Global Courant
As tax season approaches, experts at iKhokha have provided eight tips to help businesses through the stressful period.
South Africa’s tax season begins on Friday, July 7, 2023.
The South African Revenue Service (SARS) has already updated its mobile filing platform in preparation for the season and has begun populating taxpayer profiles with available data from third parties.
“Tax is a topic that, at best, will cause illicit yawning and cause eyes to glaze over and, at worst, cause stress, anger or panic,” iKhokha said.
Amid the anxiety of filing tax returns, iKhokha provided the following tips to help businesses save money, access benefits, and comply with the law.
1. Register your company with SARS
Naturally, the first step for a company is to register with the Company and Intellectual Property Commission (CIPC).
Applications can be made online and the minimum registration fee is R125, with an additional R50 to reserve a chosen name for the company.
Upon registration, the CIPC issues a corporate income tax reference number that will be used with SARS, which is also used when registering for eFiling.
2. Pay on time to avoid back tax penalties
Businesses must ensure that their tax returns are filed before the deadline to avoid penalties.
Tax season begins on July 7 this year and likely ends in November — SARS has yet to announce when it will close.
Provisional taxpayers must pay their first installment in February, and their second in August.
Those who qualify and are registered for sales tax must file a return within two months of the end of the financial year.
While previously SARS could only issue fines if there were two or more outstanding returns, a 2021 law change will allow the tax collector to penalize those with only one outstanding return.
Penalties range from R250 for taxable loss of income of less than R250,000 to a fine of R16,000 for loss of taxable income in excess of R50 million – these are monthly fines.
3. Apply for sales tax
Micro-enterprises with an annual turnover of less than R1 million are eligible for sales tax, which is a simpler tax system without all the red tape that can be challenging for a small business to manage.
“Think of sales tax as SARS that lends a helping hand to small businesses to reduce their tax costs, iKhokha said.
The turnover tax replaces income tax, VAT, provisional assessment, capital gains tax and dividend tax.
Moreover, instead of a normal business tax system where tax is calculated on a percentage of the profit, sales tax is calculated on the turnover of the company.
However, companies will still have to pay employee taxes and Unemployment Insurance Fund (UIF) contributions.
4. Take advantage of small business tax breaks
SARS classifies companies earning less than R20 million a year as a Small Business Corporation (SBC).
Most corporations typically have a 27% income tax rate, while SBCs qualify for significantly lower rates.
For example, an income of R91,250 or less is subject to a tax rate of 0%.
5. Take advantage of deductibles
Businesses can also claim deductible expenses, which fall into several categories:
Daily Expenses:
Rent Water Electricity Telephone bill Internet Office equipment Stationery Cleaning costs Software subscriptions Staff salaries Travel and transport costs Marketing and advertising costs Accounting costs Legal costs Education costs
Entertainment costs
These expenses are a bit more controversial, as many falsely claim non-business entertainment expenses. SARS, however, requires businesses to prove that the expenses were indeed business-related, such as taking a customer to a restaurant.
Biggest expenses
These are one-off expenses, such as equipment, furniture, cars and office renovations.
Other expenses
These include the following:
Startup costs can be anything you spend on starting your business before it goes live. Donations to charities with an ANBI number. Contributions that you have made to save for your retirement, such as annuities.
6. Tax benefit on solar energy
In response to the country’s energy crisis, companies can qualify for a 125% tax deduction on assets used to generate renewable energy.
This means companies can reduce their taxable income by 125% of the cost of a renewable energy investment, which can be claimed in one or three years.
7. Stay above board with employee taxes
Pay as Your Earn (PAYE) is the income tax system where the employer withholds tax from his employee’s salary and pays it to SARS.
While it reduces the administrative burden on employees, it can get complicated for businesses, especially when factoring in overtime, bonuses, and commissions.
All employees under the age of 65 who earn more than R91 250 per year must pay tax.
Employers are also required by law to provide pay slips to their employees.
Taking PAYE from staff salaries, but not paying SARS will result in severe penalties and even imprisonment.
8. Don’t try to avoid paying taxes
There are different types of tax crime in South Africa:
Failing to declare income or pay tax on this income Lying about expenses Withholding tax from employees’ salaries and not paying them to SARS Failing to file a tax return Charging VAT but not forwarding it to SARS Filing fraudulent invoices Failing to register for tax purposes
SARS says those who fail to comply with the tax system will be subject to criminal prosecution and maximum fines for non-compliance.
Read: Problems are coming for the South African economy
