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0 In Small Business

Essential Documents to Prepare for Your Tax Practitioner This Income Tax Season

Income tax season has arrived in South Africa. To maximize your claimable expenses, it’s vital to have all the necessary documents gathered for your tax practitioner. Proper preparation can save you time, reduce stress, and ensure a smooth tax filing process. This guide will help you understand which documents you need to keep aside to make your tax
preparation seamless and efficient.

Personal Information

● Your ID number.

● Bank account information for direct deposit.

● Personal contact information such as latest email address, contact number, residential, and postal address.

● Copies of last year’s tax return.

income documents

● IRP5/IT3(a) forms from all employers, usually available by the end of May.

● IT3(b) forms for interest and dividends, available from financial institutions.

● IT3(c) forms for capital gains.

● Investment income statements.

● Rental income records.

● Unemployment income documents should you have been unemployed for any duration of time during the year of assessment.

Deduction and Credit Documents

● Medical aid tax certificates, typically available by July.

● Retirement annuity fund certificates.

● Income protection insurance premiums.

● Receipts for charitable donations (section 18A receipts).

● Travel logbooks for claiming travel expenses.

● Education expenses if applicable.

Business Income and Expenses

● Annual financial statements for sole proprietors/ partnerships.

● Business-related receipts and invoices.

● Home office expense documentation.

Other Relevant Documents

● Documentation of alimony or maintenance payments just in case SARS requests them.

● Records of any additional income.

● Documents related to rental properties, including bond statements and municipal accounts.

Best Practices for Document Management

Organize by Category: Sort documents into categories like income, deductions, and credits.

Digital Copies: Keep digital copies of important documents in a secure, backed-up location.

Regular Updates: Update your records regularly to avoid last-minute scrambling.

Having your documents well-organized and ready can make a significant difference in your tax preparation process. By following this checklist and best practices, you’ll be well-prepared to provide your tax practitioner with everything they need for a smooth and accurate tax filing in South Africa.

Disclaimer: This post offers general information. Consult a professional – like an exceptional member of our team – should you require some assistance. Additionally, this post may contain affiliate links. If you purchase through these links, we may earn a commission at no additional cost to you. We only recommend products that we believe will add value to our readers. 

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Maximize Productivity: The Ultimate Guide to Organizing Your Office Space

An organized office space is more than just a clean desk; it’s a cornerstone of productivity and efficiency. A well-organized workspace can help you focus better, reduce stress, and make you feel more in control of your tasks. In this comprehensive guide, we’ll explore the best practices, essential tools, and key concepts for organizing your office space to maximize productivity.

The Importance of a Clutter-Free Workspace

A clutter-free workspace is essential for maintaining mental clarity and focus. Studies have shown that a tidy environment can significantly enhance productivity and reduce stress levels. By eliminating unnecessary items and organizing your essentials, you create a conducive environment for efficient work.

Best Practices for Office Organization

Implementing best practices in office organization can streamline your workflow and make daily tasks more manageable. Here are some tips:

  • Filing Systems: Develop a systematic approach to file management. Use a combination of digital and physical filing systems to keep your documents organized and easily accessible.
  • Labeling: Clearly label all files, drawers, storage boxes, and any documents you have uploaded to your cloud storage system. This simple practice can save you time and frustration when searching for specific items.
  • Daily Decluttering: Spend a few minutes at the end of each day tidying up your workspace. This habit prevents clutter from accumulating and keeps your desk ready for the next day.

Essential Tools for an Organized Office

Investing in the right tools can make a significant difference in maintaining an organized office. Here are some must-have items:

  • Desk Organizer: Keeps your essential items like pens, notepads, and office supplies neatly arranged.
  • Filing Cabinets: Provides ample storage for important documents and helps keep your desk free from paper clutter.
  • Digital Document Scanner: Converts physical documents into digital format, reducing the need for paper storage and making it easier to manage files electronically. For a digital document scanner on-the-go, there are many excellent apps that you can install on your phone that will serve this purpose.

Ergonomics and Office Design

Ergonomics plays a crucial role in creating a comfortable and productive workspace. Ensure your office furniture and equipment are ergonomically designed to support your posture and reduce strain. Consider adjustable chairs, desks, and monitor stands to customize your workspace for optimal comfort.

