TAX AND TAX PRACTITIONERS FOR SMALL BUSINESS

Busting Tax Myths

As accountants, we get to see many small business owners that focus on “saving tax” more so than they do on actually making a profit. The irony is that income tax is payable on profit and the success of any business depends on its ability to earn profits every year. Assuming that you have a good Tax Accountant, the stark reality is that the higher your business’s income tax bill, the more successful you and your business are.

Tax Types in Small Businesses

When it comes to tax, there are several types of tax that all business’s, no matter how small or large, will need to deal with at some stage or another, and there are other taxes that are industry specific. The most common tax types that small business and trusts will navigate are:

Income tax

• Corporate income tax (companies and close corporations)
• Personal income tax (sole proprietors, directors and members)
• Capital Gains Tax (included with corporate and personal income tax returns)
• Trust income tax (for registered trusts)
• Provisional tax (advance income tax payment every six months)
• Turnover tax (for micro businesses with annual turnover of R1 million or less in sole proprietor, partnership, company or close corporation trading entities)
• Small Business Corporation Tax (lower tax rate for qualifying companies and close corporations)

 

Dividend tax (tax on distribution of profits by companies to its shareholders and close corporations to its members).

Employing staff (includes directors and members)

• PAYE (Pay as you earn)
• UIF (unemployment insurance fund)
• SDL (skills development levy)
• ETI (employment tax incentive scheme)
• WCA (workmen’s compensation)

Value Added Tax (VAT)

Securities Transfer Tax (STT – tax on the transfer of any share (security) issued by a company or members interest issued by a close corporation).

Donations Tax (tax on any gratuitous (free or at no charge) disposal of property including any gratuitous waiver or renunciation of a right).

Depending on the nature of the business, some small businesses will need to register and administer certain industry specific taxes, for example:

Excise Duties and Levies

• Ad valorem excise duty (motor vehicles, cosmetics, perfumes, electronic equipment)
• Alcohol products
• Diesel rebates (administered under VAT for farmers, commercial fishing vessels, marine industry research vessels)

Transfer Tax (buying and selling of fixed property from non-vendors)

What is a Tax Practitioner?

A Tax Practitioner is a natural person, usually an Accountant, registered with a recognized Controlling Body as well as with SARS and who provides tax advice to any person or business about the application of any tax Act or who completes or assists to complete a SARS return for any person or business for a fee. A person can qualify as a Tax Practitioner if they have obtained a three-year Bachelor degree with tax as a major subject and have 3 years verifiable practical experience in a tax environment and in some instances, pass the Professional Tax Examination. Chartered Accounts automatically qualify as Tax Practitioners. It is a criminal offence for anyone providing tax advice and or preparing, completing or submitting tax returns for a fee without being registered as a Tax Practitioner. A Tax Practitioner with several solid years of tax experience packs a greater punch than a fancy degree with very little experience.

What does a Tax Practitioner do?

A tax practitioner can register all types of taxes, prepare and submit income tax returns for individuals and all types of businesses and trusts, prepare and submit employee returns and prepare and submit VAT returns and provide tax advice. At Business Accounting Network, our Tax Practitioners do not provide tax services to individuals unless they are owners of a business, whether trading as a sole proprietor or in a company or close corporation.

How much do Tax Practitioners Charge in South Africa?

This is not as simple a question as it may sound. Rather than ask what the cost of tax services are, ask how the fees are calculated. Most professionals base their fees on the type of tax, the complexity of your tax return and the time it takes to prepare and submit it to SARS. By way of example, the 2022 fee for the registration of a taxpayer for provisional tax can be R210 yet a more complex small business company tax return can be around R3 760, all VAT exclusive.

As with any accounting or tax service, you can save costs by doing as much of the work preparation yourself.