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Grasping the Tax Olive Branch

Small businesses should take advantage of the tax amnesty being offered by SARS – before it’s too late.

Juliet Pitman

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When an olive branch is extended to you, sometimes the best thing is to grasp it with both hands. During his 2006 Budget speech, Trevor Manual announced that SARS was introducing a tax amnesty for small business but since the amnesty opened on 1 August 2006, few businesses have taken advantage of this unique opportunity to make good with the Receiver. This is surprising, given the harsh penalties and possible prosecution business owners face if they are found to be non-compliant after the amnesty has ended.

To recap, a small business with a turnover of less than R10 million for the tax year ending 31 March 2006 can apply for amnesty for the following taxes up to the start of the 2006 tax year:

  • Income tax on profits (taxable income),
  • Secondary tax on dividends.

You can also get amnesty for the following taxes up to 28 February 2006:

  • VAT (Value Added Tax);
  • PAYE (Pay As You Earn);
  • Contributions on payroll to skills development levies (SDL) and unemployment insurance fund (UIF); and
  • Withholding tax on royalties.

Any individual (including the deceased or insolvent estate of the individual), unlisted company, close corporation, trust or co-operative which meets certain requirements may apply for tax amnesty.

These requirements are:

  • the individual or entity must have carried on a business;
  • in the case of a company or close corporation, all the shares or members’ interests must have been held directly by individuals throughout the 2006 year of assessment; and
  • in the case of a trust, all the beneficiaries of that trust throughout the 2006 year of assessment must have been natural persons.

The amnesty covers all fines, interest and penalties and, once granted, means that SARS may not make a criminal case against you – as long as you have been honest about your income. In order to apply for amnesty you need to fill in the small business tax amnesty application form (SBA001). Get it from a SARS office or download it from www.SARS.gov.za. With this form, you will need to submit the relevant income tax return for the 2006 tax year, as required in the case of an individual or business, and a statement of all assets and liabilities as at 28 February 2006. If you don’t have documents to prove what your taxable income is, give a reasonable estimate of these amounts.

The reason so few businesses have taken advantage of this opportunity may be because they will have to pay the income tax due for the 2006 year of assessment, as well as an amnesty levy. Given that they have got away with paying no tax for so long, they don’t see the point of now having to cough up. But this is seriously misguided. As SARS’s systems increase in sophistication, the chances grow ever slimmer that non-compliant businesses and individuals will continue to be able to slip under the radar. And you can be sure that SARS will deal particularly harshly with those who are non-compliant after the amnesty has ended; it pays to make use of the opportunity being offered now to put your tax affairs in order.

Bear in mind that this is a chance to be honest. Your amnesty will be withdrawn if you fail to pay the full amount of the tax amnesty levy within 12 months from the date of approval; if the estimates you make are materially incorrect; and if you do not give full and honest information or amounts, including a statement of assets and liabilities as at 28 February 2006.

Applications close 31 May 2007. Diarise this date and make sure you’re compliant by then. After all, it’s not every day that SARS is lenient with people who haven’t paid their taxes.

You cannot get amnesty:

  • For income you received in the form of a salary or wage;
  • For taxes you have already paid;
  • For taxes that become payable because you submitted a tax return before you applied
  • for amnesty; or
  • If SARS has already informed you that they want to audit or investigate you.

Rates to be applied in the calculating of the tax amnesty levy are:

FROM TO LEVY (R)

R0                    R35 000           No levy payable

R35 000           R100 000         2% of the amount above R35 000

R100 000         R250 000         R1 300 + 3% of the amount above R100 000

R250 000         R500 000         R5 800 + 4% of the amount above R250 000

R500 000 and above                R15 800 + 5% of the amount above R500 000

Juliet Pitman is a features writer at Entrepreneur Magazine.

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Take The Toll Out Of Tax

Remember that degree you’ve got in taxation? Of course you don’t, because you didn’t. Your job isn’t understanding tax code – that’s ours.

QuickBooks SA

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When you connect QuickBooks to your bank, credit cards and other accounts, your transactions are automatically imported for you, helping you ensure that come tax time, your books are balanced, and every rand is accounted for.

Once you find the right QuickBooks product for your business needs on your computer, downloading the QuickBooks companion app turns your phone’s camera into an instant receipt scanner. Snap, save and store tax deductible receipts with built-in receipt scanner. Simply take a photo of a receipt and QuickBooks will attach it to the expense in your books. Plus, the scanned receipt is saved as a digital file for documentation at tax time.

Not only does the QuickBooks app come with built-in receipt scanning to help you track and organise your expenses, it can enable you to run your business with the following features:

  • Automatically sort your expenses and save over 40 hours a month
  • Easily send invoices and payment reminders directly from your mobile device, anytime anywhere
  • Imports your transactions for you so you’ll spend only minutes reconciling your accounts at the end of the month
  • Create customised reports to get important insights specific to your business

Join over 5.6 million customers globally and find the QuickBooks plan that works for your small business on www.quickbooks.co.za. Save 30% on your subscription today! Terms and conditions apply.

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7 Direct And Indirect Taxes You Should Consider Before Registering Your Business

Tax planning is critical for us all more so for the success of your newly registered entity.

Kenlin Stride

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If your business has been registered, guess what in the eyes of the law your business is now a legal entity, congratulations. What does this mean? Well this means your business is a distinct legal entity separate from you in the eyes of the law, this means your business can now enter into contracts to purchase assets, utilise debt instruments and hire staff amongst other things. This unfortunately also means your business is subject to tax compliance. Let me try and give you a snapshot of what taxes to be aware of as a business owner however not all will automatically be applicable to your business.

