Tax Archives

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.

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…

Tax

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

How CGT taxes inflation

The more tax I pay the happier I am!

Playing football in a minefield

Tax – things you should know

Lease or Instalment Sale?