Flexible Workspaces: Hot Desking

Hot desking is a modern office trend that involves using any available desk rather than having assigned seating. This approach promotes flexibility, collaboration, and efficient use of office space. Implementing hot desking in your office can lead to a more dynamic and adaptable work environment.

 

Organizing your office space is not just about aesthetics; it’s about creating an environment that supports your work habits and enhances productivity. By following these best practices, investing in essential tools, and considering ergonomic design, you can transform your workspace into a powerhouse of efficiency. Start organizing today and experience the benefits of a well-structured office!

Disclaimer: This post offers general information and may contain affiliate links. If you purchase through these links, we may earn a commission at no additional cost to you. We only recommend products that we believe will add value to our readers.

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Understanding UIF in South Africa: Best Practices for Employers

The Unemployment Insurance Fund (UIF) in South Africa is a vital support system for workers during periods of unemployment or inability to work. For employers, ensuring compliance with UIF regulations is essential not only to avoid penalties but also to support their employees effectively. This guide provides an in-depth look at UIF, covering good-to-knows, best practices for record-keeping, submission deadlines, and important definitions.

Good to Know: Basics of UIF

The UIF provides short-term relief to workers when they become unemployed, unable to work due to illness, maternity, adoption leave, or if the employer is deceased. Both employers and employees contribute to this fund, with each contributing 1% of the employee’s earnings. Employers must register all employees for UIF who work more than 24 hours per month in the business to ensure compliance.

Best Practices for Record-Keeping

Accurate record-keeping is crucial for smooth UIF processing. Employers should:

  • Maintain detailed records of employee salaries, hours worked, and UIF contributions.
  • Use digital systems to securely store and manage UIF-related documents.
  • Regularly update records to reflect any changes in employment status or earnings.

Submission Deadlines for UI-19 Forms

The UI-19 form must be submitted by the 7th of each month. This form includes important information, such as the employees’s earnings, working hours, and any employee termination details such as the reason for leaving and the last date of employment. Timely submission and payment are critical to avoid penalties and ensure employees can claim their benefits without delay.

Important Terms and Definitions

Understanding UIF-related terminology helps in accurate and compliant submissions. Key terms include:

  • UI-19 Declaration: A document that employers must complete monthly, and provide employees upon their termination, detailing the reason and date of leaving.
  • Gross Remuneration: The total earnings paid to an employee, used to calculate UIF contributions.

Adhering to UIF regulations and best practices not only ensures compliance but also demonstrates a commitment to supporting employees during challenging times. By maintaining accurate records, meeting submission deadlines, and understanding key terms, employers can effectively manage their UIF responsibilities.

Disclaimer: This post offers general information. Consult a professional – like an exceptional member of our team – for expert assistance. Additionally, this post contains affiliate links. If you purchase through these links, we may earn a commission at no additional cost to you. We only recommend products that we believe will add value to our readers.

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Streamlining SARS VAT Compliance with Sage Cloud Accounting

In the dynamic business environment of South Africa, ensuring compliance with SARS VAT regulations is essential for any enterprise. Sage Business Cloud Accounting emerges as a powerful solution designed to simplify VAT management and ensure compliance with the latest regulations. This cloud-based software not only streamlines your accounting processes but also offers specific features for managing Domestic Reverse Charge (DRC) VAT, a crucial aspect for businesses in certain sectors.

Simplified SARS VAT Compliance

One of the standout features of Sage Business Cloud Accounting is its ability to handle VAT with ease, ensuring you stay compliant with the South African Revenue Service (SARS). The software automates calculating VAT, reducing the likelihood of errors that can lead to costly penalties. With Sage, you can:

 

  • Automate VAT Calculations: Automatically calculate VAT on sales and purchases, ensuring accuracy and compliance with SARS regulations.
  • Generate VAT Returns: Quickly generate and submit VAT returns directly to SARS, saving time and reducing the risk of late submissions.
  • Real-Time Reporting: Access real-time VAT reports to monitor your VAT liabilities and ensure accurate record-keeping.

Seamless Integration with SARS eFiling

Making tax submissions easier, Sage Business Cloud Accounting integrates seamlessly with SARS eFiling, ensuring that your business meets all digital tax submission requirements. This includes:

 

  • Digital Record-Keeping: Maintain digital records of all VAT transactions, ensuring they are ready for submission to SARS.
  • Direct SARS Submissions: Submit VAT returns directly to SARS from within the software, streamlining the process and ensuring compliance.

