Understanding all the various taxes for businesses can be a minefield, so here’s Melissa Jacobs from MJ Chartered Accountants explaining some of them for you in simple terms.
Corporate Income Tax
This is the tax charged on profits made by businesses and close corporations. It is a flat rate of 28%. If you qualify as an SBC (Small Business Corporation) your tax rate could be lower, but there are certain criteria that have to be met to qualify as an SBC. Your accountant will be able to assist you with this.
This is not a separate tax but in layman terms a “down payment” of your corporate income tax due (as per above). Your exact tax liability can only be determined after the 12 months of your financial year but SARS does not want to wait until then to get paid, so you make an estimate of your full year taxable income six months into your financial year and make a “down payment” (for lack of a better word) on this tax. You then submit another estimate due on the last day of your financial year and make another “down payment”. Once your final tax liability is calculated, you may have to pay in or you may get a refund if you have overpaid.
The distribution of company profits to shareholders are called dividends. When a dividend is distributed to a shareholder(s), a dividends tax of 20% kicks in and must be withheld by the company and paid over to SARS.
Value Added Tax (VAT)
All businesses who have made taxable supplies of one million rand or more in any 12 month period must register as a VAT vendor. As a VAT vendor, you must charge VAT of 15% on your supply of goods and services to your customers. This VAT must be paid across to SARS on either a monthly or bi-monthly basis. You are however able to deduct the VAT that you have paid on the goods and services that you have procured, and pay the net amount over to SARS.
Capital Gains Tax (CGT)
This is included in your taxable income, and is a tax on the gain on the disposal of an asset.
PAYE (Pay as you Earn)
This is the tax that is deducted from your employee’s salaries and must be paid to SARS by the employer on a monthly basis.
Non-compliance with any of these taxes could result in significant penalties and interest for your business. Furthermore you will not be able to get a tax clearance certificate, which is a very needed document in today’s competitive business environment.
OUR OFFER TO YOU:
A Complimentary Review of your Tax Status and Compliance Level.
Contact Melissa to book your spot:
- 087 821 7110
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