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.

Sole proprietor South Africa

English: South Africa (orthographic projection)

Sole proprietor literally means “the only owner”.

A person, a company or a trust can be the proprietor of a business. For example, a company ABC Elastics (Pty) Ltd runs a business called Special Elastic Suppliers. It trades with that name and is is the owner of that business, so it can be termed the proprietor of the business, even the “sole proprietor” of that business.

But usually when we use the term “sole proprietor” we are referring to an individual human (not a company) who owns/runs a business.

In order to establish your Sole Proprietorship in South Africa, kindly follow the following procedure:

  1. Trade Name Registration – apply to register your t/a (trading as) name
  2. Tax Registration – apply for an income tax number for yourself (if you do not have one; this same tax number is used for the business because you are/own the business)

Other registrations for your sole proprietorship include:

  1. VAT Application – register your business for Value-Added Tax (if needed or if 12-month turnover is R1m or more)
  2. Annual Work – annual financial statements and tax return – after your first period of trading ending 28 February.

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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.

Four weeks left to prepare PAYE submissions

Taxes

Taxpayers have just four weeks to prepare for the SA Revenue Service’s interim pay as you earn (PAYE) submission season, which commences on 1 September. There are important changes that will affect the PAYE reconciliation and submission process.

New legislation that took effect in March this year means medical aid contributions are no longer allowed as a tax deduction for employees under the age of 65. The medical aid capped amounts have also been replaced with medical aid tax credits.

“Companies that have not applied medical aid tax credits for the first six months of the tax year must correct this before they process their last payroll run this month (August),” says Laurica Kok, general manager at Softline Pastel Payroll.

“Those that do not have the correct medical aid legislation in place when submitting interim tax certificates will find that SARS will reject their submissions and they could face penalties for incorrect or late submissions.”

Kok adds that individual income tax reference numbers must be reflected in each submission. If one or more tax certificates do not include the tax reference number, the overall submission will be rejected.

“There are other important changes that will affect interim PAYE reconciliation submissions. These include a new interest rate for low or interest-free loans fringe benefits. Following the July reduction in the repo rate, companies must ensure that they apply the new official interest rate of 6% when calculating fringe benefits for August 2012.”

A new IT3(a) Reason code for tax certificates has been introduced by SARS for non-deduction of PAYE and must be applied on interim tax certificates. Code 08 will indicate a zero PAYE liability due to medical aid tax credits applied.

There are also new source codes for fringe benefits and tax deductions that must be applied to interim tax certificates, replacing the consolidated values SARS required prior to the 2012 tax year.

“Companies using up-to-date automated payroll software will find that all of these SARS PAYE requirements are implemented automatically, ensuring submission compliance.”

via Companies have just four weeks left to prepare SARS interim PAYE submissions | ITWeb.

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SARS can search without warrant

The Tax Administration Bill was promulgated yesterday in the Government Gazette. SARS expected it to come into operation in the next three months, it said. It contains a clause that permits a warrantless search.

SARS spokesman Adrian Lackay said yesterday searching without a warrant will be in “narrowly defined” situations.

“It will mostly be in cases of crime where we get to a premises and find evidence is being destroyed,” he said.

SARS got legal opinion on the constitutionality on the specific clause in the act from two senior counse ls, Gilbert Marcus and Steven Budlender, who found it to be in order.

Lackay cited an example in Durban where SARS staff had to stand by helplessly while a suspect burned documents and financial statements in the courtyard of his offices.

via Bill gives SARS more teeth – Times LIVE.

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SAICA extends tax offering to public

Institute of Chartered Accountants Australia -...

Johannesburg, Wednesday, 25 April 2012 – As tax legislation continues to be more complex and turbulent, the South African Institute of Chartered Accountants Saica has launched the Tax Suite, a tax knowledge-based platform aimed at keeping local practitioners, advisers and just about anyone that has anything to do with tax abreast of international and local best practice.Offered to both Saica members and non-members alike, the subscription-based web product is a comprehensive and broad tax resource offering on the South African market, backed by the countrys authoritative chartered accounting body.

Chartered Accountants already have access to Saicas normal tax resources, but the Tax Suite goes beyond this. It provides a great opportunity for all participants in the tax space, not affiliated with the institute, to receive a range of services at CA-quality levels not yet seen in the marketplace,” explains Saicas Standards Senior Executive Muneer Hassan pictured.According to Hassan, no other tax resource on the market delivers the same value-add that the Tax Suite does. Not only is there value inherent in court case analyses, Tax Suite newsletters and journals, and in the business matching feature, but the Tax Suite is staffed by a uniquely qualified team.There are, according to SARS, more than 34,000 tax practitioners in South Africa. Hassan believes that the Tax Suite service will find wide appeal from both members who practice in tax, and from a much wider audience of tax practitioners. “We have already received positive feedback from the legal fraternity, and the broad tax advisory industry. There are competitive offerings,” says Hassan. “but none that have the depth of staff, or value that our Tax Suite provides. We are confident that this service will become South Africas premier tax reference site in a short space of time.”

via Moneywebtax – Saica extends tax offering to public – Integritax.

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Germany taxes Swiss bank accounts

Banknotes of the Swiss franc

Germany and Switzerland signed an amendment to their deal on taxing secret offshore accounts on Thursday, toughening terms for tax dodgers after the main German opposition party blocked the original accord, saying it was too lenient.

The amendment makes it more likely the deal will get the backing from opposition-ruled states and be approved by the German parliament, ending years of tortuous negotiations and netting the country billions of euros.

The German finance ministry said Germany and Switzerland had agreed to raise the retroactive levy on German funds stashed away in Swiss bank accounts to a rate between 21 and 41 percent, from a previously agreed range of 19 to 34 percent.

They also agreed a one-off tax of 50 percent for those who inherit Swiss bank accounts and do not want to declare them, the finance ministry said.

Under the revised deal, German officials will be allowed to put in up to 1300 requests with their Swiss counterparts to investigate cases of fiscal evasion, versus a previously agreed 999.

Germans will have to alert the Swiss authorities when they move their money out of Swiss bank accounts from Jan. 1 2013, versus a previously agreed May 31, in order to prevent an exodus into other offshore accounts.

via Germany, Switzerland revise deal terms – International | IOL Business | IOL.co.za.

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