You get two types of business owners in South Africa…
You get the successful ones and then, well, the not so successful ones.
But be that as it may; they both have one common pet hate… TAXES!
ONCE YOU HAVE READ THIS ARTICLE YOU SHOULD HAVE PUT TO BED MOST OF YOUR TAX FEARS! If not, well, lets just say that you will only have yourself to blame for being the owner of a business that barely makes YOUR ends meet…
It is perfectly normal for every business owner to despise the tax system in South Africa. In fact, it is not just a South African phenomenon, it is a worldwide pet hate. Why should anyone, after having worked so hard for a full financial year, part with their hard earned money for a system that seemingly delivers on very few of its promises?
Well, this is where it becomes tricky…
No matter what anyone may think of the current financial and political climate in South Africa, the tax legislation is pretty much clear cut. It exists…period. If you own a business you must be registered for tax along with the member(s) or director(s) of the company. If that company shows a profit you are liable to pay tax. If you drew ANY amount from the company that can not be deemed as a loan repayment, you WILL pay tax on that drawings in some way or form. If you don’t, and SARS get a hold of you, you could lose your business and end up in jail. Granted, that is usually what happens in the most extreme cases, but even when things do not quite get that sour it still gets very inconvenient when SARS plonk their suited behinds down in your office, digs around your papers and generally make you feel like a criminal. It can be a life changing experience to have the SARS auditors in your environment digging through your life! And the penalties and interest charged on backdated taxes can wipe your cash flow out!!
By now, even for the hardened business people among us, the situation seems pretty dire, doesn’t it. SARS seems like this mountain no-one dares to scale. WRONG!
Over the course of the last 5 years SARS have restructured their internal procedures and, along with new tax legislation passed, made it easier for tax complaint businesses and business owners to STAY complaint without draining you financially.
A special system was set up whereby certain business entities could be classified as a Small Business Corporation…which in turn led to lower tax rates and higher rebates. What this means…you can earn more before being taxed, and once you start paying tax it will be calculated at 10% for the first few hundred thousand rand! A huge saving considering that your normal, run-off-the-mill CC will pay tax starting at 28% on all profit from rand number 1!!
The other system SARS have set up to not just help tax practitioners, but also business owners, was by creating a special division in their ranks which gives exclusive access to SARS registered tax practitioners. This means that information can be readily parted with without having to stand in kilometer long queues in pressing heat to get it! This translates into quicker service, better negotiations and lower taxes in most cases as it removes the guesswork from the equation. Beware though. Finding a “tax specialist” and employing him / her based on the fact that they claim to be “SARS registered” can be a silly thing to do. Being SARS registered does not automatically make you a great, or even good, tax consultant. Do your homework before committing to a professional. Sometimes paying more for a great professional in your corner can save you ten times as much in tax.
A lot of business owners have this idea in their head that their financial statements and subsequent tax return submissions are these massive financial burdens to their livelihood. Nothing could be further from the truth. You should be looking at your accounting function and the money you need to spend to whip things into shape as an investment. You cant get finance, investments, other loans or even tender on big contracts without having your affairs up to date. The more information you disclose to a professional, the better you can be helped. I have lost count of the amount of times a client have withheld vital information out of fear of paying too much tax only to complain about a tax assessment being sent from SARS And it turns out the information he refused to part with could have SAVED him money!! It sounds bizarre, but it’s true!
If a business owner decided to look at these submissions as an asset, all sorts of doors would open and opportunities could be noticed and grabbed with both hands.
Did you know that there are, on one particular semi government website, up to 300 tenders being posted daily? Did you know that your company do not NEED to have a single black employee, member or director in order to be BEE compliant? It’s the truth!
For the cost of a staff braai you could obtain a BEE certificate inside a matter of 3 days! And just by getting your figures in order you could get a tax clearance certificate in roughly the same amount of time when you work through a registered tax practitioner. This means the following:
- You started taking your business seriously
- You started making good decisions and started seeing assets in the place of where you previously saw liabilities.
- You can start growing your business within a month of making your first great decision in your business.
- You could double, if not quadruple, your income in your next financial year.
All because SARS became a friend…
Think about it. Why shouldn’t your tax savings not pay the person that helped you in growing your business and saving you tax?
Want spare change? Call AGBS today on 078 457 1188.