Employment Tax Incentive

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There are many unskilled and inexperienced youth in South Africa and it is difficult for them to start contributing to the economy without experience. Many employees have been reluctant to hire inexperienced unskilled youth, and contributing to this fear has been the restrictiveness of the labour regulations.

Last year, SARS implemented a new incentive scheme for businesses to employ young inexperienced work seekers, called the Employment Tax Incentive (ETI). It reduces the employers cost, of hiring young workers, through a cost-sharing mechanism with the government. It is in effect since the 1st of January 2014.

How do I qualify?

An employer qualifies for ETI if the employer is:

    • Registered for employees’ tax (PAYE);
    • Not in the national, provincial or local sphere of government;
    • Not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance  by Notice in the Gazette);
    • Not a municipal entity;
    • Not disqualified by the Minister of Finance due to displacement of an employee or by not meeting such conditions as may be prescribed by the Minister by regulation.

An individual qualifies as an employee if he or she:

    • Has a valid South African ID;
    • Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance;
    • Is not a domestic worker;
    • Is not a “connected person” to the employer;
    • Was employed by the employer or an associated person to the employer on or after 1 October 2013; and
    • Is not an employee in respect of whom an employer is disqualified  to receive the ETI (i.e. the employee is paid below the minimum  wage applicable to that employer or paid a wage below R2 000 per month if a minimum wage not applicable).

Please note: There is no limit to the number of qualifying employees that an employer can hire.

 How does it work?

An employer must follow these steps, and calculate & claim the incentive on a monthly basis:

  • Identify all qualifying employees in respect of that month
  • Determine the employment period for each qualifying employee
  • Determine each employee’s “monthly remuneration”
  • The EMP201 form was amended to include a field for claiming ETI, which can be seen on this SARS link.
  •  Calculate the amount of the incentive per qualifying employee as per the table below:
Monthly Remuneration ​ Employment Tax Incentive per month during the first 12 months of employment of the qualifying employee ​ Employment Tax Incentive per month during the next 12 months of employment of the qualifying employee​
R 0 – R2 000 ​ ​50% of Monthly Remuneration ​25% of Monthly Remuneration

R 2001 – R4000 ​

 ​R1 000 ​R500

R 4001 – R6000 ​

 Formula: R1 000 – (0.5 x (Monthly Remuneration – R4 000)) ​ ​Formula: R500 – (0.25 x (Monthly Remuneration – R4 000))

To determine the first or the second 12-month period, only count the months where the employee was qualified. For example, the employee may be qualified during the first three months and not qualified in the fourth and the fifth months. If the employee is qualified in the sixth month, then the sixth month is month is counted as number four, as far as the 12-month period is concerned.

How long is it available for?

The initial end date of 31 December 2016 was extended to 28 February 2019.

This information has been obtained from the SARS website

Tax Season for 2013 Is Now Closed For Non-Provisional Taxpayers

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However if you’re a provisional taxpayer the deadline was 22 Nov 2013 and if you are submitting it via eFiling the deadline was extended to 31st of January 2014 – provided all your tax affairs are in order.

You need to submit if you are:

  • Younger than 65 years old and earned R63 556 income during the 2013 year of assessment,
  • 65 years of age or older and earned R99 056 for the same period,
  • 75 years and older and earned R110 889 for the same period.

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Why Are Financial Statements So Important?

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Annual financial statements are very important as they provide you with a lot of information about your company and its future.

Annual financial statements can provide you with information such as earnings and if they’re higher or lower than the previous year, how sales are doing and whether the company is making more money than what it is spending. All these numbers should be clearly represented on a company’s annual financial statements.

Annual financial statements are a good indication of where the business is at financially and is useful in determining an estimate at how the business will do in the following year. It can also give a good idea of the management’s strategic plans and will let you know how management plan to build on the company’s current success, of improve on its failure if that’s the case. These statements can help management make intelligent decisions on what’s working and what isn’t in order for the business to succeed.

Annual financial statements are also important for investors to analyse investment potential and good financial statements help banks determine whether or not to loan money to a company. An annual financial statement can also help a company decide whether their customers and suppliers are going to be a good or bad risk to do business with.

An annual financial statement is the one document within a company that says “Take a look at what we do, what we’ve done, and what we will do.” Investors, banks, clients, and potential customers all rely on a company’s annual financial statement to determine how doing business with that company is going to help them. A company’s annual financial statement is usually readily available for perusal from the company itself or on their website and it is almost always free for investors, banks and a range of other people to have a look at.

