1. Income Tax
– Income tax is the tax you pay on any money your business earns. Each year, you need to lodge a tax return to tell the South African Receiver of Revenue ( SARS) how much money your business has made and how much tax you are expected to pay.
This will be determined by the expenses incurred while operating the business.
If you’ve made a profit you will probably have to pay some tax. It’s best to put money aside throughout the year to help pay for your tax.
It is the reason why we encourage that you prepare the management account so you can be able to estimate the tax payable each month.
2. Sole Proprietor Tax (Self Employment Tax)
– a sole proprietor is considered an individual, and their taxable income is calculated by subtracting allowable deductions from their total income, which includes income from their trade. They account for their taxes under their individual tax numbers. They are also categorised as provisional tax payers. They basically use their profession, skills or experience to earn an income.
3. Payroll Tax (Employees’ tax)
– Employees’ tax is a system where an employer deducts employees’ tax called Pay As You Earn (PAYE) from the earnings of employees and pays it over to SARS on a monthly basis. This tax functions as a tax credit which is then set off against the final income tax liability by that employee. This happens on an annual basis. The employer will prepare a tax certificate for the employee ( IRP5) for them to confirm the estimated tax deducted over the 12 months if it is correct or not.
4. Value Added Tax
– is a consumption tax that is levied on the value added at each stage of a product’s production and distribution.
Unlike Income tax you do not automatically qualify to charge / pay VAT as a business. There are certain criteria your business should meet in order to register for VAT. We have what we call voluntary registration and compulsory registration. If the business makes a turnover of up to 50 thousands plus per year you then qualify for a voluntary registration. The compulsory registration occurs when your business turnover is over a million per year.
5. Excise Tax
– It increases the retail value of excisable goods to discourage consumption. This logic is applied to products that have a harmful effect on the health of South African people, or the local environment. For this reason, excise is often referred to by its nickname, sin-tax.
The revenue generated by these duties and levies amount to approximately ten per cent of the total revenue received by SARS.
Develop a Tax Strategy
Paying taxes is a civic duty. Due to all of the varieties of local, state and federal taxes, you might want to develop a long-term tax strategy.
Now that you know which small business taxes are most important, look for credits, deductions and corporate structures that can help you reduce your tax liability.
Compiled by Ms. Dikeledi Seoloane on behalf of Matsobanemetja Business Consulting (Pty) Ltd – Registered Accountant and Certified Tax Practitioner.
If you need a consultation with us with regards to your business, any type of business – please reach out to us on email hello@matsobanemetja.blog
Matsobanemetja Business Consulting (Pty) Ltd offers a wide range of bookkeeping and accounting services, tailored to your business needs at an affordable price.
You may please inquire with us by sending an email to enquiries@matsobanemetja.co.za
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