Tax Avoidance vs Tax Evasion

Tax avoidance is the legitimate minimizing of taxes, using methods included in the tax code. Businesses avoid taxes by taking all legitimate deductions and by sheltering income from taxes by setting up employee retirement plans and other means, all legal and under the Internal Revenue Code or state tax codes.

Most taxpayers use some form of tax avoidance.

For example, individuals who contribute to employer-sponsored retirement plans with pre-tax funds are engaging in tax avoidance because the amount of taxes paid on the funds when they are withdrawn in retirement is usually less than the amount the individual would owe. Furthermore, retirement plans allow taxpayers to defer paying taxes until a much later date, which allows their savings to grow at a faster rate. (more…)

Zero-Rated, Exempt & Deemed Supplies

Zero-rated supply

– refers to items that are taxable, but the rate of tax is nil on
their input supplies. The government doesn’t tax its retail sale but allows credits for the value-added tax (VAT) paid on inputs. This reduces the price of a good.

Governments commonly use zero-rated goods to lower the tax burden on low-income households by zero-rating essential goods.

NB in South Africa we also have goods that zero-rated because the goods are leading contributors to other manufactured goods and thus a leading part of a broader supply chain. Many food items are designated as zero-rated goods; these food items are sold with a 0% value-added tax. (more…)

Tables of Interest Rates From SARS

Interest rates charged in terms of the legislation administered by SARS are split into three main categories, i.e. –

  • interest charged on outstanding taxes, duties and levies and those payable in respect of refunds of tax on successful appeals and certain delayed refunds
  • interest payable on credit amounts (overpayment of provisional tax) in terms of section 89quat(4) of the Income Tax Act, 1962
  • interest applicable to a loan denominated in the currency of the Republic, as described in paragraph (a) of the definition of ‘official rate of interest’ in section 1(1) of the Income Tax Act, 1962

For ease of reference, the tables of interest rates are given below in three separate documents, numbered according to the three main categories, i.e. the first group of interest rates can be found in Table 1.

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Steps to Assist With SARS eFiling Disputes

ACCOUNT RELATED DISPUTE

If you don’t agree with a penalty due to the late payment of taxes and the related interest, follow these three easy steps:

Step 1: Request remission for the penalty by providing reasons for the late payment of tax by submitting a ‘Request for Remission’ via eFiling.

Step 2: If the request for remission is partially allowed or disallowed you may dispute by completing a ‘Notice of Objection’. With your ‘Notice of Objection’ you will need to supply reasons and substantiating documents. (more…)

Rare scenarios for Income Tax Number

Please take note of the following rare scenarios:

  • An individual can have an income tax number from birth if he / she becomes liable to submit an income tax return or becomes liable for any normal tax. For example, a child born into a wealthy family may be registered for income tax if his / her parents open a trust fund for him / her.
  • In the case of a late estate (upon death of tax payer), the old tax number cannot be used after death of a taxpayer. The executor has to apply to SARS for the new income tax number.
  • In the case of voluntary or mandatory sequestration, the tax payer must apply for a new income tax number from the date of sequestration.

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Employees Taxation For Personal Service Company or Trust

Employees taxation for personal service company or trust. This is a company (or trust as the case may be) that is not a labour broker, and whose services to clients are performed on its behalf by a connected person;

  •  and such person would be regarded as an employee of the client if the relationship was directly between the person and the client; or
  • the person fails the control and supervision test; or
  • the person fails the regular payments test; or
  • more than 80% of the income of the company/ trust from services rendered is directly or indirectly from the client;

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Membership & Members Interest

Differences between loans and capital contribution for members and outsiders.A loan is the act of giving money, property or other material goods to another party in exchange for future repayment of the principal amount along with interest

Member’s Loan

In simple terms, this is the money you have borrowed, or the company has loaned you. (more…)

Employees Taxation

Rules for Taxation on Remuneration for Employees and DirectorsAs a Director of a Company, your salary is subject to monthly PAYE and UIF deductions. Many small business owners don’t realise that if they operate their business through a company (Pty), the company needs to be registered as an employer with SARS.

This means, the company needs to deduct employee’s tax (PAYE) from the amounts paid to Directors. It’s also required to make monthly EMP201 submissions (this is the PAYE, UIF and SDL return) to SARS. The same applies even in the case of “owner managed” businesses -where there is only one director and no employees. In this case, the sole director is deemed to be an employee per the Tax Act and his/her salary will be subject to monthly PAYE and UIF deductions. (more…)

Donations tax – Estate Duty

What is Estate Duty and Donations Tax Estate Duty is payable on the estate of every person who dies and whose nett estate is in excess of R3.5 million. It is charged at the rate of 20%.  Estate duty is levied on property of residents and South African property of non-residents less allowable deductions. The duty is levied on the dutiable value of an estate at a rate of 20% on the first R30 million and at a rate of 25% above R30 million. A basic deduction of R3.5 million is allowed in the determination of an estate’s liability for estate duty as well as deductions for liabilities, bequests to public benefit organisations and property accruing to surviving spouses. (more…)

PATC Closure 2018

Closed on the 14th December 2018 from 12.00 for our Christmas function

We will be closing at midday on the 21st December 2018 until Monday the 7th January 2019 for our Annual December Shutdown

We take this opportunity to wish all our clients, friends and colleagues a joyous, festive and happy holidays. May Christmas bring fun, laughter and happiness to All….

A personal thank you from Gavin Bacon and his team for all the support from our wonderful partners.