Chapter 13 - Small Business Law
Income tax is the government's main source of income and is levied in terms of the Income Tax Act (No 58 of 1962).
Small-business corporations (those with an annual turnover of less than R14-million) are taxed according to a sliding tax rate. This scale is adjusted every year.
CIPC (Companies and Intellectual Property Commission) controls the registration of companies. A Company will automatically be registered as a taxpayer when CIPC informs SARS of the registration of the company. A sole trader must register, but a Company will automatically be registered.
Example: Lena Jacobs and Susan Smith own a business called KwikSave. KwikSave is a partnership. When they register for income tax, they would each have to register as taxpayers in their own names. If KwikSave was a Company, then they would register the business as a taxpayer, in the name of KwikSave Pty.
Individuals who are provisional taxpayers (the sole trader, partners, members and directors) must submit a provisional tax return twice a year. If a payment is due, the first provisional tax is paid before the 31st August and the second on or before 28/29th February of each year.
IRP 6 returns are done through SARS e-Filing. Taxpayers can pay through a bank by using the account details on the IRP6 Provisional Returns, or through the SARS e-Filing service. Go to www.sarsefiling.co.za or www.sars.co.za for more information. The reference and account details must reflect on the IRP6 and must be used when making the payment.
A sole trader or partner calculates the tax to pay by taking her or his income and subtracting all the money spent on the business. Business expenses are things like:
CCs and companies pay tax on the income brought into the business, after the expenses of running the business have been deducted. One of the expenses which a CC or company can subtract is the salaries paid to members or directors. Members of CCs and directors of companies cannot subtract the business's expenses from their own salaries. The CC or company will subtract these expenses when it pays CC or company tax.
The Income Tax Act specifies that all expenses incurred in the production of income must be deducted. . These are some of the things that can be deducted:
Even if the directors or members are provisional taxpayers, PAYE must still be deducted on a monthly basis.
It is complicated to work out tax. The local SARS will help people to fill in their tax forms. A CC or company should ask an accountant to help with its tax.
Once a year all taxpayers have to submit an income tax return. On this return the taxpayer must indicate all income and deductions. SARS will then determine what the final income tax payable is. This is called an Assessment. On the assessment SARS will consolidate all provisional tax paid as well as tax credits and PAYE. The difference between what was paid through provisional tax etc, and the final amount will show as the result of the assessment, If not enough tax was paid the taxpayer must pay the difference to SARS. If there was an overpayment SARS must refund the taxpayer.
Contact the nearest SARS office in your area and ask for form IT77. Fill it in and send it back to the SARS. Instead of completing the form, you could send the following information to the SARS and they will complete the form:
The person and the CC or company who register like this are called provisional tax payers.
If you are a sole trader or a partner in a partnership, this is all you have to do to register.
When a CC or a company is registered with the Registrar of Companies in Pretoria, the Registrar lets the Receiver of Revenue in your area know. The Receiver will send the CC or company a form IB68 to fill in. The Receiver will tell the members or directors what information the Receiver needs, and what else the CC or company must do. The CC or company will then be registered as a taxpayer itself, besides its members or directors being registered as provisional taxpayers themselves.
It is a criminal offence not to pay tax. If tax is paid late, the Receiver can fine the taxpayer.
Electronic filing (e-Filing) through the SARS eFiling website is a way of submitting your tax returns electronically. This method of submitting your returns removes the risks and problems of manually sending in your tax returns.
Before submitting your tax returns, you first need to complete the registration process on www.sarsefiling.co.za.
The main benefits for taxpayers of eFiling are that it is simple, must faster and more convenient. The other benefits include:
What is the cost?
The eFiling service is offered at no charge. However, normal service charges for Internet Banking payments will apply.
What are the steps involved?
For more information, contact the eFiling Call Centre on 0860 709 709 (07h00 to 17h30, excluding weekends and public holidays), or visit www.sarsefiling.co.za
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