Pharsyde is doing a series of blog posts designed specifically to raise awareness with regards to statutory submissions. Business ownership overs a wide-range and long list of responsibilities and it is not uncommon for a small business owner to be unaware of the extent of his legal requirements. These posts cover the common statutory submissions: what they are, why they exist and when they are due. If you need more detail about a specific submission or help in getting it right, please give us a shout – we would be happy to go through them in detail with you.
Income Tax is a fairly self-explanatory label – it is the tax you pay on any income you have earned in a tax year.
The most important thing to remember when dealing with Income Tax as a small business owner is that you and your business are two separate taxpayers in the eyes of SARS. This means that both of you need to account for your income, both of you need to pay tax and both of you need to submit tax returns.
The Income Tax return is only due once a year. For individuals, it is normally due between July and November. For businesses, it is due within 12 months of your financial year-end.
When you submit your tax return you need to list every single source of income received for the year (even those you think are not taxable) as well as all allowable expenses. You are taxed on the net income of your taxable income less your allowed expenses. SARS will issue you an assessment based on the information provided and then they will allocate any tax payments you have made during the year (via PAYE or provisional tax). If you paid more tax than you needed to, you get a refund but if you did not pay enough, you will have a short period of time (usually one month) in which to pay SARS the difference.
It is very important to note that if you underpaid your tax by more than 20% in the financial year, SARS will levy a 10% “understatement” penalty on top of your outstanding amount. So rather pay more than you think you need to! Especially since, in South Africa, you receive interest on your tax refunds. When educating yourself about tax, remember to investigate both Personal Income Tax and Corporate Income Tax.
SARS has a number of documents that you can read in order to make sense of tax:
All of this just Greek to you? Want some help with taxes and tax returns? Book some time with us and we’ll get you up to speed.