So you have registered your PTY with CIPC, what are your tax implications?
Well unless you qualify as an SBC you will be taxed at a flat rate of 28% (which is quite high). A lot of new business owners are convinced that because they do not “make enough”, they do not need to declare anything, this is most certainly not the case, any and all income must be declared to SARS
Qualifying as an SBC means that your tax rate will be progressive, the higher your profit the higher the tax rate, this means your profit may qualify from anywhere between 7% to 28% on the tax tables vs the flat rate of 28%. Its also important to note that each year the tax tables change.
Did you know that not all PTY’s qualify as an SBC? and there are certain criteria that one needs to fall into in order to benefit from the progressive tax rate.
- Shareholders/ Members must be natural persons that do not hold an interest in any other PTY/CC or Co-Op
- Gross Income doesn’t exceed R 20 Million
- Not more than 20% of gross income and capital gains consists collectively of investment income and income from the rendering of personal service
- INVESTMENT INCOME: Annuity, Interest, rental income from immovable property, royalty or any income similar in nature, local dividends, foreign dividends
- PERSONAL SERVICE PROVIDER: Accounting, Actuarial Science, Architecture, Auctioneering, Auditing, Broadcasting, Consulting, Draughtmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, performed personally by any person who holds interest in the PTY, Co-Operative, CC
- AN EXCEPTION IS MADE TO THIS WHEREBY: The business employs 3 or more unconnected full-time employees for core operations throughout the year of assessment
This is one way to motivate small businesses to create employment opportunities within their business, always make sure that you are aware of your tax responsibilities and that your taxes are accounted for correctly
(Source: PKF Tax Guide – 2021)
So you are a sole prop and essential service provider, but you have NO idea how to go about trading? After speaking to someone from the DTI this morning I have the steps needed for you to be able to trade.
The first thing is you need to establish if you are an essential service provider, you can do that here http://www.gov.za/documents/disaster-management-act-regulations-address-prevent-and-combat-spread-coronavirus-covid-19 once you establish if you fall under the essential services bracket you need to print out the attached form below.
You will need to print this on your company letterhead, complete the details and issue to each staff member – you need to list who the owner of the sole prop is and each employee that works under you, this is needed to be on your persons should you need to travel. You will need to also get an affidavit from the police station stating you do operate as a sole prop.
If you have any questions that are not addressed herein please feel free to contact me on my email address.
Currently, South Africa is on Lock-Down, meaning no one is allowed to operate unless you are an essential service provider. That means for many, our doors are shut with no income being generated. Government has put in place a relief fund for SMME’s and other forms of enterprises
Below is a PDF document that outlines all the funding available and the process of application
Tax Season starts next month (1st July 2019), and I know that some are excited and some are just petrified. Most of the time, the fear comes from uncertainty or the fact that they have not lodged their returns and rather choose to take the ostrich approach…
“Do I need to lodge a return? Should I submit, I honestly don’t make enough money to lodge”
I hear this on the regular… HOWEVER, if you are self-employed (Sole Prop / PTY) it doesn’t matter what your income/sales/turnover is you still have lodge a tax return. The only time that you are exempt (and I still recommend that you submit a return) is when you are employed by a business and only earn 1 source of income and have NO deductions other than PAYE and UIF.
I know its easier to look away than face any returns that are outstanding but I promise you, if you just start somewhere you are already further than where you were yesterday.
If you want to chat about your tax or accounting I am just a mail away.
HOW DOES YOUR MARRIAGE CONTRACT AFFECT YOUR TAX RETURN?
ICOP – In Community of Property
- Interest – Jointly held bank account
- Spouse A: 50% of Interest
- Spouse B: 50% of Interest
- Foreign Dividend paid to spouse A
- Spouse A: 50% of Dividend Income
- Spouse B: 50% of Dividend Income
- Rental Income
- Spouse A: 50% of income and expense
- Spouse B: 50% of income and expense
OCOP – Out of Community of Property
- Interest paid to Spouse B
- Spouse A: Nil
- Spouse B: Will be taxed in the hands of the owner of the investment at 100%
- Foreign Dividend paid to Spouse A
- Spouse A: Will be taxed in the hands of the owner of the investment at 100%
- Spouse B: Nil
- Rental income; owned by spouse B
- Spouse A: Nil
- Spouse B: 100% Rental income and expenses
- Rental income; each spouse owns 50%
- Spouse A: 50% of rental income and expenses
- Spouse B: 50% of rental income and expenses
source: Tax Talk issue 70