Domestic Reverse Charge (DRC) VAT Feature in South Africa

The implementation of the Domestic Reverse Charge (DRC) for certain industries, such as jewellers, has added another layer of complexity to VAT compliance. Sage Business Cloud Accounting is equipped with features to manage DRC VAT seamlessly:

 

  • Automatic DRC Calculations: Automatically apply the correct DRC VAT rules to relevant transactions, reducing manual intervention and errors.
  • Accurate Reporting: Generate detailed reports that clearly show DRC transactions, making it easier to prepare for VAT returns and audits.
  • Compliance Assurance: Ensure that your business adheres to the latest DRC regulations in South Africa, minimizing the risk of non-compliance penalties.

Enhanced Financial Control and Visibility

Sage Business Cloud Accounting provides comprehensive tools to give you better control and visibility over your financial operations:

 

  • Detailed Financial Insights: Gain insights into your business’s financial health with real-time dashboards and customizable reports.
  • Cash Flow Management: Monitor cash flow and manage expenses more effectively, ensuring your business remains financially healthy.
  • Scalable Solutions: As your business grows, Sage can scale with you, offering additional features and capabilities to meet your evolving needs.

User-Friendly Interface

Adopting new software can be daunting, but Sage Business Cloud Accounting is designed with user-friendliness in mind:

 

  • Intuitive Design: The software’s interface is intuitive and easy to navigate, even for those with limited accounting knowledge.
  • Comprehensive Support: Access a wealth of resources, including tutorials, webinars, and customer support, to help you make the most of the software.

Sage Business Cloud Accounting stands out as a powerful tool for managing VAT and ensuring compliance with SARS regulations, including the complex Domestic Reverse Charge VAT. By automating VAT calculations, integrating seamlessly with SARS eFiling, and providing comprehensive financial insights, Sage helps businesses stay ahead of their VAT obligations while maintaining financial health and growth. Whether you’re a small business or a growing enterprise, Sage Business Cloud Accounting is your partner in achieving VAT compliance with ease and efficiency.

Disclaimer: This post offers general information. Consult a professional – like an exceptional Sage Business Cloud Advisor on our team – if you need assistance. Additionally, this post contains affiliate links. If you purchase through these links, we may earn a commission at no additional cost to you. We only recommend products that we believe will add value to our readers.

0 In Small Business

Navigating VAT Compliance in South Africa: A Comprehensive Guide

Understanding the intricacies of Value-Added Tax (VAT) is essential for businesses operating in South Africa. This comprehensive guide covers key aspects such as definitions, best practices for record-keeping, and important submission deadlines. Stay informed and compliant with our expert insights.

What is VAT?

VAT, or Value-Added Tax, is a consumption tax levied on the value added to goods and services at each stage of production and distribution. In South Africa, the standard VAT rate is 15%.

Key Definitions

Input VAT: The VAT you pay on business-related purchases.

Output VAT: The VAT you charge on sales of goods and services.

VAT Return: A document submitted to SARS (South African Revenue Service) detailing the VAT collected and paid during a specific period.

Best Practices for VAT Record Keeping

Organize Invoices and Receipts: Maintain detailed records of all transactions.

Use Accounting Software: Utilize software, like Sage Business Cloud Accounting, to track and manage VAT automatically.

Regular Reconciliation: Frequently compare your VAT records with bank statements to ensure accuracy.

When is VAT Due?

The frequency of VAT return submissions depends on the size of your business. Smaller businesses may file every two months, while larger businesses file monthly. VAT returns are typically due one month after the end of the VAT period. For example, if your VAT period ends in April, the return is due by the 25th of May. Adhering to these deadlines is crucial to avoid penalties and interest charges. Set reminders and prepare in advance to ensure timely submissions.

By understanding VAT and implementing best practices for record-keeping, you can ensure your business remains compliant and efficient. Stay ahead of deadlines and keep your records to avoid any complications with SARS.

Disclaimer: This post offers general information. Consult a professional – like an exceptional member of our team – for clarity before submitting. Additionally, this post contains affiliate links. If you purchase through these links, we may earn a commission at no additional cost to you. We only recommend products that we believe will add value to our readers.

