Starting your own Business – Registering for Taxes

Registering for taxes and understanding tax can be a confusing at the  best of times, but we will take you through a brief overview of what you need to know.

Corporate Income Tax:

This is also known as business tax which is a tax imposed on businesses incorporated under the laws of the Republic of South Africa. It is mandatory for all business to Register as taxpayer. You will then be asked to submit an annual tax return as well as a provisional tax return every 6 months. You will have to make payments in the following periods:

• First payment – within six months from the beginning of the year of assessment
• Second payment – on or before the last day of the year of assessment
• Third payment – seven months after the year of assessment for taxpayers with February year-end and six months after year of assessment for all other cases.

Provisional Tax

Most people seem to think that provisional tax is a separate tax, but it is not. It is a method of ensuring that you pay tax over the relevant period instead of having to pay a large sum at the end of the year assessment. Provisional tax is mandatory for any person who receives income. Provisional tax is due in the following periods:

• The First Period:
  • Half of the total estimated tax for the full year;
  • Less the employees tax for this period (6 months);
  • Less any allowable foreign tax credits for this period (6 months).
• The Second Period:
  • The total estimated tax for the full year;
  • Less the employees tax paid for the full year;
  • Less any allowable foreign tax credits for the full year;
  • Less the amount paid for the first provisional period.
• The Third Period (voluntary):
  • The total tax estimated payable for the full year;
  • Less the employees tax paid for the full year;
  • Less any allowable foreign tax credits for the full year;
  • Less the amount paid for the 1st and 2nd provisional tax periods.

Value-added Tax

Also known as VAT. It is an indirect tax on the consumption of goods and services. In south Africa it is levied at a standard rate of 14% on the supply of most goods and services, although there are some supplies that are zero-rated and exempt from VAT. Any person that carries on a business may register for VAT but anyone with a turnover that exceeds R1 million in 12 months is compelled by law to register for VAT. Each registered VAT vendor is required to make payments or claim in accordance with the tax period allocated to that specific vendor.

Unemployment Insurance Fund

Also known as UIF. This is a payment aimed to provide short-term relief to workers that might become unemployed or are unable to work because of maternity or adoption leave, or illness. All employees and employers  are liable for contributions towards UIF. If you are registered for tax purposes with SARS then you are also required to register for UIF. The following is paybale

• An employee is due 1% of the remuneration paid to him/her by his/her employer
• An employer will then therefor have to pay a total contribution of 2% (1% contributed by the employee and 1% contributed by the employer)

Skills Development Levy

Also known as SDL. This is a levy imposed on businesses to promote learning and development in its employees in South Africa. SDL is payable by employers, who have registered, and expects his/her total salaries to exceed R500 000 over the next year. 1% of the total amount paid in salaries to employees are then allocated to SDL, these funds are then used to develop and improve skills of employees. This is payable on a monthly basis.

In our next “Starting your own business” article we will discuss how to open a bank account for your business. Start registering for taxes today with SARS here