Taxes are an inevitable part of life and of your business. They need to be paid to ensure that you stay on the right side of the law. When it comes to your business, there are a number of tax requirements. As the owner, it is your responsibility to ensure they are fulfilled.
Let us begin by saying that, for business tax, it is best to consult an expert to ensure that you are paying what you need to pay, on time and in full. For now, here are some tax tips to ensure that you pay what you should but not more than that – you should discuss them with your accountant or a financial expert:
- Know the law: It’s important to educate yourself around what is required for your business to comply with South African tax law. Remember that, in the eyes of the law, ignorance is no excuse. At the end of the day, the responsibility for your business affairs rests with you as the owner. It is important to keep on learning and monitoring your business activities, making sure all tax is paid (and returns are filed) on time in order to avoid fines from SARS.
- Investigate exemptions: Your business will qualify for certain exemptions from SARS depending on its size, work, number of employees, and turnover. For example, if your employees’ annual salaries total less than R500 000, it will be exempt from paying the Skills Development Levy, which has been set up for employee training and development.
- Keep those receipts: Out of pocket expenses are often neglected by small business owners but, by the end of each month, they can add up to a significant amount. Met a new business contact for coffee? Paid for parking when visiting a client? Used your phone for business calls? Business purchases (such as entertainment, client gifts, and office expenses) make for legitimate tax deductions.
- Check out your wheels: If you buy a vehicle through your company and it is used for business and private travel, you will be taxed on the fringe benefit value for the private element. If you buy the car yourself, you could look at incorporating a travel allowance into your salary. This would be taxed at 20% as long as at least 80% of your travel is for business purposes. But be wary – a travel allowance is most often the better choice but it depends on the value of the vehicle and the business kilometres driven through the year. You also need to keep a log book or you won’t qualify for deductions.
- Get the right online tools: Tax can be confusing but the right online tools can help you understand what tax applies to your business, how to pay it, and when. Use an established tax calculator, SARS or SME body guidelines, and reputable apps (such as our free Tax Deadline Calendar App) and make sure you don’t miss a deadline or tax requirement. If you miss a deadline, it can be difficult to catch up and you will expose your business to harsh penalties.
- Hire an expert: An expert business tax consultant or firm will have advanced knowledge of business tax law. They can help minimise your business’ taxation while ensuring compliance. They will structure your accounts in a way that will result in the business having a lesser tax liability than what it would have paid. They should also complete and file the business’ tax returns on time to avoid unnecessary costs and penalties.
Please note that the suggestions in this blog post are suggestions only – as explained above, your tax (and any possible deductions) should be calculated by an experienced individual with the proper qualifications.