Tax Insights for Businesses

It is legal obligation in South Africa that as soon as you commence your business, you are required to register with your local SARS office to obtain an income tax reference number. You must register within 60 days after you have commenced business by completing an IT77 form (available from your local SARS office.

A CC or private company must be registered with the Registrar of Companies and Close Corporations to obtain a business reference number. Your CC or private company will then be registered automatically as a taxpayer. Depending on other factors such as turnover, payroll amounts, whether you are involved in imports and exports etc. You could also be liable to register for other taxes.

Provisional tax – The payment of provisional tax is intended to assist taxpayers in meeting their normal tax liabilities. This occurs by the payment of two installments in respect of income received or accrued during the relevant tax year and an optional third payment after the end of the tax year, thus obviating, as far as possible, the need to make provision for a single substantial normal tax payment on assessment after the end of the tax year.

The first provisional tax payment must be made within six months after the commencement of the tax year and the second payment not later than the last day of the tax year.

The optional third payment is voluntary and may be made within six months after the end of the tax year if your accounts close on a date other than the last day of February. For a tax year ending on the last day of February, the optional third payment must be made within seven months after the end of the tax year.

Employees tax – Employees’ tax is a system whereby an employer, as an agent of government, deducts employees’ tax (PAYE) from the earnings of employees and pays it over to SARS on a monthly basis. This tax serves as a tax credit that is set off against the final income tax liability of an employee, which is determined on an annual basis. A business (an employer) that pays salaries, wages and other remuneration to any of its employees above the tax thresholds, must register with SARS for employees’ tax purposes.

This is done by completing an EMP 101 form and submitting it to SARS. The EMP 101 is available at all SARS offices and on the SARS website. Once registered, the employer will receive a monthly return (EMP 201) that must be completed and submitted together with the payment of employees’ tax within seven days of the month following the month for which the tax was deducted.

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