Tax obligations: a phrase that can instantly make small business owner’s palms sweaty. Tax obligations are not stressful or overwhelming when you partner with a small business accountant you can trust. We take a brief look into the tax obligations for small businesses, and why you should use SureBooks as your small business accountant to handle your small business taxes.
What Are Tax Obligations?
The first step to making sure you are a tax-compliant small business is to understand what tax obligations are. As a South African small business, you are obligated to register your business with the South African Revenue Service (SARS), file your tax returns, and pay your small business taxes on time.
South African tax obligations are residence-based, which means that every small business in South Africa is required to pay tax irrespective of whether their income is earned within South Africa or from an international source.
All South African taxes are paid to SARS, which is an autonomous tax collecting authority. Alongside collecting all due revenue, SARS ensures businesses and individuals are compliant with their tax obligations. SARS will also take retributive action against those who are not tax compliant. Your tax obligations are usually filed and paid to SARS eFiling.
SARS eFiling is an online platform that you will use to interact with SARS. You will need to register your small business with the SARS eFiling and ensure that all your information about your business, such as contact details, banking details, and other relevant business information, is correct. You can register for all your small business taxes on the SARS eFiling platform without needing to visit a SARS branch.
Tax Obligations for Small Businesses:
We have listed the main tax obligations for small, medium, and micro enterprises (SMMEs) in South Africa.
Corporate Income Tax (CIT):
Corporate Income Tax (CIT) is a tax obligation for businesses registered with the Companies and Intellectual Property Commission (CIPC). These are the types of registered businesses and companies in South African that are expected to pay CIT.
- Small business corporations.
- Private companies.
- Listed and unlisted public companies.
- Share block companies.
- Body corporates.
- Public benefit companies.
- Dormant companies.
- Close corporations.
- Collective investment schemes.
The CIT obligated amount for small businesses depends on the taxable income earned by the small business per financial year. We have outlined the tax rates as stipulated by SARS for small businesses that have their financial year ending between 1 April 2021 and 31 March 2022.
- Small businesses that earn up to R87 300 pay a 0% tax rate.
- Small businesses that earn between R87 301 to RR365 000 pay a 7% tax rate.
- Small businesses that earn between R365 001 to R550 000 pay a 21% income rate plus an additional R19 439.
- Small businesses that earn R550 001 or higher pay a 28% tax rate plus an additional R58 289.
CIT can be paid through either SARS eFiling, online banking, electronic funds transfer, or bank payments. CIT is expected to be paid once a year at the end of your small business’s financial year.
Your CIPC registered small business will need to submit an Income Tax Return form (ITR14) once a year. On this ITR14, you will declare your small business’s incomes and expenses or deductions. SARS will then calculate your CIT or tax refund.
Provisional tax is not a separate form of tax, but rather is the payment of your CIT in smaller instalments over the financial year. The amount you pay is an estimated amount based on the small business’s taxable income.When you register your company for CIT, you are automatically registered for provisional tax. You will then need to determine whether your small business is liable for provisional tax.
Provisional tax is usually paid twice in a financial year, but you can pay provisional tax three times a year. You will have to submit a return for payment of provisional tax with an IRP6 form and make the payments.
Pay As You Earn (PAYE):
If you own a small business and have employees who perform work for your small business, you are required to contribute the employee’s pay as you earn (PAYE) to SARS. PAYE is paid monthly and is due within 7 days after the tax is deducted from the employee’s salary.
Value Added Tax (VAT):
Value Added Tax (VAT) is an indirect tax. Businesses whose annual turnover exceeds R1 million must register for VAT in South Africa. Businesses are expected to pay VAT, but they can redirect this tax to their customers by adding the VAT costs to their services or products.
Capital Gains Tax:
Small businesses are expected to pay a capital gains tax when they make a profit on sold business assets. Business assets can include bonds, property, stocks, or business equipment. If your small business sells an asset at less than its original value and therefore makes a loss, this can be used to offset other capital gains taxes.
Special Taxes Applicable to Small Businesses:
We have listed the two special taxes that are available as tax options for small businesses.
