Posts Tagged ‘income tax’

SARS no longer allows claims for income protection for the 2016 year of assessment which used to be claimed under source code 4018. If you manually capture this amount on your ITR12, you will not be able to submit your income tax return. In cases where source code 4018 is pre-populated on your ITR12 for the year of assessment 2016, your income tax return will be received by SARS but this amount will not be allowed on assessment.

People who pay income tax are generally individuals who earn an income e.g. from a salary, commission, fees, etc.
If you earn under R350 000 for a full year from one employer (that’s your total salary income before tax) and have no other sources of additional income (for example, interest or rental income) and no deductions that you want to claim (for example medical expenses, travel or retirement annuities), then you don’t need to submit a return
Do any of the following apply to you for the tax year 1 March 2014 to 28 February 2015?

  • Did you conduct any trade* in South Africa?
  • Did you have an allowance such as a travel, subsistence or Office Bearer Allowance?  Check your IRP5/IT3(a) if unsure.
  • Do you hold any funds or assets outside South Africa that have a value of more than R200 000?
  • Did you have a local Capital Gain/Loss exceeding R30 000?
  • Did you get any income or Capital Gain in a foreign currency?
  • Do you hold any rights in a Controlled Foreign Company?
  • Did you get an Income Tax Return or were you asked to submit an Income Tax Return for the tax year?
  • Was your annual income* more than R70 700?

If you answered yes to any of the questions above, them you may need to submit a tax return.

Numbrfactory…

We accept that you are a South African tax resident temporarily working Overseas. You will then still have to declare and possibly pay tax in the RSA on all your income.

The remuneration earned outside South Africa may qualify for an exemption from normal tax.

This would apply if you have been outside South Africa for a period or periods exceeding 183 full days in aggregate during any 12 month period and for a continuous period exceed 60 full days and the services (in respect of which the remuneration was derived) were rendered during that period.

‘Piet Nel, SA Institute of Tax Professionals

Check out our latest flyer. approved-numbrfactory-flyer-january-2015-page-001 (1)

 

An annual tax that is payable to SARS based on taxable income (net income) that is received by or accrues to individuals, companies, and other taxpayers, after deducting qualifying expenses and allowances.

According to independent research commissioned by SARS and the National Treasury in 2007, South African tax practitioners charge their small business clients an average of R7 030 a year to ensure that tax returns for income tax, provisional tax, VAT and employees’ tax are prepared, completed and submitted as required, Tax compliance costs therefore tend to be regressive, especially for businesses with a turnover under R1 million a year.

The reality is that many small businesses are outside the income tax net either because they generate small profits or because of the big compliance burden. Many were also historically marginalised. Government, therefore, announced a small business amnesty in 2006 to encourage informal and other small businesses with a turnover of up to R10 million a year to enter the tax system and regularise their tax affairs.

Payroll taxes such as employees’ tax (SITE and PAYE) and UIF contributions are excluded as they are taxes generally borne by employees and collected by employers on behalf of the State. In terms of existing law, however, businesses whose employees are not liable for employees’ tax will not be required to register for employees’ tax and businesses with a payroll of up to R500 000 a year will not be liable for the SDL

An important feature of the turnover tax system is that the tax liability imposed is broadly aligned with the tax liability under the current income tax system, but on a simplified base with reduced compliance requirements. However, the tax burden on micro businesses at the higher-end of the turnover range (R750 000 to R1 million) is increased to encourage them, as they grow, to maintain sufficient accounting records to migrate to the normal income tax system. Special consideration was given so as not to artificially or inadvertently encourage micro businesses to remain trapped in the turnover tax system, but to grow and migrate into the standard tax system. As a packaged approach, the compulsory VAT registration threshold will be increased for all vendors to coincide with the turnover tax cap of R1 million. Businesses will not be permitted to register for turnover tax if they are registered for VAT

Specific anti-avoidance rule for qualifying turnover

An anti-avoidance rule to guard against income-splitting by a micro business has been incorporated into the legislation. This will cater for circumstances where the micro business is broken up between connected persons (for example, a family) to ensure that each business component remains within the R1 million cap. In such instances the turnover of the connected persons’ business activities will be added together for purposes of applying the cap.

A business is disqualified from turnover tax if that business, or any shareholder in that business, holds shares or has any interests in another company or close corporation. The specific relief to be afforded in terms of the turnover tax system is aimed at the very small start-up type of business. Multiple shareholdings indicate more complex legal structures belonging to more sophisticated taxpayers and hence have been excluded for purposes of this system. This disqualification is also an anti-avoidance measure to guard against income-splitting where a business is conducted by more than one entity with the same shareholder in order to ensure that each business entity remains below the R1 million cap.

Certain investments are, however, permitted because they are more of a public or social nature and present fewer opportunities for tax arbitrage. These are interests –

  • listed South African companies;
  • Collective investment schemes;
  • Bodies corporate and share block companies;
  • Venture capital companies;
  • Less than 5% in social or consumer co-operatives;
  • in any company that did not trade during any year of assessment, and which did not own assets with a total market value that exceeds R5 000 during any year of assessment; and
  • in any company that has taken steps to liquidate, wind up or deregister.

There are two circumstances when a registered micro business is deregistered from the turnover tax by SARS, namely: 

• Voluntary deregistration, that is, where a registered micro business elects to deregister. Unless it closes down, it may only elect to deregister as a micro business after being registered for turnover tax for at least three years.  

• Compulsory deregistration, that is, where a registered micro business no longer qualifies. The qualifying turnover of this micro business from carrying on business activities exceeds the R1 million cap and it cannot demonstrate that this will be a small and temporary event. The registered micro business must notify SARS within 21 days from the date on which it no longer qualifies as a micro business.

In the event of a compulsory deregistration of the micro business, that micro business will be moved back into the standard income tax system from the first day of the month following the month during which the business no longer qualifies to be a registered micro business. It will therefore be assessed for two periods in the year of assessment – one under the turnover tax system and the other under the normal income tax system. The business will also have to register for VAT where it exceeds, or is likely to exceed, the R1 million threshold at which registration for VAT is compulsory. A micro business that is deregistered from turnover tax, be it voluntary or compulsory deregistration, may not re-enter the turnover tax system for three years. This period matches the minimum period the micro business must remain in the turnover tax system

On our next post, we will be looking at the Small business corporation Tax,

NumbrFactory.