Tax. This is one word which strikes fear in many business people’s heart but we are here to help diffuse the fear by giving you a general understanding of tax and how to register for it. This is a basic guide to tax and we do advise that you hire a tax practitioner to help you further in your tax journey.
Who should pay tax?
Individuals pay income tax on salaries, commission, or fees etc that they earn. Companies pay company tax on their annual income.
What taxes should I pay?
The tax you pay will depend on the type of business you have and if you have employees.
Here are the taxes which may apply to your business and what they mean:
Corporate Income Tax
This tax is for listed public companies, unlisted public companies, private companies, close corporations, co-operatives, collective investment schemes, small business corporation (s12E), body corporates, share block companies, dormant companies, and public benefit companies. This tax is paid on all income received or accrued by the business within one financial year. You can learn more about corporate income tax here.
This is not a separate tax from income tax. This tax is put in place to assist taxpayers to pay their tax in two instalments rather than one large lump sum at tax assessment time. There are two instalments and these payments are then put against the tax assessment you receive and depending on the assessment you may need to pay more or you could get a refund. You can learn more about provisional tax here.
Pay as you earn (PAYE)
This tax is paid by the employer and is taken off the employee’s remuneration before they are paid their salary. This is tax must be paid every month to SARS. You can learn more about PAYE here.
Skills Development Levy (SDL)
This levy is used to develop and improve skills in South Africa. If the employer’s yearly salary bill is above R500 000 then they are required to pay SDL. The employer is required to pay 1% of the total amount paid in salaries to employees. The salary bill includes overtime payments, leave pay, bonuses, commissions and lump sum payments. There are some companies which are exempt from pay this levy. You can learn more about SDL here.
Unemployment Insurance Fund (UIF)
This fund is to give short-term help to unemployed workers or people who can’t work because of maternity, adoption leave or illness. The employer and employee contribute to this fund by each paying 1% of the employee’s remuneration to the fund. You can learn more about UIF here.
Some business may need to pay other taxes depending on the industry you are in and you can find out more about them here.
How do I register for tax?
When you register your company with the Company and Intellectual Property Commission(CIPC), SARS will automatically create an Income Tax reference number for your business.
If you are a sole proprietor you will need to register with SARS as an individual. If you don’t have an income tax number from when you worked with a previous employer, you will receive one when you register for SARS e-filing.
1. Go to the SARS e-filing website.
2. Click on “register now” and complete the form.
3. Request a notice of registration and it will have your tax number on it.
We hope this will help you with your tax compliance journey.
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