Turnover Tax (TOT):
Turnover tax (TOT) is a simplified tax system where you pay one single tax instead of the various other taxes small businesses are obligated to pay to make tax easier. Instead of paying CIT, provisional tax, VAT, dividends tax, and capital gains tax, you simply pay TOT.
TOT is specifically for micro-businesses that earn R1 million or less per financial year. TOT is available for partnerships, sole proprietors, close corporations, companies, and co-operatives.
Small Business Corporation (SBC):
Any small business corporation (SBC) with an annual turnover of R20 million or less may be qualified to receive a reduced tax rate on the CIT if your business meets the requirements.
Avoiding and Evading Tax Obligations:
Avoiding or evading tax obligations often comes up when discussing paying tax. There is a key difference between avoiding and evading tax obligations.
Avoiding tax obligations is the use of legal means to reduce the amounts of tax your small business pays. Evading tax obligations is the use of illegal means to not pay taxes and is a criminal offense.
The best way to ensure that your small business is avoiding tax obligations correctly and not evading tax obligations is to hire small business accounting services. SureBooks offers small business accounting services that are suitable for small businesses in any industry.
SureBooks; Your Small Business Accountant:
SureBooks is the small business accountant that you can be sure of. We pride ourselves on offering an all-around small business accountant service. Whether you require assistance with your tax obligations, payroll, or other accounting needs, we are the best partner to choose for your small business.
As your small business accountant, we use only the latest accounting software to ensure your accounting needs are handled accurately and efficiently. We will take care of all your financial needs while you focus on what is truly important; making sure all the other requirements of running your small business are being met and that your small business is constantly growing financially.
The SureBooks team is comprised of experienced accountants who are qualified and capable of handling the finances of a small business. If you are looking for a small business accountant to partner with that you can trust will handle your business finances correctly and promote financial growth, then SureBooks is for you.
Reasons To Choose SureBooks to Handle Your Tax Obligations:
We have listed the reasons why SureBooks is the small business accountant best suited to handle your small business’s tax obligations.
Ensuring that your small business is tax compliant can be stressful if you are uncertain about the processes of paying your tax obligations. The last thing you want is SARS performing an audit on your small business because they suspect your business is committing a tax offense.
These are a few ways your small business can commit a tax offense.
- Fail to register your business for tax, or fail to update your registered information if there is a change.
- Fail to submit your business tax return to SARS.
- Fail to keep any relevant documents or records which SARS will need.
- If you submit a falsified tax return to avoid taxes.
Any of these tax offenses can result in a fine or imprisonment, which is the last thing any small business needs when trying to grow in South Africa.
As your small business accountant, SureBooks will alleviate any stress associated with your tax obligations. We will ensure that your tax returns are submitted on time, are accurate, and that all relevant documents are recorded. With SureBooks as your small business accountant, you get to enjoy peace of mind when it comes to your tax obligations.
Although investing in the services of a small business accountant is an additional cost to your business, this service can be invaluable as it can save you money in the long term. If your small business is committing tax offenses, whether knowingly or unknowingly, you can be held liable to penalties. These penalties could be a financial burden that your business simply cannot bear, and therefore have dire effects on the financial health of your business.
SureBooks offers an affordable small business accountant service. We strive to make our accounting services easily available to small businesses so that no small business has to deal with the financial strain of penalties due to tax offenses.
Accurate Record Keeping:
Having an up-to-date and accurate record is critical when it comes to tax. This record will include most of your business-related documents, such as invoices, bank deposit slips, receipts, and sales slips. This information is important as it makes it easier to be tax compliant, makes managing your tax simple, and if you are ever queried by SARS on your income tax return, you have all the relevant documentation.
SureBooks is the perfect small business accountant for your small business as we will keep all your documents and records accurately recorded to ensure a smooth tax process.
Recording all your business documentation, filing tax returns, and ensuring that your business is tax compliant can be a time-consuming process. When you add this to the many other business obligations you have to manage on a day-to-day basis, your tax obligations can easily become overwhelming or get neglected.
SureBooks is a successful accounting company due to our focus on financial managerial efficiency. We will make sure that you can focus on running your business without needing to worry about handling your small business finances and tax obligations. By using SureBooks as your small business accountant, you will save valuable time and energy.
SureBooks is the best small business accountant for your business as we will make sure you are compliant with your tax obligations.