Tax – TMMBS

Key Dates for Taxpayers in 2024: A Comprehensive Guide to SARS Deadlines

tmmbsonline — Fri, 26 Jan 2024 03:47:23 +0000

Key Dates for Taxpayers in 2024: A Comprehensive Guide to SARS Deadlines

As the new tax year unfolds, South African taxpayers are gearing up for another round of compliance with the South African Revenue Service (SARS). Staying on top of important dates is crucial to ensure a smooth and hassle-free tax season. Staying informed about these crucial dates is imperative for South African taxpayers to fulfill their obligations to SARS promptly. Failing to adhere to these deadlines may result in penalties and unnecessary complications. As tax regulations evolve, it's advisable for taxpayers to stay updated on any changes and seek professional advice if needed to ensure compliance and peace of mind during the tax season. In this article, we will delve into the significant dates that taxpayers should mark on their calendars to meet their obligations and avoid any potential penalties.

Tax Season Opening Date: March 1, 2024

The tax season typically kicks off on March 1st each year, signaling the commencement of the period during which individuals and businesses can submit their tax returns to SARS. Taxpayers are encouraged to prepare their financial documentation well in advance to facilitate a smooth filing process.

Submission of Individual Income Tax Returns

Taxpayers need to submit their individual income tax returns within the specified period. For non-provisional taxpayers, the deadline is November 23, 2024, while provisional taxpayers have an extended deadline until January 31, 2025. It is crucial to gather all relevant financial information, including income statements, expenses, and supporting documentation, to ensure accurate and timely submission.

Opening Date: April 1, 2024
Closing Date: November 23, 2024 (Non-provisional taxpayers)
Closing Date (Provisional Taxpayers): January 31, 2025. Take note of the following: Tax season for provisional taxpayers will be closing on 24 January 2024. Provisional taxpayers will have until this date to pay their dues and finalize their affairs for the 2022/23 tax year. For provisional taxpayers, the first period's payment is due on August 31, 2024. Provisional taxpayers include individuals who earn income not subject to PAYE (Pay As You Earn) deductions and businesses with an annual turnover exceeding a specified threshold.

Employee Tax Certificates (IRP5/IT3(a))

Issuing Deadline: May 31, 2024:

Employers are required to issue employee tax certificates (IRP5/IT3(a)) by May 31, 2024. These certificates provide employees with the necessary information to complete their individual income tax returns. Furthermore, these certificates detail income earned, taxes deducted, and other relevant information necessary for accurate individual tax filings.

VAT Submission and Payment Deadline

Submission Deadline: 25th day of the month following the end of the tax period.
Payment Deadline: 25th day of the month following the end of the tax period.

Value-added tax (VAT) vendors must submit their VAT returns and make payments by the 25th day of the month following the end of the tax period. Accurate record-keeping is essential for a seamless VAT compliance process.

PAYE Reconciliation Submission

Deadline: May 31, 2024

Employers must submit their Pay As You Earn (PAYE) reconciliation declarations by May 31, 2024. This process ensures accurate reporting of employee income and deductions. However, the monthly PAYE submissions must be executed on the 7^th of each and every month. In a PAYE system, the employer deducts a portion of the employee's earnings each pay period and remits it directly to the tax authorities. This ensures a regular and steady collection of income tax throughout the year, rather than requiring individuals to pay a lump sum at the end of the tax year.

Employer Interim Reconciliation

Submission Period: September 1, 2024, to October 31, 2024.

Employers are obliged to submit their interim reconciliations during this period. This involves providing accurate information regarding employees' tax certificates (IRP5/IT3(a)), ensuring compliance with SARS requirements.

Tax Season for Trusts

Opening Date: July 1, 2024
Closing Date: December 31, 2024

Trusts have a specific tax season, starting on July 1, 2024, and concluding on December 31, 2024. Trustees must submit their income tax returns during this period to avoid penalties.

Tax and labor law are interconnected in various ways, as both areas of law address aspects of employment, compensation, and financial responsibilities. An example of the interconnection relates to Unemployment Insurance Fund (UIF) and Compensation for Occupational Injuries and Diseases Act (COIDA). The UIF and COIDA are crucial components of the social security system in South Africa, each serving specific purposes to safeguard the interests and well-being of workers. Understanding and navigating the intersection of tax and labor law is essential for both employers and employees to ensure compliance with legal requirements, fulfill tax obligations, and create fair and transparent employment relationships. Legal advice and expertise in both areas may be necessary to address the complexities and nuances associated with the tax implications of employment.