0 In Small Business

10 Red Flags to Watch Out for When Hiring New Employees

Hiring the right employees is crucial for the success of any business. However, the hiring process can be fraught with challenges, and sometimes, despite our best efforts, we end up with bad hires. Learning to spot red flags early on can help prevent costly hiring mistakes and ensure that you build a strong team of talented professionals. In this blog post, we’ll explore 10 red flags to watch out for when hiring new employees, along with tips on how to avoid them.

1. lack of preparation 🚩

 

A candidate who shows up unprepared for the interview, hasn’t researched your company, or doesn’t have a clear understanding of the role may not be genuinely interested or invested in the opportunity.

2. Unprofessional Behaviour 🚩

Pay attention to how candidates conduct themselves during the interview process. Red flags include arriving late, dressing inappropriately, or displaying rude or disrespectful behavior towards you or your team.

3. Dishonesty or Inconsistencies 🚩

Be wary of candidates who provide inconsistent information on their resume or during the interview, exaggerate their skills or experience, or are evasive when asked probing questions.

4. Negative Attitude 🚩

Candidates who exhibit a consistently negative attitude, complain about past employers or colleagues, or seem disengaged during the interview may not be a good fit for your team culture.

5. Lack of Accountability 🚩

Watch out for candidates who deflect responsibility for past mistakes or failures, blame others for their shortcomings, or demonstrate a lack of ownership over their actions.

6. Poor Communication Skills 🚩

Effective communication is essential for success in any role. Red flags include candidates who struggle to articulate their thoughts clearly, have poor grammar or spelling in written communications, or fail to actively listen during the interview.

7. Overemphasis on Salary and Benefits 🚩

While compensation is an important factor, candidates who focus excessively on salary and benefits during the interview process may be more interested in what they can get from the role rather than what they can contribute to your organization.

8. Limited Growth Potential 🚩

Be cautious of candidates who lack ambition, have a limited career trajectory, or show little interest in professional development opportunities. Hiring employees with growth potential ensures that your team remains dynamic and adaptable to change.

9. Lack of Cultural Fit 🚩

Assess whether candidates align with your company’s values, mission, and culture. Red flags include candidates who demonstrate values or behaviors that are incompatible with your organization’s culture or who fail to integrate well with your existing team.

10. References and Background Checks 🚩

Don’t skip the reference and background check process. Follow up with references provided by the candidate and conduct thorough background checks to verify their qualifications, employment history, and character.

By being vigilant and proactive in identifying red flags during the hiring process, you can avoid making costly hiring mistakes and build a team of talented and dedicated professionals who contribute to the success of your organization. Remember to trust your instincts, ask probing questions, and conduct thorough due diligence to ensure that you make informed hiring decisions.

Disclaimer: This post offers general information. Consult a professional should you need assistance with the hiring process.

0 In Small Business

Mastering EMP501 Filing: Your Ultimate Guide to Tax Compliance Success!

The looming deadline for EMP501 filing can be a daunting prospect for many businesses, but fear not! In this comprehensive guide, we’ll provide you with all the information and support you need to tackle your EMP501 filing with confidence and ease.

Understanding EMP501

 

The EMP501 is a crucial tax submission required by the South African Revenue Service (SARS) for employers to declare their employees’ tax information and reconcile the Pay As You Earn (PAYE) amounts deducted from their salaries. It serves as a summary of the employer’s payroll tax liabilities and payments made throughout the tax year. Employers are required to submit the EMP501 twice a year, with deadlines typically falling on the last day of May and the last day of October.

Key Components of the EMP501

 

Employers need to reconcile the total PAYE deducted from employees’ salaries with the total PAYE liability for the tax year.

 

Employers must provide each employee with an IRP5/IT3(a) certificate, detailing their income, deductions, and taxes withheld during the tax year.

 

Employers may need to include additional third-party data, such as medical aid contributions and retirement fund contributions, in their EMP501 submissions.

Getting Organized

To streamline the EMP501 filing process, it’s essential to gather all the necessary documents and information in advance. Start by ensuring that all employee information, including personal details and tax data, is accurate and up to date. Compile IRP5/IT3(a) certificates for each employee and reconcile your payroll records to identify any discrepancies or errors that need to be corrected before submission. Creating a dedicated folder or digital file for EMP501-related documents can help keep you organized and ensure that nothing is overlooked.

