Sole proprietor tax

Tax

Sole proprietor tax is an issue which raises its head when you personally run a business with a trade name and not through a company or corporation.

So, as a sole proprietor, you are Joe Black t/a Better Photo Agency, for example. That is, your business is Better Photo Agency and you are the only owner. A CC or a company does not feature in this set-up. Your letterhead typically has “Better Photo Agency” in big at the top and “Sole proprietor: J Black” in small at the bottom. No registration number is displayed, even if “Better Photo Agency” has been registered as a defensive name.

If you as an individual are registered for tax with SARS, then there is no need to register your sole proprietor business for tax as it is not a separate legal entity and cannot be registered for tax as such. You are the business and the business is you, as it were, and your business trading figures are reported to SARS as your own personal figures.

If you do not have a personal tax number then you will need to apply for one and that number is used when reporting your personal and business income.

SARS monitoring your bank account

BERLIN, GERMANY - OCTOBER 13:  Model Nadja Aue...

Government Gazette no. 35090 (the Gazette), issued on the February 29 2012, has fundamentally changed the access the South African Revenue Services (Sars) has to every person’s bank account information.

The Gazette gives notice that in terms of section 69 of the Income Tax Act all “reporting institutions” are required to submit bi-annual returns directly to Sars in respect of all monies “invested with, loaned to and deposited” with the reporting institution, and in respect of interest received by or accrued to any person from the “reporting institution”. The first returns, covering the period 1 March 2012 to 31 August 2012 are required to be submitted to Sars by 31 October 2012.

Accountholders may be lulled into a false sense of security in understanding this to mean that all banks will now simply submit information of all interest paid by the bank to an accountholder directly to Sars, instead of the accountholder being required to disclose the information to Sars themselves. Further reading of the Gazette proves this understanding dangerously inadequate.

Firstly, it is important to note how widely the gazette defines a “reporting institution”. Included in the definition are, for example, all banks (including Postbank), companies listed on the JSE that issue bonds, debentures and similar financial instruments and organs of state that issue bonds (government bonds).

Secondly, that the “reporting institutions” must submit returns for both natural persons and, as per the Gazette, “other persons” which will include companies and trusts.

Thirdly, and possibly of greatest concern, is the information the Gazette dictates each return must contain. Whilst the requirements differ slightly for natural and “other” persons, the issues raised below are common to both.

The returns must disclose for all persons: identity particulars and tax reference numbers, the closing balances of the accounts at the end of the relevant six-month period, any interest amounts received or accrued by the persons from the “reporting institutions” and interestingly, monthly totals of all debits and credits to the accounts.

No clarity has been provided on the use Sars will make of this information. The information at the very least will assist Sars in identifying all persons who should be registered for Income Tax and VAT purposes and the non-disclosure of all receipts and accruals (local and foreign) by registered taxpayers when making provisional payments and submitting returns.

via Moneywebtax – Sars has more access to your bank account – Income tax.

SARS becomes stricter

Tax Preparation

In this respect, SA falls in line with a world wide trend: the discernible flexing of muscle by tax administrations in a bid to generate extra revenue. For many countries this is a knock- on effect of the global financial crisis; for many African countries, enhancing domestic revenues is also crucial to reducing dependence on foreign assistance.Whatever the local imperative, the environment has never been riper for tax controversy in developed and emerging markets.The worry for companies is that aggressive clampdowns by a country’s revenue authority can lead to prolonged, burdensome wrangles that can ultimately render it inefficient for firms to continue doing business there .But an important policy shift is taking place, of which business, especially multinationals, should take heed: not only are tax administrations becoming more aggressive, they are becoming more effective. It emerges from a recent global survey by Ernst & Young that taxpayer data is being shared by tax administrations as never before , while multilateral tax enforcement efforts are growing.The Joint International Tax Shelter Information Centre is an example of this collective approach, as is the recent signing by SA and 12 other countries of the convention on mutual administrative assistance in tax matters.But perhaps the most chilling manifestation of this increased co-operation between tax administrations is the dawn of the joint audit investigation, which is a simultaneous examination of a multinational by the tax authorities in a number of jurisdictions .In the face of this phalanx of revenue scrutiny, it is perhaps of some comfort to be aware that tax administrations recognise that to be effective they need to co-operate with taxpayers and engage with them in dialogue.As the chairman of the African Tax Administration Forum Ataf, Oupa Magashula, said recently: “Experience has proven that there are distinct and tangible benefits for both revenue and business, as well as their advisers, to engage in more consultative and collaborative relationships.” While at present Ataf has no formal procedure to facilitate engagement with investors, Magashula has said he would welcome suggestions from business on a possible African engagement strategy.However, Ataf has also been vocal about the need to bed down measures to stem tax avoidance and evasion in the region, saying developing countries lose revenue through the siphoning of money to tax havens.The recognition by tax authorities that dialogue with taxpayers is integral to effective tax collection is encouraging. But for it to be meaningful, authorities should resist the temptation to paint all multinationals with the same brush. Just as emerging markets can differ considerably from one another and should not be regarded by investors as homogeneous, so it must be recognised that multinational companies often differ markedly from one another in approach, behaviour, policy and their philosophy on tax matters.Realistic communication between tax authorities and taxpayers should engender a more holistic appreciation of what multinationals are doing and lead to a less confrontational position being taken by all sides.In the meantime, routine information sharing between tax authorities, together with more sophisticated risk assessment and audit methodologies, mean that tax risk management needs to be securely embedded in companies’ approach to corporate governance .