Unemployment Insurance Fund (UIF)

The UIF is a social security program in South Africa that provides temporary financial assistance to workers who become unemployed, unable to work due to illness, or go on maternity leave. It is a mandatory fund to which both employers and employees contribute, and its purpose is to offer income support during periods when individuals are unable to earn a salary.

Pertaining to payment of contributions, employers must pay the 1% they deducted from workers, together with the 1% they have contributed, to the UIF or SARS before the 7th of every month.

Regular and accurate payment of UIF contributions not only avoids legal consequences but also ensures that employees have access to the necessary social security benefits when needed.

The Compensation for Occupational Injuries and Diseases Act (COIDA)

A short description of what COIDA entails is that it serves the purpose of providing compensation and benefits to employees who sustain injuries or contract diseases in the course of their employment.
Pertaining to payment of contributions, if for example an employee has earned a total earnings of R600 000 from the employer per annum, the amount should be capped at R529 264 and be declared as such. Furthermore, if an employee as earned the total earnings of any amount below R529 264, the total earnings must be declared as is, regardless of whether the said employee worked for a full year or part year.
If an employer is not registered with the Compensation Fund or has not paid the required assessments, employees may face difficulties in accessing compensation for work-related injuries or diseases. This can lead to financial hardship for the affected employees.

Paying taxes is a fundamental civic responsibility and is crucial for the functioning of a country's government and economy. Taxpayers are advised to consult with tax professionals, utilize online tools provided by SARS, and keep abreast of any updates or changes in tax regulations throughout the year. Compliance with these key dates ensures a smooth and efficient tax-filing process, contributing to the overall financial health of individuals and businesses in South Africa.

For more information refer to the following website:

https://www.sars.gov.za/important-dates-4/

VAT: “what if I do not agree?”

tmmbsonline — Wed, 01 Nov 2023 10:00:00 +0000

VAT: “what if I do not agree?”

Value Added Tax (VAT) is a crucial source of revenue for governments worldwide, including South Africa. VAT is an indirect tax (consumption-based tax) which is levied at every stage of production and distribution, ultimately borne by the end consumer. In South Africa, the VAT system has evolved over the years and has grown to become a significant part of the country's tax revenue. Furthermore, VAT has consistently since 2011 been the second largest contributor to tax revenue. Revenue is raised for government by requiring certain traders (vendors), that carry on an enterprise to register for VAT.

A VAT vendor is an entity or individual that is registered with the tax authorities (SARS) and is authorized to collect VAT from its customers on behalf of the government. VAT vendors play a pivotal role in the administration of the VAT system and are responsible for complying with various tax laws and regulations.

Although Value Added Tax (VAT) is a crucial source of revenue for governments worldwide, VAT disputes do transpire. VAT disputes can transpire at various points in the business cycle, and they typically arise due to discrepancies, differences in interpretation, or misunderstandings between taxpayers and tax authorities. Here are some common scenarios in which VAT disputes may occur:

Interpretation of Tax Laws: VAT disputes often arise from differences in interpreting complex tax laws and regulations. The VAT Act, as well as various SARS guidelines, can be subject to various interpretations, leading to disputes about the correct tax treatment of transactions.
Incorrect VAT Calculations: Mathematical errors, miscalculations, or discrepancies in VAT returns can trigger disputes. These errors may result from human mistakes or inaccuracies in accounting and record-keeping.
Classification of Supplies: Determining whether a particular transaction is subject to VAT or exempt can be contentious. The classification of supplies is a common source of disputes, especially when businesses are involved in diverse activities.
VAT Refunds: Disagreements over VAT refund claims are also common. Taxpayers might assert that they are entitled to a refund while SARS may have a different interpretation of the circumstances.

Tax disputes have resolution mechanisms. For example, taxpayers are required to self-assess their VAT liabilities. In cases of disputes, it is advisable for the parties involved to communicate and try to resolve the issue amicably through self-assessment. Often, these disputes can be resolved at this stage without involving SARS. Furthermore, ADR mechanisms, such as mediation and arbitration, can be used to resolve VAT disputes. Mediation is a voluntary process where a neutral third party assists in reaching an agreement. Arbitration is a more formal process where an arbitrator makes a binding decision.

SARS has established a Dispute Resolution Unit to handle VAT disputes. Taxpayers can approach this unit with their disputes. The DRU aims to provide an efficient and cost-effective dispute resolution process. Furthermore, if the dispute remains unresolved after exhausting other avenues, taxpayers can approach the Tax Court, which is part of the South African judicial system. The Tax Court has the authority to make binding decisions on tax disputes.

