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Registering For Tax And Obtaining A Tax Certificate |
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The obligation to register for and pay taxes is one that the majority of South Africa bears, including companies, close corporations and other taxable entities. As such, registering for taxes is an equally important requirement when incorporating a business entity. Income tax and business Income tax, also referred to as “normal tax”, is a form of tax imposed upon all persons, including companies, close corporations and other taxable entities. Income tax is payable on the taxable income of a taxpayer for a specific year of assessment and consists of gross income less allowable deductions as per the Income Tax Act 58 of 1962. Income tax returns must be submitted for each year of assessment. For individuals (sole proprietor and partner) and trusts, the commencement date of the year of assessment starts on 1 March and ends on the last day of February of the following year. For companies and close corporations the year of assessment may coincide with its financial year. Who has to register for tax? There are various forms of business entities with different tax obligations, which I will briefly address, below. When incorporating a private company or close corporation you create an entity with separate juristic personality and in terms of tax law, an entity which has to register as a taxpayer in its own right. A partnership is not a separate juristic person or taxpayer, and as such, each partner is taxed on his or her share of the profits. Similarly, a sole proprietorship is a business that is owned and operated by a natural person and has no separate existence from the owner. The owner must include the income from such business in his or her own income tax return and is responsible for the payment of taxes thereon. Given that the taxpayer is the owner of the sole proprietorship or partner in the partnership, they need only declare the income as part of their taxable income. How do I register my business as a taxpayer? As soon as you start your business you are required to register it with your local South African Revenue Service (“SARS”) office in order to obtain an income tax reference number. This is done by completing an IT 77C form, which can be obtained from your local SARS office or the SARS website. This form together with relevant supporting documentation must be submitted to SARS. However, a company must be registered with the Companies and Intellectual Property Commission (“CIPC”) to obtain a business reference number. In this instance, CIPC will notify SARS of the registration and the company will automatically be registered as a taxpayer when CIPC informs SARS of such registration. Other forms of tax Depending on other factors such as turnover, payroll amounts, whether you are involved in imports and exports etc. you could also be liable to register for other taxes, duties, levies and contributions such as Value-Added Tax (“VAT”), Pay-as-you-earn (“PAYE”), and various other contributions. You will be liable to register for VAT if the turnover in relation to your taxable supplies exceeded or is likely to exceed R1 million in any consecutive period of 12 months, and such registration must be done within 21 days of becoming liable. An entity may also of its own volition register as a VAT vendor if its turnover in relation to your taxable supplies in any consecutive period of 12 months exceeded R50 000 or is likely to exceed R50 000, but did not or is not likely to exceed the R1 million mark. In order to register for VAT, you must submit a completed VAT101 form, along with any relevant supporting documentation to SARS. Moreover, if the entity has employees, it must register as an employer for employees’ tax purposes by completing an EMP 101 form and submitting it to SARS within 14 days of becoming an employer. There are two types of tax an employer can deduct from an employee’s wages, namely Standard Income Tax on Employees (“SITE”) and PAYE. An employer will deduct SITE from the wages of employees who earn below the prescribed threshold per year (currently R60 000) and have no other form of income, in which case employees do not have to complete a tax return. Alternatively, an employer must deduct PAYE from employees’ wages when they earn over the prescribed threshold, per year. Once registered, the employer will receive a monthly return (EMP 201) that must be completed and submitted together with the payment of employees’ tax and other contributions (if applicable) within 7 days of the month for which the tax was deducted. Tax Clearance Certificate (“TCC”) The obligation to register for and pay ones taxes carries increasingly more weight in South African business. A TCC is a certificate which certifies that SARS has, after checking its records, found that the relevant taxpayer has filed all required tax returns and has paid all taxes, penalties, and interest due as of the date the TCC is issued. There are various reasons for obtaining a TCC, the most popular being to show good standing (i.e. that the taxpayer is tax compliant) when applying for a tender. In either instance you can apply for a Tax Clearance Certificate by completing a TCC-001 form. |