1. Income Tax

Income tax is one of the state’s main sources of revenue and is levied on taxable income determined in terms of the Income Tax Act. All businesses must be registered for Income Tax. It is illegal not to be registered for Income Tax if you have a business.

2. Provisional Tax

The payment of provisional tax is to assist taxpayers in meeting their tax liabilities by way of installments out of their taxable income. Income tax is only paid once the full 12 months of trading is complete. It would be impractical to expect taxpayers to pay one large lump sum of income tax to SARS. Companies automatically fall into the provisional tax system.

Related: Tax Basics For Business Owners

3. Small Business Corporations Tax

SBC Tax was introduced as a tax relief measure for small business. SBC Tax will not be calculated on the flat 28% of taxable income. Dependent on your annual taxable income, you will be liable at the percentages in the table.

4. Pay As You Earn

Employees’ tax refers to the tax required to be deducted by an employer from an employee’s remuneration (salary) paid. The process of deducting or withholding tax from remuneration as it is earned by an employee is commonly referred to as PAYE.

5. Value Added Tax

This is an indirect tax levied on the ‘sale’ and ‘purchase’ of goods and services. This tax is not compulsory unless your turnover has exceeded R 1 000 000 mark however you choose to register voluntarily if it makes sense for your business strategy.

Related: How to Reduce Your Taxable Income

6. Unemployment Insurance Fund

UIF contributions are compulsory for all employees working more than 24 hours a month. The contributions are paid to the Department of Labour (DOL), or can be included in the SARS payment of PAYE on the EMP201

7. Workman’s Compensation

An employer must register with the Commissioner within seven days after the day on which he employs his first employee, (this includes the Director or Owner of the company)

You might be thinking tax compliance, what’s the big deal? I’ve been doing that most of my adult life, well personal tax is very different to business tax. As the director of your newly registered business it is assumed that you have done the research as to what laws to comply with as a business owner. In reality however the thrill of having a business overshadows the mundane compliance elements that go hand in hand when running a business. Let’s face it as much as your business is now a legal entity your business won’t do the research and comply with the necessary taxes on its own that responsibility lies with the director and when I say director I mean you.

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Tax

Tax Refunds – What You Need To Know

You are able to object/dispute any SARS decision not to release the refund on efiling or through your tax practitioner.

Maselaelo Mphela

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Most taxpayers are not aware of the requirements for a tax refund to be facilitated and SARS very often will delay paying out the refund. In this article, we will look at the requirements taxpayers need to be aware of and the Tax Ombud’s report on the investigation into alleged delayed payment of refunds as a systemic and emerging issue in terms of section 16 (1) (b) of The Tax Administration Act No. 28 of 2011 (TAA).

What you need to know as a taxpayer:

  • The tax refund must be claimed within 5 years from date of submission of the return.
  • SARS has the right to withhold the refund as per section 190 (2) of TAA: “SARS need not authorise a refund as referred to in subsection (1) until such time that a verification, inspection or audit of the refund in accordance with Chapter 5 has been finalised.”
  • Authorisation of payment of refund done once SARS is satisfied with the acceptable security provided by the taxpayer in terms of section 190 (3) of TAA: “SARS must authorise the payment of a refund before the finalisation of the verification, inspection or audit if security in a form acceptable to a senior SARS official is provided by the taxpayer.”
  • As a taxpayer, you need to ensure that you verify your banking details with SARS and that there are no outstanding returns in order for your refund not to be delayed.
  • Any decision not to refund by SARS is subject to an objection and appeal by the taxpayer in terms of section 190 (6) of TAA.
  • Refunds less than R100 are not refunded but carried forward to the next tax period.
  • To view the status of your refund you can use the Refund Dashboard on efiling under the ‘Returns History’ tab for the tax period in question or contact the SARS call centre.
  • Interest starts accruing from 21 business days from the date on which the refund became due, i.e. verification/audit outcome finalised.

Related: Tax Basics For Business Owners

Tax Ombud’s Report

The Tax Ombud’s report identified various mechanisms used by SARS to defer or delay the payment of refunds due:

  • SARS failing to link submitted supporting documents at a SARS branch to the main file.
  • The use of special stoppers on taxpayers’ accounts and the delay in lifting the stoppers, e.g. being required to verify banking details in person at a SARS branch. Even after the verification is done, there is still a lengthy delay in paying the refund.
  • Using the filing of new returns as an excuse to block refunds. The system blocks already verified refunds the moment a subsequent return is submitted by the taxpayer.
  • Withholding of refunds for one period while an audit/verification is in progress on another period. This is contrary to section 190 of the TAA.
  • The use of historic returns suddenly reflecting as outstanding but these have never been shown as outstanding on the Tax Clearance Certificate or the Statement of Account.
  • The raising of assessments and passing of journals to absorb credits on taxpayers’ accounts, i.e. overpayments. In doing so, SARS creates fictious tax liabilities instead of making a decision on the refund.
  • Requesting further information during the audit to delay finalisation, thus delaying the time frame from when the interest accrues.
  • No turnaround time for assessments successfully disputed.
  • Obstacles regarding diesel refunds.
  • Raising of assessments prematurely before the 21 days to submit the supporting documents
  • Refunds for periods that have been verified automatically set-off against bad debts on other periods not withstanding a request for suspension or where there is the suspension of payment. SARS may not instate any collection steps from date of submission of request for suspension of payment until 10 days after decision to not grant the request has been communicated to the taxpayer in terms of section 164 (6).

You are able to object/dispute any SARS decision not to release the refund on efiling or through your tax practitioner.

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