Navigating the tax requirements for running your own business can be a bit like trying to solve a Rubik's Cube while blindfolded. So, we've done all the hard work for you: you'll find everything you need to know about Tax Clearance Certificates, Tax Returns, and Turnover Tax Registration. Don't let your tax obligations overwhelm you, our expert team, in partnership with tax specialists TTT Financial Group, will help you navigate tax compliance effortlessly and ensure that your business stays on the right track.
Running a business of any size is admin intensive. From registering it with the CIPC, Sars and any professional organisations you need to be part of, to opening and running a bank account, running your payroll and paying tax on behalf of yourself and your employees, there's a lot to do. Then you still need to grow the business, and to do that you'll have to do more paperwork to establish those relationships. No matter where you are in your business journey, one thing you'll need to stay on top of is Tax.
What is a Tax Clearance Certificate?
A Tax Clearance Certificate is a written confirmation from the South African Revenue Service (Sars) that your company is in good standing with them and that your tax affairs are in order. A Tax Clearance Certificate may be required when applying for tenders, contracts and RFQs (Requests for Quotations). This helps confirm to the business you're dealing with that yours is a credible company in Sars' eyes.
How do I get a Tax Clearance Certificate?
Sars is the only entity that can issue legal Tax Clearance Certificates in South Africa. You can request one online via Sars eFiling, by visiting a Sars branch, or we can do all the hard work for you by securing your Tax Clearance Certificate within two days, once we have all your information and if a registered representative is appointed. It costs R450 and you will need:
Can my request for a Tax Clearance Certificate be declined?
For tender and/or good standing applications, a Tax Clearance Certificate is only valid for one year from the date of issue, provided that the taxpayer is still compliant with Sars' requirements. A Tax Clearance Certificate could be declined if:
Obtaining a Tax Clearance Certificate is a vital part of ensuring that your company and the businesses you're dealing with are legitimate in Sars' eyes, which goes a long way towards building professional trust.
What is a tax return and why companies can claim back tax?
If you have a company that operates in South Africa, you need to file a corporate tax return with Sars annually. The complexity of the return depends on the structure of your company, but it's less complicated than it sounds for a small business.
Companies in South Africa are taxed on their profits and the tax return is the document that lists income, expenditure and deductions that Sars uses to calculate how much tax the company must pay.
Both business and personal income tax are paid retrospectively, ie on income and expenses incurred in the previous tax year. While there's a 'tax season' for personal income tax, for companies that window is 365 days after the end of the most recent financial year. Company profits are taxed at a flat rate of 27%. Companies are required to be registered for Provisional Tax, which is a different estimate and payment system, but the Annual Income Tax is the major focus.
What impact does turnover play in ability to claim back?
Sars taxes companies on their profits, which are calculated, if we're to oversimplify, as Turnover – Cost of Sales = Gross Profit. Gross Profit – operating expenses = company profit/loss. The smaller the gap between your income and expenses, the less profit you've made, but less profit means less tax. You still need to submit a tax return if your business made a loss in the last financial year.
Is there a limit to how much a company can claim?
Tax deductions are amounts that you can deduct from your personal or company taxable income to lower the amount of tax you owe. There are a very specific set of deductions that companies are allowed to claim from Sars, and each deduction type has specific criteria that are spelled out on the Sars website.
It's important to note here that tax laws and regulations can be complex, so you may want to consult with tax specialists like TTT Financial Group to ensure your company is getting the maximum benefits and money back that you're entitled to.
Tax return process and requirements
In order to complete a business tax return, you will need:
If you want to take the hassle out of the process completely, our partners at TTT Financial Group will do all the hard work for you for a fee of R1,500, and offer a speedy two-day turnaround. Easy, right?
What is Turnover Tax and who qualifies for it?
Turnover Tax is a simplified tax system designed for small businesses with a low annual turnover (less than R1,000,000). Businesses that qualify will be taxed based on their annual turnover, rather than their taxable income, so they don't have to determine their expenses or deductions for income tax purposes. The tax rates, though, are progressive, which means that the higher your turnover, the higher your tax liability.
The benefits of registering for Turnover Tax
The real benefit of Turnover Tax is that it's less admin-intensive for small businesses. As it replaces Income Tax, VAT, Provisional Tax and Capital Gains Tax for small businesses, that means the tax calculation process is much easier, and businesses don't have to determine their expenses or deductions for income tax purposes. Pretty nifty, isn't it?
We can take the chore out of Turnover Tax Registration and handle the whole process for you. You'll need to provide us with:
With that paperwork in hand, we'll sort out your Turnover Tax Registration within 21 working days. The fee? Just R2,500.
Other business services you may need
Do you need help getting to grips with everything involved in running a business?
Are you wondering what PAYE is and why you have to pay it? What it VAT and why you need to register your company for it? We answer all your questions.
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