Unless you are a tax consultant, you most probably will benefit from the expertise offered by tax specialists. Since you focus on your career or business, you won’t spend all that much time in keeping up to date with every possible tax regulation, changes in legislation or tax tables. But tax specialists do and that’s why their help is so valuable with the regards to every aspect of your business and even as individual, you will benefit from their guidance or handling of your tax returns.
Some of the aspects you will have to deal with when starting a business in South Africa are briefly explained below, giving you an indication of the importance of complying with relevant payroll, accounting and tax registration in the country.
Registering your Business for Tax
You cannot operate a business without having registered with the South African Revenue Services within the allowable period. If you do, you should expect a knock on the door at one stage or another from a SARS official.
Registration entails going to the nearest SARS office where you are trading and registering the business for tax. You will receive a tax reference number, which will be used every time you submit returns. This number is also important when it comes to imports and exports. Registration must take place within 60 days of commencing with business.
Don’t delay as hefty fines can be expected for non-compliance with the regulation. You will need to complete the IT77 form which can be downloaded from the SARS website or obtained from the nearest tax office.
If you register a private company then you will need a business reference number from CIPCO. By in so doing, your company will automatically be registered for tax. If you have one or more employees you will need to register for administration of employee tax. Likewise, you will also need to register for VAT if your business has the required turn-over; however, you don’t immediately have to do this and can wait until your company’s turnover reaches the threshold amount.
If you have registered a private company then you will automatically fall in the provisional taxpayer category. This type of tax allows for two tax payments regarding income generated during the relevant tax period. SARS allows for a third payment after the end of your company’s tax year to make it easier to pay the amount due, rather than having to pay one large sum after assessment.
You will be expected to pay your first provisional tax within six months from the start of your the relevant tax period with the second payment due on or before the last day of the said tax period. Note that you don’t have to make a third payment, but if so chosen, you must make it within six months of the end of the same tax year. This is only relevant should your financial year not end on the last day of February. If it ends on the last day of February, you will have an additional month to make the optional payment.
If you have employees then you must deduct tax from their salaries and pay the deducted amounts to SARS every month. It is called Pay As You Earn or PAYE tax. If your employees receive any wages or salaries above the current tax thresholds then, according to law, you must register as employer for employee’s tax at SARS by completing the EMP101 form. You will then receive the EMP201 form every month, which you must complete and return to SARS together with the payment of the amounts deducted from the remuneration of your employees.
Even if you don’t have employees, you are still a director of the company. With such comes the obligation to pay taxes on your remuneration as director. You cannot receive an IRP5 tax certificate as is the case with a normal employee if the company hasn’t deducted tax from you as director.
When it comes to director remuneration, the formula is quite different and this is where you will benefit from the expertise of The Tax Shop specialists. It is often difficult to determine your director remuneration early on in the tax period because you may still pay for your living costs out of your loan account. And that’s why a special formula is used to determine what amount of tax must be deducted from your remuneration for payment to SARS.