Tax for small businesses in South Africa
Tax isn't at the top of many entrepreneurs' to-do list. There are plenty of other things that demand attention, such as building the business, talking to consumers, or developing new goods, so deadlines may seem far away.
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
When your company needs to file tax returns and pay taxes is determined by the type of tax it is registered for, as well as the end of its fiscal year.
Visit the SARS website to learn more. Alternatively, you can speak with an accountant who will be able to assist you.
Companies that pay small business tax are required to file one annual tax return, as well as two provisional filings, which are used to estimate tax for the coming year.
Companies that register for Turnover Tax have fewer criteria and just must file one return each year.
Companies that are VAT, PAYE, or other tax-registered will have their own set of regulations.
Make sure your books are in order, right from the beginning
You can't file your taxes until you have accurate, up-to-date books.
When you make a purchase or a sale, make sure to maintain all receipts/financial records related to company activities as a first step.
Next, keep track of all your company transactions as they happen, categorizing each one as clearly and regularly as possible. This can be done manually. There are, however, software solutions that can help you record these transactions quickly and easily.
Make sure your books are balanced
Take the time to balance your books if you use a manual double-entry accounting method. To put it another way, the sum of all the credits equals the sum of all the debits.
If you're using software, you may skip this step because the program will take care of it for you.
Reconcile your bank accounts
When you reconcile your bank accounts, you're basically making sure that your bank records and your internal financial records are in sync.
Any problems, such as missed or multiple payments, will become clear. You'll also have a clear image of your current financial situation.
Keep separate personal and business expenses
Make it a point to keep your personal and business transactions separate throughout the year.
Understand Sales Tax, or VAT
In South Africa, sales tax is called VAT – “value-added tax”. It is only mandatory to register for VAT once your business revenue exceeds R1 million per year. Some businesses, on the other hand, may choose to register for VAT before reaching that milestone.
Due to the additional tax reporting requirements associated with VAT, you may want to seek the advice of an accountant to assist you with filing.
VAT reporting requirements for enterprises registered under the Turnover Tax system may differ slightly. Make sure you understand the details of what pertains to your company.
Claim all your deductions
As a small business owner, you are eligible for a variety of tax deductions - items that can help you lower your tax bill and keep as much money in your company (and your pocket) as possible.
Make sure you consider all the deductions you might be entitled to.
Put the right person in charge of your books
Hire an accountant to assist you with your yearly financials and bookkeeping requirements. This saves you
time and energy so that you can focus on your business.
Require assistance with your bookkeeping, financials, or tax requirements? Contact us.