When starting a business, taxation is often overlooked. It comes an after-thought.
The bible said we must be good stewards. A good steward demonstrates the spirit of excellence and adheres to the laws of a country. Jesus dealt with the issue of payment of taxes in Matthew 22. He was asked whether it is right to pay taxes to Caesar or not? His response was “give to Caesar what is due to Caesar”. Roman 13 speaks of not being indebted to anyone.
Running a business involves a lot of administration and management of taxes brings extra load and costs. As a good steward, we comply with tax laws, pay to Caesar what is due to Caesar and we endeavour not to owe anyone.
I will share with you taxation issues to consider when starting a business or in your current business to ensure be tax compliant.
My number one tip is start from the beginning; do not wait to make a million profit before considering taxes. Get into the habit of compliance from day one.
Tax Compliance Tips:
Corporate tax
Registration for corporate income tax is not dependant on the amount of income you generate. These days when you register at CIPC , they immediately register with SARS. As a business, you submit the annual tax return irrespective of the amount of income generated even if you have zero income.
Provisional tax payments
Provisional tax is an advancement of your corporate income tax. Instead of paying one big tax amount at the end of the tax year. You can make six monthly payment based on an estimated taxable income. SARS requires submission of IRP6 return followed by payment every six months in your financial year.
VAT
You don’t have to register for VAT. Registration requirements are two-fold , voluntary and compulsory registration. You can opt for voluntary registration if taxable supplies of R50 000 or more. You are required to register if you make taxable supplies of R1million. As a VAT vendor you act as an agent on behalf of SARS. If you pay over to SARS what you collect from your clients/ customers; the VAT you charged. You can claim back what you paid to your suppliers.
PAYE
You pay over PAYE over to SARS only if you are an “employer” paying “remuneration” to an “employee”. All these terms are defined in the Income Tax Act.
Many find tax administration to be very burdensome especially on the SMMEs however we still need to make sure we comply. Below are few practical nuggets for you to apply in your business.
How do you ensure you are compliant?
Know and understand the deadlines
Know and understand the penalties for non- submission of tax returns.
Remember, you have to submit tax return irrespective of whether the business generated income, made a profit or traded.
When do you submit each return?
Corporate Income Tax
IT14 – Annually, A year after the end of the preceding tax year e.g. financial year ended 31 December 2019, you will then submit corporate income tax return on 31 December 2020.
Provisional Tax
IRP6 –every six months and payment immediately upon submission. It is based on estimate therefore you can make top up payment to make up for shortfall i.e. year- end 31 December, 1st IRP6 on 30 June , 2nd IRP6 2 – 31 December.
VAT
VAT201 return. It depends on the type of business. Submission deadline by the 25 of the following month i.e. for January VAT201 – include VAT for December and January transactions and submit return by 25 February.
PAYE
EMP201 return – submitted monthly and payment to be done by the 7th day of the following month i.e. 31 March – submission by 7 April and payment.
EMP501-PAYE reconciliation: This is process towards creating an IRP5 for your employees so that they can submit tax returns at the end of the tax year.
One last big tip, tax is a complex issue, do not take it for granted, seek advice of the tax professional when unsure. You are ultimately responsible for your own tax affairs.
“render to Caesar what is due to Caesar” and “don’t owe anyone anything”.
Read Keamo Molebalwa bio here