The Close Corporations Act requires that companies provide annual financial statements and they are required to be in agreement with all accounting records of the company. If you and your business requires help with this, we at PATC can help you. We will work with you in order to provide an accurate annual financial statement of your company.

For more information on how we can help you do this, please contact us.

Image courtesy of FreeDigitalPhotos.net

Record Keeping Tips For Businesses

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When it comes to owning your own business and working for yourself, there are a lot of things to remember. All these aspects to remember are things that could help or hinder your business. One very important job to remember is that of record keeping. It requires a fair amount of patience and organisation but, if done properly, can help you in many ways.

Keeping good records can help you keep track of the progress your business is making, prepare your financial statements, prepare your tax returns and keep track of your expenses. It means staying on top of your business and being in the know of all that is coming into your business and what’s going out.

The type of records you need to keep depends on your business but the general rule of thumb is to clearly keep track of your income and expenses. The way to do this best can be alphabetically, numerically or by date and month. Some business people work best with everything arranged by month, others by name. Whichever way works for you, it’s best to be, and try to stay, organised.

If your records are organised and kept together, it’s easy to keep track of what’s happening and what you need for various times, e.g. tax season.  If something also goes wrong within your business, good record keeping can help rectify the problem and potentially save you money. If you are not a very organised person and are someone who struggles to keep your records in order, we suggest hiring someone to help you keep your records in order.

It is suggested that you keep all records for a minimum of 7 years. By not keeping your records, or if you find yourself not being able to produce a record of something, SARS could penalise you up to 200%. Because SARS could ask for proof of something regarding your business at any time, we advise that you keep your records up to date and organised for the recommended 7 years. Additionally, if you cannot support any deductions you’ve made, SARS will question the validity of all your claims – an unnecessary situation one might find themselves in if only they had stayed on top of their records.

Because record keeping is so important, it is vital that it is done correctly. It can be as easy as keeping files and folders for each expense, but if you’re not a very organised person, PATC is on hand to help keep you on top of your business records. For information on how to keep good records, or how to be more organised with your records, contact us today and we’ll help your stay on top of your record keeping.

Image courtesy of FreeDigitalPhotos.net

 

Domestic Workers

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What exactly are the rules and regulations regarding domestic workers?

Approximately 1 to 1.5 million South Africans work as domestic workers, gardeners and child minders. These days, there are far more rules and regulations regarding domestic worker than in the past. In present day, they are now considered regular workers just like a chartered accountant, or doctor would be. Therefore, they are entitled to the same benefits and answer to the same rules as anyone else. But what exactly are these benefits and rules?

General rules:
The general rules of a workplace now apply to domestic workers. The same notice period and termination of employment applies to domestic workers as normal workers. Transport allowances and bonuses are not specified and are therefore open for negotiation between parties. Working hours, public holidays, annual, sick maternity and family responsibility leave and deductions all apply to domestic workers the same way that they would to anyone else.

Wages:
Wages are calculated according to a table and take working hours into account. It also takes various areas into account. Domestic workers are entitled to a payslip which includes all regular information as any normal payslip. Deductions are permitted to be included; however, certain deductions are not permitted. These include; breakages, damages, clothing and training.

Termination:
Normal termination procedures apply to domestic workers. On termination of services, the employer must give the domestic worker a certificate of service.

Housing:
Should you provide your domestic worker with housing, it needs to fulfil certain criteria. It needs to be weatherproof and in good condition, it has to have at least one window and door that can be locked, and it needs to be fitted with a toilet and shower/bath, or it has to have access to another bathroom. A deduction of no more than 10% may be taken for accommodation.

UIF Contribution
If your domestic worker works for you for more than 24 hours a month, they must be registered for UIF. It is the responsibility of the employer to register their domestic worker with UIF and ensure that payment is made. Monthly contributions are 2% of the worker’s wage. If a domestic worker is employed by more than one employer, each employer must register the domestic worker separately and ensure payment is made.

It is important to be up to date with the regulations regarding domestic workers. As they are now considered normal workers just like everyone else, the same rules apply to them and the same consequences can apply to you should you not follow procedure.

For more information on tax and UIF, contact Professional Accountants & Tax Consultants and we can help you and answer any questions you might have.

1 July 2013 was the start of 2013 Personal Income Tax Filing Season

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What info do you need and how can PATC help?

You might be cringing at the thought of submitting your tax returns but it need not be that difficult, let us help you tick off the check list and get all your tax documents in order and we will submit your tax return for you.

