For many entrepreneurs, tax is not at the top of the to-do list. Deadlines may seem like a long way off, and there are plenty of other things that demand attention – like growing the business, talking to customers, or developing new products.
Yet paying tax accurately and on time remains a vital part of every healthy business – both large and small.
In South Africa, the type of tax a company is registered for will determine its tax filing requirements. For example, companies registered for small business tax, turnover tax, provisional tax, or VAT all have different filing requirements. The requirements differ both in terms of frequency (how often returns are required and tax is paid) and type (what tax is paid for).
Making sure you’re prepared for tax time
To make sure you’re fully prepared for tax time, here are some helpful tips:
Note down your tax deadlines
The type of tax your company is registered for – as well as your company’s financial year-end – will determine when your company needs to submit tax returns and pay taxes due.
If you’re unsure, head over to the SARS website to read up more. Alternatively, get in touch with an accountant, who can assist you.
As a guideline, companies that pay small business tax need to submit one tax return annually, in addition to two provisional returns, which are used to estimate tax for the year ahead.
Companies registered for Turnover tax have simplified requirements and only need to submit one return annually.
Companies registered for VAT, PAYE and other tax types will have their own specific requirements.
Make sure your books are in order, right from the beginning
Without correct up-to-date books, you cannot file your taxes.
As a first step, make sure that you keep all receipts/financial records related to business transactions when you make a purchase or a sale. This will avoid any last-minute scrambling around to find documents.
As a next step, record all of your business transactions as you go, categorising each transaction as accurately and consistently as you can.
There are various ways to do this. Manually, excel a software programme or outsourcing to your accountant.
Make sure your books are balanced
If you use a manual double-entry accounting system, take time to check that your books are balanced. In other words, that the sum of all the credits is equal to the sum of all debits.
If you’re using a program, you can skip this step, as the program will do it automatically for you.
Reconcile your bank accounts
When you reconcile your bank accounts, you basically make sure that your bank records match up with your own internal financial records.
Any issues – such as missed payments or double payments – will become clear very soon. And you’ll have an accurate picture of your actual financials.
Keep separate personal and business expenses
If you’re new to the entrepreneurship world, make a point to keep your personal and business expenses separate throughout the year.
It is only mandatory to register for VAT once your business revenue exceeds R1 million per year. However, some companies may choose to voluntarily register for VAT before reaching that milestone.
VAT entails additional tax reporting requirements, so you may wish to seek the advice of an accountant to help guide you when it comes to filing.
For companies registered under the Turnover Tax system, VAT reporting requirements may differ slightly. So make sure you’re certain about the specifics of what applies to your business.
Claim all your deductions
As a small business owner, you are entitled to a number of tax deductions – items that can help you reduce your tax bill. Ensure you consider all the deductions that you’re likely to be eligible for.
Put the right person in charge of your books
If you have got a great mind for finances – or run a business with fairly simple finances – you may feel confident preparing your tax return yourself.
If not, hire an accountant to help you out.
Require assistance with your small business financials and tax returns?
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