Best Practices for Filing

Maximizing deductions and avoiding common mistakes are key objectives when filing your EMP501. Take advantage of available tax incentives and allowances to minimize your tax liability legally. Double-check all calculations and ensure that your EMP501 submission is accurate and compliant with SARS regulations to avoid penalties or delays. Consider leveraging accounting software or enlisting the help of professional tax advisors to streamline the filing process and ensure accuracy.

Pro Tips for Success

Insider tips from accounting professionals can provide valuable insights and guidance for navigating the EMP501 filing process effectively. Consider segregating your payroll data by employee category to simplify the reconciliation process and identify any discrepancies more efficiently. Keep abreast of changes to tax laws and regulations that may impact your EMP501 filing requirements, and be proactive in addressing any issues or concerns that arise during the filing process.

Why Choose Professionals

While some businesses may opt to handle EMP501 filing internally, enlisting the help of accounting professionals can offer numerous benefits. Accounting professionals have the expertise and experience to navigate complex tax regulations and ensure accurate and timely EMP501 submissions. By outsourcing your EMP501 filing to professionals, you can free up valuable time and resources, minimize the risk of errors or non-compliance, and focus on running your business with peace of mind.

Conclusion

Don’t let the EMP501 filing deadline overwhelm you. With the right tools, knowledge, and support, you can master tax compliance with confidence. Whether you choose to tackle EMP501 filing independently or enlist the help of accounting professionals, it’s essential to stay organized, informed, and proactive throughout the process. Reach out to us today to learn how we can help you streamline your EMP501 filing process and achieve peace of mind.

Disclaimer: This post offers general information. Consult a professional – like an exceptional member of our team – for clarity before submitting.

0 In Small Business

Improve Your Credit Scores With These 7 Steps

Having good credit is the place you want to be.

With good credit, you can easily access funds and grow your business. The problem is that over the years and due to current events, many business owners are worried about their credit scores. If this sounds familiar, consider these 7 steps towards improving your credit score.

Recommended in the Shop: Merchant Capital – Business Funding For SMEs >>

Step 1: Understanding your credit score

The first thing you need to do is check what your credit score is through an available credit bureau. Various engines measure your score differently. Either giving you a score of between 0 – 999 or working out 0 – 750. Both versions are fine, but make sure you understand which model they are using so you can understand how to assess the results. In the ‘750’ model anything over 650 is considered excellent, 600-650 is very good, 550-600 is good, 490 – 550 is subprime and 490 and anything below is considered poor credit. Any individual from the 550 and below will find it more difficult to get a loan and they will have much higher interest rates. In the ‘999’ credit engine, excellent is in the 767 – 999 range, good is in the 681 – 766 range, favourable is plotted 614 – 680, the average is 583 – 613, below average is 527 – 582, unfavourable is 487 – 526, and poor is 0 – 486.

Step 2: Check and rectify any disputes or judgements against you or your business profile

It can happen that people are not even aware of disputes against their names, even if only for very low amounts. If this is the case it is important that you pay down any amounts owing and have them removed off your credit profile so that future opportunities aren’t affected by past debt. 

Step 3: Always pay your bills timeously and in full

Your payment history actually makes up around 35% of your credit score. So it is important that you always pay your bills on time and in full. To make things easier for yourself, consider debit orders for fixed expenses, and set reminders for others. This kind of good housekeeping has an important knock-on effect on your overall credit score. 

Step 4: Separate personal expenses from business expenses

While it may feel simpler to put certain expenses like the bond and gardening services through your business, it is important to distinguish between personal and business expenses so that when it comes to tax season you know exactly what to allocate where. Further to this, if your business fails, then your personal assets could also be at risk which would negatively affect your personal credit score. Also, mixing your personal and business accounts can prevent your business from building a strong credit score of its own. 

Recommended in the Shop: Accounting Services for Small Businesses >>

Step 5: Keep credit usage lower than 30%

Credit bureaus reward you if you have credit but don’t use it too much. The way to do this is to either increase your limit so that your normal monthly usage falls under 30%. The other option is to pay down what is currently owed on your credit card and make sure you are falling below the limit. Never spend what you don’t have. 