via On my mind – Tax laws-Tax muscle-flexing.

Enhanced by Zemanta

SARS tax amendment for ownership of secondary properties

Tax

Last year South African Revenue Services introduced a tax amnesty covering capital gains tax, transfer duty and secondary tax for all natural persons South African citizens willing to transfer property owned by them in a company, a trust or a close corporation into their own names.The amnesty, it was made clear, would expire in December 2012.

This “enlightened” measure, says Tony Clarke, MD of Rawson Properties, was hailed by the property sector as a breakthrough because the capital gains tax on companies 15% was high and on trusts higher still 20%, whereas by contrast individuals usually pay only ±10% and more importantly are exempt of tax on the first R1,5 million capital gain.

However, there was one major snag: the exemption applied only to property in which the owner “ordinarily resided”, i.e. his primary residence. Second homes, holiday homes, investment properties and the like initially could not be transferred to individual ownership without paying in full the taxes referred to.Now, however, that has all changed. The recently promulgated Tax Laws Amendment Bill allows secondary residential properties to benefit from the amnesty in the same way as primary properties – provided the transfer is set in motion, i.e. not necessarily completed – by December 2012.

Clarke said that there will still be cases in which it might be preferable to hold the property in a company or other legal entity.  He pointed out, too, that the conveyancer’s fee would remain payable.Nevertheless, he said, the vast majority of property owners stand to gain significant tax benefits if they make use of the amnesty before it expires and he advised them strongly to do so.

via SARS tax amendment for ownership of secondary properties – SA Commercial Prop News | Commercial Property News in South Africa

Sars nails security boss for R2.2m

border|22x20px South Africa, Durban beach

A former Durban police detective, who now owns a security company, is facing a tax fraud, alternatively tax evasion, charge for just over R2.2 million after a company audit by the SA Receiver of Revenue.

Sandile Nkabinde, 37, who is now wheelchair-bound, appeared briefly in the Durban Magistrate’s Court on Wednesday. Nkabinde and his close corporation, Inside Edge, which trades under the name Sandile Security Services, have been charged for tax fraud.

According to the charge sheet, Nkabinde is listed as the sole member of the company that is registered as a value-added tax vendor. The state alleges that Nkabinde intended to defraud Sars by submitting false VAT returns on behalf of his company for the period June 2006 to February 2010, causing Sars to suffer a prejudice of just over R2.2 million.

The security company had a contract with the Mangosuthu University of Technology, in Umlazi, during this time.

According to Nkabinde’s LinkedIn profile, he was a detective with the South African Police for 11 years. During this time as a detective, it said, he led a team of detectives that was responsible for investigating police killings in Durban. He was also part of a team that investigated the political killings in Richmond.

His company was listed as providing a service to various government departments, specialising in physical guarding, special events, bodyguarding, skilled investigators and includes former guerrilla freedom fighters.

Nkabinde is also listed as being a chairman of a non-governmental organisation that helps raise funds for paraplegics and quadraplegics.

State advocate Selvan Govender requested an adjournment for representations to be made, and Nkabinde will again appear on February 28.

via Sars nails security boss for R2.2m – Daily News | News | IOL.co.za.

Enhanced by Zemanta

Ask Fixed Accounting to change your banking details online

Tax rates around the world: Individual income ...

Image via Wikipedia

Banking detail changes will be verified before profiles can be updated.

SA Revenue Services (Sars) has implemented new fraud prevention procedures and processes regarding the way in which taxpayersbanking detail changes will be implemented.

From now on, any changes to banking details will be verified before an individual or company banking profile can be updated and if any refunds are due, these will only be processed after the receipt and verification of the new banking details.

