With tax season fast approaching, experts at iKhokha have given eight tips to help businesses get through the stressful period.<\/p>\n
Tax season in South Africa is set to kick off on Friday, July 7 2023.<\/p>\n
The South African Revenue Service (SARS) has already updated its mobile filing platform in preparation for the season and has started to populate taxpayer profiles with available third-party data.<\/p>\n
\u201cTax is a subject that, at best, will illicit yawns and cause eyes to glaze over and, at worse, cause stress, anger or panic,\u201d iKhokha said.<\/p>\n
Amidst the fear of filing tax returns, iKhokha gave the following tips to help businesses save money, access benefits, and comply with the law.<\/p>\n
1. Register Your Business With SARS<\/strong><\/p>\n Obviously, the first step for a business is to register with the Company and Intellectual Property Commission (CIPC).<\/p>\n Applications can be made online, and the minimum registration fee is R125, with an additional R50 to reserve a chosen name for the company.<\/p>\n Once registered, the CIPC will issue a Company Income Tax reference number that will be used with SARS, which is also used when registering for eFiling.<\/p>\n 2. Pay on Time to Avoid Back Taxes Penalties<\/strong><\/p>\n Businesses must ensure their tax returns are filed before the deadline to avoid penalties.<\/p>\n Tax season will open on July 7 this year and will likely end in November – SARS is yet to announce when it will close.<\/p>\n Provisional taxpayers must pay their first instalment in February, with their second in August.<\/p>\n Those who qualify and are registered for turnover tax must file their returns within two months of the company\u2019s financial year-end.<\/p>\n Although SARS used to only be able to issue penalties if there were two or more outstanding returns, a law change in 2021 allows the tax collector to penalise those with only one outstanding return.<\/p>\n Penalties range from R250 for taxable income loss less than R250,000 to a fine of R16,000 for taxable income loss of over R50 million – these are monthly penalties.<\/p>\n 3. Register for Turnover Tax<\/strong><\/p>\n Micro businesses with an annual turnover of less than R1 million qualify for turnover tax, which is a simpler tax system without all the red tape that may be challenging for a small business to manage.<\/p>\n \u201cThink of turnover tax as SARS lending a helping hand to small businesses to reduce their tax expenses, iKhokha said.<\/p>\n Turnover tax replaces income tax, VAT, provisional tax, capital gains tax and dividends tax.<\/p>\n Moreover, instead of a normal business tax system where tax is calculated against a percentage of profit, turnaround tax is calculated against the turnover of the business.<\/p>\n However, businesses will still need to pay employee tax and unemployment insurance fund (UIF) contributions.<\/p>\n 4. Take Advantage of Tax Benefits for Small Businesses<\/strong><\/p>\n SARS sees companies who earn less than R20 million per year as a Small Business Corporation (SBC).<\/p>\n Most companies usually have an income tax rate of 27%, whilst SBCs qualify for significantly reduced rates.<\/p>\n For instance, income of R91,250 or less is subject to a 0% tax rate.<\/p>\n 5. Take Advantage of Deductibles<\/strong><\/p>\n Businesses can also claim deductible expenses, which fall into several categories:<\/p>\n Day-To-Day Expenses:<\/strong><\/p>\n Entertainment Expenses<\/strong><\/p>\n These expenses are slightly more controversial as many falsely claim non-business-related entertainment expenses. However, SARS requires businesses to prove that the expenses were indeed businesses related, like taking a client to a restaurant.<\/p>\n Capital Expenses<\/strong><\/p>\n These are once-off expenses, such as equipment, furniture, cars and office renovations.<\/p>\n Other Expenses<\/strong><\/p>\n These include the following:<\/p>\n 6. Solar Tax Break<\/strong><\/p>\n In response to the nation\u2019s energy crisis, businesses can qualify for a 125% tax deduction on assets used to generate renewable energy.<\/p>\n This means that businesses can reduce their taxable income by 125% of the cost of an investment in renewable energy, which can be claimed over one or three years.<\/p>\n 7. Stay Above Board with Employee Taxes<\/strong><\/p>\n Pay as Your Earn (PAYE) is the income tax system where the employer deducts tax from their employee\u2019s salary and pays it to SARS.<\/p>\n Although it limits the administrative burden on employees, it can become complicated for businesses, especially when factoring in\u00a0overtime, bonuses and commission.<\/p>\n All employees younger than 65 and who earn more than R91\u202f250 a year must pay tax.<\/p>\n Employers are also legally required to issue their employees with payslips.<\/p>\n Taking PAYE off staff salaries but not paying SARS will result in heavy penalties and even jail time.<\/p>\n 8. Don\u2019t Try to Avoid Paying Tax<\/strong><\/p>\n There are several types of tax crime in South Africa:<\/p>\n SARS says that those who do not adhere to the tax system will face criminal prosecution and maximum non-compliance penalties.<\/p>\n
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