 

  • Firstly you will need an IRP5, (this is the employees’ tax certificate your employer issues to you) however this is not essential as we can get this information for you from SARS.
  • If you have a retirement annuity with will need to provide a contributions certificate.
  • You also need to provide all details of medical expenses incurred and this information will be sent to you directly from your medical aid provider.
  • Details of medical expenses paid by you but not covered by medical scheme.
  • If you receive a travel allowance, please provide details of business travel such as a Log Book, details of your car (make, model, registration number of the car and purchase price).
  • Further information that you may need to provide is financial statements, if applicable e.g. business income, certificates that you received in respect of investment income [IT3 (b)] and or any other documentation relating to income you received or deductions you want to claim or we can assist you to prepare the Annual Financial Statements.
  • Certificates you received for the local interest income earned.
  • Any other documentation relating to income received or accrued, such as remuneration that has not been reported to SARS by your employer, or business or investment income, etc.
  • Banking particulars (I.e. Bank account number, bank name, branch code branch name type of account).
  • Completed confirmation of diagnosis of disability form (ITR-DD) if applicable.
  • Information relating to foreign tax credits withheld.

Please note that although we will be using all of the above documentation to complete your return, it is NOT submitted to SARS with your return. You must retain this documentation for a period of five years in case SARS calls for them.

For a complete guide on all the documents you require for your tax return, or if you need assistance filling your tax return, please contact the tax consultants at PATC today!

SARS Scams and Phishing Emails

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People are subject to scams every day and they are becoming increasingly difficult to spot the difference between a scam and a legitimate email so you need to remain vigilant when working online. As a result of this increase in scams and phishing attacks SARS has created a section of the website where they will post updates of any scams they have heard about. Similarly they would like you to tell them about any emails you think are scams or phishing. To report or to get more information on phishing, please send an email to phishing@sars.gov.za or call the Fraud and Anti-Corruption Hotline on 0800 00 2870.

How do you know if a SARS email is a scam or not?

Fraudulent emails are always aimed at enticing unsuspecting taxpayers to part with personal information such as bank account details. Examples include emails that appear to be from returns@sars.co.za, or refunds@sars.co.za indicating that tax payers are eligible to receive TAX refunds. Once taxpayers put their personal information such as banking details into these false forms, the information is then fraudulently extracted by the criminals to clear out your funds.

Members of the public are randomly emailed with false emails made to look as if these emails were sent from SARS so take your time to look through your emails properly and follow these tips below: –

Do not open or respond to emails from unknown sources

  • Beware of emails that ask for personal, tax, banking and eFiling details (login credentials, passwords, pins, credit / debit card information, etc.) as SARS will never ask taxpayers for such information in an email.
  • SARS will not request banking details through the phone, email or websites.
  • Beware of false sms’s.

Management Accounting Best Practices

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Management accounting is a specialised type of accounting in which accounting firms focus on the requirements and use of accounting information to managers within companies. This information helps to provide managers with data and advice that allows them to make informed business decisions, while also improving management and control functions. Compared to financial accounting, management accounting differs in that it is forward-looking rather than historical, model based rather than case based, intended for managers rather than stakeholders or clients, confidential instead of publically reported and focused on the needs of managers rather than general accounting standards.

The industry has changed greatly as business trends have changed, with many changes in the best practices of management accounting. Professional accountants who specialise in management accounting need to realise that both traditional practices and innovative practices play a role in ensuring the best practices overall.

Some of the more essential core practices include the following:

1. Determine user needs

While financial accounting has set guidelines and practices, management accounting focuses on specific needs of the user. Every business is different, and every management requirement is also different, therefore accountants need to spend time identifying the exact needs in order to develop a strategy. Users request different reports and analyses depending on their objective, with anything from employee overtime hours to expenses and other areas to be considered.

2. Determine specific information required

Companies retain a wide range of information that pertains to the management of the business, from production costs to payroll information, expense information and other financial data. Professional accountants handling the management accounting for the company therefore need to understand exactly what information is required by managers to reach their specific goals and also determine which information is relevant to these goals.

3. Understanding the role of internal customers

For management accountants, managers and employees take the role of internal customers. Each person’s role within the company is different, and accountants need to understand each of these roles in order to accurately identify tasks and assist properly. The accountant can then deliver reports and analysis that target these specific needs within the company, in order to assist all internal customers in reaching their business goals.

4. Communicate effectively with all role players

Communication plays a vital role in management accountant, and professional accountants working within the management sphere need to be able to effectively listen, process information and report back to managers at all times. In the accounting world, jargon is used on a regular basis. For most businesses who do not work within financial industries however, many of these terms are not understood. Being able to effectively communicate concepts and strategies is crucial, so that all parties are able to understand the accounting processes at all times.