Step 6: Avoid debt consolidation and debt review if possible

When your monthly payments are out of control, debt consolidation may seem like a good solution. But there are downsides to this. The concept of debt consolidation is to take out a new loan agreement with a single provider, who you pay a single monthly amount to, and they in turn pay off your creditors. The enquiry when taking out a debt consolidation loan lowers your credit score. In addition, your overall score can be affected for the full duration of paying off the loan.

With debt review, the intention is to create a way to pay back all your creditors in a way that doesn’t cripple your monthly finances. Your debt review service provider contacts your creditors on your behalf to see if they can arrange lower repayments. Your service provider essentially has control over your credit and the perception that is created is that you are a person who can’t control their finances. It will be extremely difficult to take out any other loans during this time. This, and debt consolidation, will affect how credit-worthy you appear to future lenders. 

Recommended Freebie: 7 Steps To Improving Your Credit Score Download >>

Step 7: Limit hard credit score enquiries

There is a difference between hard and soft credit score enquiries. Soft enquiries don’t affect your credit score (like when you do it yourself). A hard enquiry is made when you apply for a car, bond, business finance etc. Every time you go through an aggregator for a hard enquiry it shows up, and with these types of credit applications you will have a credit check run by each provider. Too many of these can affect your score for up to 2 years so the less you do this, the better. 

The bottom line

Good credit scores are essential to keep you in a strong position to apply for future loans and other credit opportunities. Fortunately, if you find yourself in a bad position when it comes to your credit scores, there are things you can do to systematically build them up and get you back into a strong position for future business growth. 

We are always on the lookout for articles that will help you grow, market, fund and manage your business. We often write the articles ourselves but sometimes we come across one from another blog that is just too perfect not to share with you. This article was written by Merchant Capital, one of our funding partners, and appears on their Blog. We will be sure to share more of their quality content on The Busy Bookkeeper’s blog soon!

This post may contain affiliate links. Please read our affiliate disclaimer here. >>

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Types of Business Structures

Are you planning to start a business?

There are various types of business structures available for an entrepreneur to choose from when deciding what will work best for their needs. Not only are you able to trade through a registered entity, but you are also able to trade as sole proprietors or partnerships, or purchase franchise rights. In this article, we will go over these in a bit of detail.

Recommended in the Shop: Start a Micro Business in South Africa >>

Companies

A company is a juristic “person”. This is a body recognized by law as being entitled to rights and duties in the same way as a natural or human person. The Companies Act of 2008 breaks down the various forms of companies as follows:

PRIVATE COMPANY (PTY LTD)

The number of directors that are required to start this company must be between one to fifty with at least one shareholder. This company has the least amount of formalities and is perfect if you are planning on being a “one-man show”.

Recommended Read: Write A Business Plan >>

PUBLIC COMPANY (LTD)

This one is usually a listed company on the JSE. It is managed by a Board of Directors and is liable to its shareholders. They offer shares to the public to raise funds. This entity must have a minimum of three directors, and one shareholder.

PERSONAL LIABILITY COMPANY (INC)

Most accountants, doctors, and lawyers elect to trade through this type of company. Directors both past and present may be jointly and severally attached to the company’s contractual debt. It incorporates under section 8(2)(c) of the Companies Act the terms of its memorandum of incorporation.

STATE-OWNED COMPANY (SOC LTD)

This form of business entity can either be owned by local government – referred to as a “state-owned enterprise” in the Public Finance Management Act 1 of 1999 or a local municipality. An example of these could be Metrorail or eThekwini Electricity. The majority of the provisions of public companies will apply to state-owned companies as well.

DOMESTICATED COMPANY

This is a company that started out as a foreign entity. Registration was transferred to South Africa and now it is recognized by the Companies Act of 2008 as if it had originally been registered and incorporated on our soil.

NON-PROFIT COMPANY (NPC)

An NPC is set up for public benefit and its income and assets are not distributable to its incorporators, directors, members, officers or any persons related to anyone involved in the operations of the NPC. Its profits are purely to fund the NPC’s main objective.

It differs to a Non-profit Organisation (NPO) as it does not have to register with the Registrar of NPO’s. An NPO is not limited to registering as a company. It can be a charitable Trust, a Company or a Voluntary Association.


