you couldn’t possibly keep up with the frequent changes. Sometimes one change deletes a previous change even before the previous one came into effect. Other times one change amends a previous one before the previous one came into effect. This happened with Dividends Withholding Tax. It was promulgated at 10% and signed…

I checked “Important dates” on the SARS website – no mention of the last date for provisional taxpayers to file their 2015 returns via efiling! I guess SARS doesn’t consider that important? Anyway, the last date is 31 January 2016. Later than that and you will become liable for administrative penalties. Some of them are quite severe for repeat offenders (anything from R250 to R16 000 per month). But here are some more things you really must know about SARS Voluntary Disclosure. There’s a permanent option to voluntarily disclose previously undisclosed income or other naughties. SARS…

I often I get asked whether to “buy” on a Lease or buy on Instalment Sale and then whether the firm should own the vehicle or the Director. The answer to the first does depend on the answer to the second, so let’s tackle the second one first. (How confusing is that?!) If the object is to minimise the combined tax bill of the company and the director, then it is worth while doing the numbers. But the chances are that, if the vehicle is in the middle to upper bracket and the director does a fair amount…

The Stamp Duties Act was repealed with effect from 1 April 2009 so that lease agreements concluded from that date no longer needed to be stamped. The only remaining item that required stamps was the transfer of company shares and this duty now falls under the Securities Transfer Tax Act. STT is levied at 0,25% of the transfer consideration as before, but stamps are no longer used. The transfer must now be declared electronically using the SARSe-STT system. The company is liable to SARS to pay the STT within two months after the month of the transfer. The company may recover the…

In tax law the concept of Connected Persons arises frequently. They are sometimes defined specifically for a particular section of the Act so that the interpretation of the term “Connected Persons” is by no means easy. Typically, a taxable transaction between connected persons must be considered to have taken place at Market Prices rather than the actual transaction price. This is an obvious anti-avoidance mechanism and it is therefore important to interpret the definitions correctly. This article is, therefore, only a rough guide to the meaning of “connected persons” and is intended to alert you to the need to examine…

Registration Because of the high level of VAT fraud SARS is making it increasingly difficult to register and the delay can be extremely frustrating especially for start-ups. For this reason registration is usually undertaken by professionals, such as Harbour and Associates, on behalf of their clients. However, this engagement takes a lot of partner time as is commensurately priced. Who must register Any business which is expecting to turn over in excess of R1m during the coming 12 months is required to register as a VAT vendor. Where the turnover figure is less than R1m but more than R50…

Cash versus Accrual basis Normally, vendors account for VAT on the accrual basis. That is, the VAT falls to account on the date of the relevant invoice. If the vendor has uncollected debtor balances at any time, then the debtors book contains VAT that has often already been paid over to SARS by the vendor, but not yet collected from the debtor. The converse is true in respect of the vendor’s unpaid creditors, but since debtors balances almost invariably exceed creditors balances, the VAT tied up can cause severe cash flow difficulties. Sole traders, partnerships and other unincorporated…

Tax Invoices A full tax invoice, which must usually be denoted in Rands, must contain the following – 1) The words “Tax Invoice” in a prominent place 2) The name, address and VAT number of the supplier 3) The name, address and VAT number (if registered) of the recipient 4) An individual serialised number and the issue date 5) Full description of the goods or services indicating that they are second hand if this is the case. 6) The quantity or volume of the supply 7) Either the value, the VAT thereon and the total or 8) The amount…

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…

There is no distinction in tax law between married couples and same sex and opposite sex life partners, they are all referred to as “spouses”. Therefore, although it is not strictly necessary, we recommend that all life partners who are not married should swear an affidavit (we are Commissioners of Oaths, so you can get that done at our offices) to the effect that they consider themselves to be life partners and that they attach the affidavit to their Wills. It is not necessary that the partnership survives for life, just as married couples can get divorced and terminate the…

All South African residents are taxed on their world-wide income regardless of its source. If the income is also taxed in a foreign country then reference must be made to the Double Taxation Agreement between South Africa and that country to determine how the resident will be taxed. Exemptions Payment for services rendered outside South Africa if such a person was outside South Africa for at least a total of 183 days of which 60 days were continuous. Non-South African pension and social security payments. Who is a South African resident? A…

Registered micro businesses are taxed on receipts from turnover rather than profits. We are of the view that this is a terrible approach to taxation. Think carefully before deciding to register! The object is to simplify compliance and books of account need not be kept. Registered micro businesses must ignore capital gains and losses on sale of fixed property to the extent that it was used for business purposes. They must also ignore capital gains and losses on sale of other fixed assets used mainly (i.e. more than 50%) for business purposes. Who qualifies – Natural persons in business (or…