Questions & Answers

When I registered a company with CIPC I received a tax reference number. Do I need to do anything else with SARS?
Yes, you need to identify and register a representative with SARS. SARS need to be able to deal with a real person referred to as the Registered Representative.
Without a Registered Representative no tax returns can be submitted which in turn can lead to penalties and interest, even if the company does not yet trade or make a profit.
It is also important to appoint a Tax Practitioner for a company.

A foreign national can be a Registered Representative, but they would need to register also for an individual tax number in advance.

If the entity employees staff, the company must also register for payroll taxes (PAYE and Unemployment Insurance (UIF)
Registration for VAT is compulsory if turnover exceeds R1 million in a 12 month period. 

Can my company be deregistered?
Yes. It is a requirement to submit annual returns and pay renewal fees to CIPC on an annual basis in the anniversary month of registering the entity. If this is not done, CIPC will to
re-instate a de-registered company costs extra money and proof that it was active must be supplied eventually deregister the company.

What is a Beneficial Ownership declaration?
A shareholder agreement is critical where there are multiple shareholders.
A well designed shareholder agreement will help to:
• Provide clear direction on finer detail of rights and responsibilities of directors and shareholders
• Correctly value the shares of the company
• Dictate what will happen with company should an unforeseen event take place such as death of a key shareholder
• Give direction as to how remuneration will be paid
• Provide guidance on dealing with loans to and from the company
• A shareholder agreement will help to manage relationships and expectations as well as saving possible high legal fees down the line   

Do we only need to submit tax returns when we start making money?
No, every legal entity must register with SARS and ensure compliance with tax laws, even if no tax is payable.

What is Provisional Tax?
Provisional tax is simply a method of collecting Income Tax. Whereas employees generally pay tax monthly through the PAYE (Pay-as-you-earn) tax collection system, provisional taxpayers pay six monthly.

Important to correctly estimate Provisional Tax to avoid penalties and interest. Important to also consider Capital Gains Tax (CGT) when doing provisional tax estimates

Companies are by default provisional taxpayers Individual taxpayers only become provisional taxpayers in certain cases such earning more interest than the annual threshold or earning trade or rental income in excess of R 30,000 per year.

What Expenses can I claim for Tax?
In general terms any expenses incurred to earn an income could be tax deductible
In some cases the Income Tax Act provides specific rules (for example: wear and tear deductions on assets used for a business)
In some cases expenses are prohibited such as private expenses (e.g. for your household or upkeep)

Important is to maintain a proper system to be able to provide proof to revenue authorities for all expenses claimed. These must be kept for at least 5 years from date of assessment.
Where a vehicle is used for business purposes a logbook of business trips will be required.

Do I need slips for expenses?
Yes, the revenue authorities may ask for documentary proof of any expense claimed, If it is requested and proof cannot be provided, an expense may be disallowed, this in turn can lead to penalties and interest.    

What medical expenses can be claimed?
Generally, only:
Prescription medication and payments to a registered medical practitioner
Over the counter or self medication may not be claimed

Medical aid contributions qualify as deduction, but not Gap cover or medical insurance products
Always check with your broker or service provider if you can claim it for tax

Generally a disability can be temporary or permanent. It is important to obtain the ITR-DD form from
your medical practitioner as proof. Disclose on your tax return there is a disability.
If there is a proper documented disability then a higher % medical rebate applies    

Can I claim a deduction for tax for a home office?
There is a possibility to claim for a home office if you are expected to work from home.
To support your claim, make sure you have a letter from your employer

Claims for home office expenses are normally scrutinised and should therefore be very accurate. Often Revenue Authorities requires photographs of the home office

The office should be a separate room and only used for the purposes of an office.
Therefore no beds, tv, dining room table, etc

Expenses can be claimed in relation to square meterage of the office vs the total buildings on a premises.

Qualifying expenses are normally: rent or interest on bond, insurance, electricity, repairs, wages for cleaning & garden
Expenses such as coffee, tea and Wi-Fi will not be allowed as deductions
Deductions that can be claimed in full: specific repairs for the home office; wear and tear on equipment for the home office       

What is Turnover Tax?
Individuals or companies may register for a turnover tax in stead of normal income tax for certain activities. The turnover has to be below R1m.
The beneficial tax rates only apply to the registered activity. Tax is calculated on turnover in stead of profit. From a Tax perspective it reduces administration for individuals, but Companies still have to prepare financial statements in terms of the Companies Act. The first R 200,000 dividends are also exempted from dividend tax if a company is registered for turnover tax

What is Small Business Tax (SBC)?
For companies with qualifying activities beneficial tax rates apply if:
Turnover is below R20 million per annum
All shareholders are natural persons
No shareholders holds shares in any other active company (apart from exceptions such as shares in listed entities)
These requirements must be met 365 out of 365 days of the year

Income such as rental or personal service providers do not qualify

If a company qualifies, tax rates on a sliding scale is used to calculate tax on profits.
There is no need to register specifically as a SBC.

Is Tax Planning legal?
Tax planning refers to analysing and arranging your tax affairs in an efficient manner to reduce overall tax payable.
It is done in accordance with the law.

Tax evasion on the other hand is using illegal methods to avoid paying tax and we do not assist with such requests.
Given the fact the penalties for tax evasion is exorbitant and could also include time in prison, it is not a good idea.

What are the different tax cycles?
Individuals - who are not Provisional Taxpayers
Annually - from July to October
Requirement - Tax Return

Individuals - who are Provisional Taxpayers
Provisional Tax - August and February
Annual Tax return - due from July to January the following year

Trusts
Provisional Tax - August and February
Annual Tax return - due from September to January the following year

Companies & Closed Corporations
Dependent on month in which year end falls:
Provisional Tax - 6monthly
Annual Tax return - 12 months after date of year end

Value Added Tax
Bi-Monthly for companies with turnover below R30m per month, by the 25th in the following month preceding the two month cycle

Payroll Taxes (EMP201)
Monthly, before the 7th of the following month

Payroll tax reconciliations (EMP501)
September and April (issuing IRP5/IT3 certificate to employees)

Workman's Compensation April to June annually

Promotion of Access to Information Act (PAIA) returns June deadline