5. Strategic, performance and risk management

A final essential practice within management accounting is the ability to develop and implement strategic, performance and risk management approaches within the company. As this type of accounting is forward-thinking rather than historical and partners with management areas, professional accountants working with management need to be able to understand the importance of these approaches in order to best serve the needs of companies.

Need and Accountant? Contact us.

SARS Is Strict About Record-Keeping

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Get it wrong and you could face massive penalties! …of up to 200%. By LAW,  taxpayers (Companies and Individuals) are required to keep certain tax records for 5 years, however SARS urges us – as consultants, to keep records for 7 years. If you don’t know which documents and records SARS requires you to keep, then you will find yourself facing penalties. A single item of which you don’t have proof will cause the SARS to doubt the validity of all your other deductions claimed or disclosures of income received. This could lead to additional assessments and additional tax of up to 200%.

The words tax, tax man, Receiver and SARS are known to strike fear into the hearts of many an entrepreneur. This is not only because it implies that you have to part with your money, but because the tax process can be a daunting one. A good place to start when getting your taxes in order is by keeping accurate records. You may choose your own system of record keeping that suits the purpose and nature of your business, but your records must always establish your income and expenses. You need to keep permanent books of account as well as any other information to support these records, such as invoices, cheque stubs, paid accounts, and bank statements. The Income Tax Act and the Value-Added Tax Act specify certain records that you are required to keep. These records include:

  • ledgers
  • cash books
  • journals
  • cheque books
  • bank statements
  • deposit slips
  • paid cheques
  • invoices
  • stock lists and
  •  other books of account

Recent changes to the Act now include any data created by means of a computer, including data in the electronic form in which it was originally created or in which it is stored for back-up purposes. As a business-owner, it’s crucial that you keep records that will help you to prepare complete and accurate tax returns. It’s up to you to choose an accounting or bookkeeping system suited to your business and that complies with regulations.

If your company’s financial administration is in arrears or it’s just not your area of expertise, it’s probably better to get a professional tax consultant to get you up to date and to make sure all your taxes are paid up. It’s worth spending the extra money.

Your financial records.

To put it simply, your financial records reflect your company’s income, expenses, financial position and cash flow. Together with these records, you must also keep all other documentation (such as receipts, invoices, cancelled cheques, deposit slips, etc.) that support the entries in your records and tax returns. These “supporting documents” are very important, so file them in a logical order and store them in a safe place.

You’ll need the following records:

Those showing the assets, liabilities, undrawn profits, revaluation of fixed assets and various loans A register of fixed assets Detailed daily records of cash receipts and payments reflecting the nature of transactions and names of the parties involved (except for cash sales) Detailed records of credit purchases (goods and services) and sales reflecting the nature of transactions and the names of the parties involved

Statements of annual stocktaking and supporting vouchers

NB: If you’re operating both your personal and business banking from the same account, it’s best to open a separate account for your business, to enable proper record-keeping and tax filing. Keeping accurate and up to date records are essential for keeping track of money coming in and money going out of your business. At tax time, they are also important to: Identify nature of receipt – to show whether anything you received of a revenue nature or capital nature Avoid omitting deductible expenses – by recording your expenses as soon as they are incurred, you won’t forget to include them in your tax return

Establish amounts paid out as salaries or wages – Under normal circumstances amounts paid to employees for services rendered are taxable in the hands of the employees. In these cases employees’ tax must be deducted from salaries or wages by the person paying such salaries or wages. Explain items reported – If your income tax return is examined by SARS, you may be asked to explain certain items, which will be simple if you’ve kept complete records and their supporting documents.

 Get a professional

A company is required by law to appoint an auditor/independent reviewer, if it is owner managed (New Companies Act), who will audit and sign an audit report relating to its financial statements. A CC must appoint an accounting officer. Normally, the auditor or accounting officer will help to determine the taxable income and the amount of tax to be paid. In the end, it’s also a lot easier for a professional to do it.