EXTERNAL COMPANY

Foreign companies looking to expand their profit or non-profit activities in South Africa will open up these branches. They are not recognised as separate legal entities.

Natural Persons

There are two options available to you, should you wish to be self-employed but not trade through a company. We will go through these next.

Sole Proprietor

A sole proprietor, often referred to as a sole trader, is the simplest form of business structure that a person can trade as. It refers to a single founder, who owns the business and is personally responsible for all its debts. Any profits made by the business is added to the owner’s personal income and is taxed accordingly. The down side to trading as a sole proprietor is that the owner is responsible for all credit and debts, and should the business in any way default resulting in debt collection lawsuits, the owner’s personal assets will be consumed to cover them.

Partnership

This business structure is owned by two to twenty people. They contractually agree to operate a profit generating business, pooling together their collective skills, knowledge, and resources. They agree to split any profits as per their percentage of interest in the business.

As it is not a formally registered business, there is no legal separation between the owners and the business. This means that the debts of the business are the responsibility of its owners.

Franchise

A franchise is an opportunity to own and operate a business using the trademark/ trade name, systems and proven business model of an existing brand. The owner of the brand (franchisor) will then license the rights to trade as a franchise of their business to a third party (franchisee) for a fee.

This post may contain affiliate links. Please read our affiliate disclaimer here. >>

0 In Small Business

Provisional Tax and Your Small Business

What is provisional tax?

Provisional tax is a method created by SARS to help relieve the pressure of making one large payment at the end of its relating year of assessment. This system requires the taxpayers to pay at least two amounts in advance during the year of assessment. At the time of submission of each return, there will be no historic data to base the calculations on. They will be calculated based on estimated taxable income (what your taxable income is predicted to be at the end its relevant year of assessment). Once your income tax return has been submitted, all the provisional tax payments that have been made to SARS will be offset against your final assessed amount.

Provisional tax shares a tax number with Income Tax. This means that no separate registration is necessary should you be required to submit provisional tax returns. You will however, have to activate this tax type on e-Filing using your income tax number in order to start submitting these returns to SARS.

Recommended in the Shop: Small Business Accounting Packages >>

Who is required to submit a provisional tax return?

For individuals:

If you earn an income other than your regular salary or an allowance, you must register as a provisional taxpayer. Should you be a “one-man band” sole proprietor who does not employ any staff, you will need to submit these returns as well.

For companies:

Companies are automatically added to the provisional tax system and are liable to submit these returns or become non-compliant. This will directly affect their tax compliance status with SARS which can negatively impact trade.

Note: Some entities (natural and judicial) have been excluded from this tax system. Read about them here. >>

When are provisional tax returns due?

Provisional tax is mandatory for payment twice a year, with a third voluntary payment as follows:

The first payment:

This payment must be made within six months of the start of the year of assessment. For years of assessment starting March, this will be 31 August if your financial year end is February.

The second payment:

It is due no later than the last working day of the year of assessment. This will be 28/29 February if your business’s financial year is February.

The third, voluntary payment:

The third payment may be made within six months of the year of assessment.

Recommended in the Shop: Start A Micro Business in South Africa >>

How do I submit my IRP6?

There are various ways to submit your provisional tax (IRP6) return. We’ve added them below:

Submitting at a SARS branch:

You can go into a SARS branch where a SARS consultant will assist you with the submission of your provisional tax return.

Using the e-Filing system:

You can submit your IRP6 on the e-Filing system. This will require you to register an e-Filing profile and activate your registered tax types. If you have an existing e-Filing profile, but have never been required to submit an IRP6 before, you will need to activate this tax type on your profile using your Income Tax number.

Hiring a Tax Professional:

A Tax Professional will calculate your amount payable and submit the IRP6 on your behalf. They may (depending on their in-house policies) also send a payment instruction to your registered bank account that will include all the correct, relevant payment details as generated by the e-Filing system. Once it has been sent to your bank, you will be able to review the payment and release it, making the entire process much less stressful for the taxpayer.

Recommended in the Shop: Small Business Accounting Packages >>

Disclaimer: This post may contain affiliate links. Please read our affiliate disclaimer here. Additionally, this post offers general information. Consult a professional – like an exceptional member of our team – for assistance before submitting.

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