The new procedures will improve security and reduce fraud. Banking details can be changed in person at any Sars branch or the change can be made when an individual Income Tax return is submitted. Supporting documents must be provided.

As part of the general Sars encouragement of electronic submissions, banking details can also be changed via the Sars eFiling system when submitting an ITR12 Individual Income Tax return, but Sars may still ask the taxpayer to go to a branch to verify the change.

via Moneywebtax – Sars`s stringent new fraud measures – Income tax

What happens if I die without a will?

An obvious starting point in our first of a new series of Trusts and Estates Alerts, is to consider the importance of having a well-constructed, valid Will.    

If you, at the time of your death, have no Will, or your Will is invalid or does not deal with your entire estate, you are said to have died intestate. It is estimated that more than 50% of South Africans die intestate every year

Despite the horror stories, if you die without a Will, your assets are not forfeited to the state, however the distribution thereof is regulated by statute as opposed to your own directions, as you would have set out in your Will.

The relevant Act that regulates the devolution of your assets should you die without a Will is known as the Intestate Succession Act, 81 of 1987.

The Act sets out a fixed formula that is applied to determine who inherits your estate and in what proportion.

The Act is based on – excluding benefits to a spouse – a system of passing benefits to the blood family of the deceased. The general principle being that those family members closest to the deceased in terms of the bloodline, stand to inherit first.

So for example, if the deceased is married, but does not have children, the spouse will inherit the entire estate. 

If however the deceased does not have a spouse at the time of his death, but has children, the children will inherit the entire estate in equal share.

via What happens if I die without a will? – Lexology

Make sure all your registrations are up to date before you die: Register

Donations Tax and CGT

Accordingly, if the taxpayer renounced a right for the benefit of a third party for no consideration, it will be difficult for the taxpayer to discharge the onus that he did not have an intention of generosity or liberality. As a result the taxpayer will in all likelihood be liable for donations tax which is levied at 20%. It should, however, be noted that if the taxpayer does not settle the donations tax liability, the South African Revenue Service, can hold the done personally liable and recover the outstanding donations tax from such a person.  

CGT implications

In addition to the abovementioned donations tax implications, the taxpayer needs to establish whether the transaction has any CGT implications.

In terms of the Eighth Schedule to the Act, a “capital gain” arises when the proceeds received on the disposal of an asset is greater than the base cost of the asset.

The meaning of an asset for purposes of the Eighth Schedule to the Act is defined widely and includes “property of whatever nature, whether movable or immovable, corporeal or incorporeal, excluding any currency but including any coin made mainly from gold or platinum as well as a right or interest of whatever nature to or in such property”. The meaning of a disposal on the other hand specifically provides for the inclusion of the waiver or the renunciation of a right. The renunciation of the right by the taxpayer would constitute a disposal of a capital asset and the taxpayer will be liable for CGT on the difference between the proceeds received, and the base cost of the right. If the taxpayer waived the right for no consideration, the proceeds would be nil.

However, in terms of paragraph 38(1)(a) of the Eighth Schedule, where a person disposes of an asset by means of a donation, or for a consideration not measurable in money, or to a connected person for a consideration which does not reflect an arm’s length price, the proceeds will be deemed to be the market value of the asset on the date of the disposal.

If an asset is disposed of by means of a donation, such disposal is deemed to have taken place at market value for CGT purposes and the taxpayer will be liable for CGT on the difference between the market value of the right and the base cost thereof.

Accordingly, unless careful consideration is given to the construction of a transaction, the good intentions of a taxpayer can have adverse tax consequences. It should, however, be noted that none of the tax implications set out above will be applicable if the taxpayer makes a donation to an approved Public Benefit Organisation.

via Good intentions gone bad – Lexology

SARS employees might abuse their position

COLIN WOLFSOHN: Look, their whole principle of separating and making our ordinary Tax Act simpler, without these administrative provisions, is very good, no question about it. We understand where SARS is coming from in terms of cases of genuine crooks or people, as we say, like an Enron kind of case. We are concerned on a practical basis though, whether all these provisions…because this Act is written in the basis where everything is perfect and we’ve seen, unfortunately, cases in the past where you might have SARS employees who don’t interpret these legislations pieces totally accurately and, if I can use the wrong wording, might abuse their position. That kind of situation concerns us but hopefully with proper training of SARS officials that things will improve. 

via What the new Tax Administration Bill covers – Tax | Moneyweb

We have had instances where SARS employees have abused their position and unfairly interpreted the VAT Act to the total and unnecessary disadvantage of the taxpayer. Arrogant and unprofessional behaviour like that should never have been allowed to take place. It echoes the harshness and intolerance of Apartheid racism.