Keeping all your documents

You are required to keep your books and records, as SARS can ask to examine them at any time, should something not add up or seem suspicious. Retention periods in terms of the Companies Act and the Close Corporation Act are:

For Closed Corporations (CCs)

DOCUMENT – RETENTION PERIOD

1. Founding statement (form CK1) – Indefinite

2. Amended founding statement (forms CK2 and CK2A) – Indefinite

3. Minute book as well as resolutions passed at meetings – Indefinite

4. Annual financial statements including annual accounts and the accounting officer’s report – 15 years

5. Accounting records, including supporting schedules to accounting records and ancillary accounting records – 15 years

6. The microfilm image of any original record reproduced directly by the camera – the “camera master” – Indefinite

 For Companies

DOCUMENT – RETENTION PERIOD

1. Certificate of incorporation – Indefinite

2. Certificate of change of name (if any) – Indefinite

3. Memorandum and articles of association/Memorandum of Incorporation (New Companies Act) – Indefinite

4. Certificate to commence business (if any) – Indefinite

5. Minute book, CM25, CM26 and resolutions passed at general/class meetings – Indefinite

6. Proxy forms – 3 years

7. Proxy forms used at Court convened meetings 3 years – 3 years

8. Register of allotments after a person ceased to be a member (section 111) – 15 years

9. Registration of members – 15 years

10. Index of members – 15 years

11. Registers of mortgages, debentures and fixed assets – 15 years

12. Register of directors’ shareholdings – 15 years

13. Register of directors and certain officers – 15 years

14. Directors attendance register – 15 years

15. Branch register – 15 years

16. Annual financial statements including annual accounts, Directors’ report and an Auditors’ report – 15 years

17. Books of account recording information required by the Act – 15 years

18. Supporting schedules to books of account and ancillary books of account – 15 years

Record keeping for Income Tax or Capital Gains Tax purposes

As a taxpayer, you are required to keep records such as ledgers, cash books, data in electronic form, all supporting documents and any records relating to capital gains or capital losses for a period of five years from the date on which the tax assessment for that year was received by SARS. However, if objections and appeals have been lodged against assessments, you should keep all relevant records and information until the objection or appeal has been finalised, even if it takes longer than five years to sort out.

Appoint a Representative Taxpayer

Every Company/Close Corporation which conducts business or has an office in South Africa must, within one month of commencing operations or buying an office, for the purposes of section 101 of the Income Tax Act, appoint a representative as the Public Officer of the Company/CC. The name of the representative and his position must be given for approval to the SARS office for the district in which the Company/Close Corporation has its registered office.

The representative must be a responsible officer of the Company/Close Corporation (for example, director, manager, senior member, secretary, etc.) and such position must constantly be kept filled by the Company/Close Corporation. Accurate and up to date record-keeping is not only about making life easier when you file your taxes. It can also protect your business’s cash flow and enable to run a tight ship. Failure to pay your taxes is not only illegal, but it can lead to the closure of your business.

Get PATC to help with your record keeping, contact us today.

Do You Qualify As A Small Business Corporation?

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Small businesses that wish to register their business will benefit hugely from business tax services, which assist in all areas of business tax, including registration of Small Business Corporation. Your accountant or business tax services consultant will be able to register on your behalf, and assist with all requirements that may be needed. Companies that meet all of the following requirements will be able to qualify as a Small Business Corporation:

  1. All shareholders or members are natural persons.
  2. All shareholders hold no shares in any other private company.
  3. All members hold no members’ interest in any other Close Corporation.
  4. Gross income for the year of assessment does not exceed R14 million.
  5. Not more than 20% of the gross income and all the capital gains consist collectively of investment income and income rendering a personal service.
  • Investment Income includes any annuity, rental income, royalty or any income from investment or trading in financial instruments, marketable securities or immovable property.
  • Personal Service includes any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draughtsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, which is performed personally by any person who holds an interest in the company or Close Corporation, except where such small business corporation employs three or more unconnected full-time employees for core operations.

 Small Business Corporation Benefits

Business tax services offer the most effective way to register as a Small Business Corporation. The benefits that can be enjoyed from a tax point of view include the following:

    1. For the year ending 31 March 2011:
      • Taxable Income less than R57 000 attracts NIL tax
      • Taxable Income greater than R57 001 up to R300 000 attracts 10% tax
      • Taxable Income greater than R300 001 attracts 28% tax (+R2 4300)
    2. For the year ending 31 March 2012:
      • Taxable Income less than R59 750 attracts NIL tax
      • Taxable Income greater than R59 751 up to R300 000 attracts 10% tax
      • Taxable Income greater than R300 001 attracts 28% tax (+R24 025)
    3. Investment Incentive:
      • The full cost of any asset used in a process of manufacture and brought into use for the first time on or after 1 April 2001, may be deducted in the tax year in which the asset is brought into use. As from 1 April 2005, all other depreciable assets are written off on a 50:30:20 bases.

To register as a Small Business Corporation, contact PATC today for further business tax services advice relating to small business taxes.