Business owners are also individual tax payers – which means that the adjustment of tax tables, rebates and all other issues like the deductibility of contributions to pension, provident, and retirement annuity funds affect them in exactly the same manner as they would affect an employed person. In this commentary, Kobus Engelbrecht, Marketing Head for Sanlam Business Market, notes some of the key aspects of the National Budget in relation to business owners.
Minister of Finance Pravin Gordhan, in his National Budget speech, revealed a number of tax-related changes that will impact on small business owners.
A key change is the implementation of dividend withholding tax on 1 April 2012. This will bring an end to secondary tax on companies, and entails that dividend withholding tax at 15 % will be paid on any dividend paid out to the shareholders of the company.
The Minister further announced that the inclusion rate with regard to capital gains tax for companies and trusts (other than special trusts) would increase to 66.6 %. This will raise the effective capital gains tax rate to 18.6% for companies, and to 26.7 % for trusts (other than special trusts).The tax exclusion amount on the disposal of a small business when a person is over the age of 55, will rise from R 900 000 to R 1 800 000.The market value of assets allowed for a small business disposal for business owners over 55 years of age increases from R 5 000 000 to R 10 000 000.
Businesses with a turnover of less than R1 million (microbusinesses) are likely to welcome Minister Gordhan’s announcement that they will be given the option of making payment for turnover tax, VAT and employees’ tax at twice-yearly intervals from 1 March 2012. The Minister further announced that businesses in this category would be able to file a single combined tax return on a twice-yearly basis from 1 March 2013. This essentially means that the number of returns required for these taxes will fall from about 18 per year to only two a year.
On the other end, it was announced that this year will see an increase in the tax threshold for small business corporations from R 59 750 to R 63 556. Currently, taxable income up to R 300 000 is taxed at 10%. This threshold will now increase to R 350 000 and the applicable rate will be reduced to 7%. For taxable income above R 350 000, the normal corporate tax rate of 28% applies. These amendments will come into effect for years of assessment ending on or after 1 April 2012.
In an effort to improve governance, streamline procedures and provide more focused support to businesses operating within special economic zones, the National Budget announced the introduction of legislation to build on industrial development zone policy. In support of this initiative, the Minister said the following tax interventions would be explored:
· A possible reduction in the headline corporate income tax rate for businesses within selected zones (as determined by the Minister of Finance after consultation with the Minister of Trade and Industry);
· An income tax exemption for the operators of special economic zones; and
· An additional deduction from taxable income for the employment of workers earning below a predetermined threshold.
The South African tax system is complex and Sanlam urges business owners to employ the services of adequately qualified Tax professionals to help them to comply with the relevant legislation and to assist them to benefit from the allowable deductions.
Article written by Kobus Engelbrecht, Marketing Head : Sanlam Business Market