Here are some practical ways or tips in which one can handle their VAT Disputes:

Maintaining Accurate Records: Accurate and well-maintained financial records are critical for resolving VAT disputes. It is essential to keep documentation that supports your VAT returns and transactions.
Seeking Professional Advice: In complex VAT matters, it's advisable to seek professional tax advice from qualified experts who are well-versed in South African tax laws and regulations.
Open and Transparent Communication: Effective communication with SARS is vital. Whenever a dispute arises, it's beneficial to engage in open and transparent dialogue with the tax authority to clarify the issue and potentially resolve it without escalation.
Timely Filing and Response: Ensure that VAT returns are filed accurately and on time. Additionally, respond promptly to any communication from SARS, including requests for information or audits, to avoid unnecessary disputes.
Review SARS Guidelines: Stay updated with SARS guidelines and rulings to ensure that your VAT returns are compliant with the latest interpretations of the law.

VAT disputes can arise for various reasons, and it's essential to comprehend their nature, causes, and resolution mechanisms. Understanding VAT disputes and how to navigate them is essential for maintaining financial stability and compliance with tax regulations. Whether you are a business owner, taxpayer, or tax professional, being well-informed about VAT dispute resolution is crucial for ensuring a smooth financial operation.

SARS pursuing directors personally for unpaid company taxes

tmmbsonline — Tue, 13 Jun 2023 10:09:58 +0000

SARS pursuing directors personally for unpaid company taxes.

In South Africa, companies are separate legal entities from their directors or shareholders. Corporate Income Tax (CIT), is legislation which governs the imposition of tax in relation to companies. Non-resident companies which operate within the Republic are also bound by this legislation. Generally, the tax liabilities of a company are the responsibility of the company itself, and the directors are not personally liable for the company's unpaid taxes. However, there are circumstances where SARS can pursue directors personally for a company's unpaid tax liabilities.

One such circumstance is when a director is found to have acted negligently or fraudulently, resulting in the non-payment of taxes by the company. In such cases, SARS can potentially hold the director personally liable for the company's tax debts. This is often referred to as "piercing the corporate veil" or "lifting the corporate veil," where the legal protection of limited liability is disregarded due to the director's misconduct.

If SARS believes that a director has intentionally or negligently committed tax fraud, they can initiate legal proceedings against the director to recover the unpaid taxes. SARS may also hold directors personally liable if they can prove that the company was used as a means to evade taxes or that the director was involved in fraudulent activities. Furthermore, SARS may pursue directors personally for outstanding tax debts if it can be proven that the director acted in a manner that resulted in the non-payment of taxes, and if it is determined that the director is personally responsible for the company's tax liabilities. This can occur if the director has intentionally or negligently failed to comply with tax laws, or if the director has abused the corporate structure to evade taxes.

In such cases, SARS can issue what is called a "section 179 notice" under the Tax Administration Act. This notice holds the director personally liable for the company's tax debt and allows SARS to recover the outstanding taxes directly from the director's personal assets. It is important to note that this process involves a formal legal procedure, and SARS must follow due process before holding a director personally liable.

Another question is what happens to a company when its directors fail to pay company taxes? When company directors intentionally fail to pay taxes, it can lead to significant legal and financial consequences for the company and the individuals involved. Here are some potential outcomes:

Legal penalties: Tax authorities have the power to investigate and penalize companies for tax evasion or non-payment. If directors are found to have intentionally avoided paying taxes, they may face fines, penalties, and even criminal charges depending on the jurisdiction and the severity of the offense. Penalties can vary widely, including monetary fines, interest charges, and imprisonment.
Increased scrutiny and audits: When tax evasion is suspected, tax authorities may increase their scrutiny of the company's financial records and conduct thorough audits. This process can be time-consuming, expensive, and disruptive to normal business operations.
Reputational damage: Tax evasion can have a severe negative impact on a company's reputation. News of intentional tax evasion can damage the trust and confidence of customers, suppliers, investors, and the general public. This negative perception can lead to a loss of business opportunities, decline in customer loyalty, and difficulties in attracting investors.
Civil lawsuits: Parties affected by the tax evasion, such as shareholders, creditors, or business partners, may file civil lawsuits against the company and its directors seeking compensation for damages. These lawsuits can further drain the company's financial resources and reputation.
Business restrictions or closure: In some cases, severe tax evasion can result in the revocation of business licenses, permits, or other legal authorizations required for operation. Tax authorities may also impose restrictions or sanctions on the company, hindering its ability to conduct business. In extreme cases, persistent tax evasion can lead to the dissolution or bankruptcy of the company.

The steps taken by SARS to enforce compliance are as follows:

Notice and Demand for Payment: SARS will issue a notice and demand for payment to the company, specifying the outstanding tax amount, penalties, and interest accrued. The company will be given a specific period, usually 10 business days, to settle the amount.
Penalties and Interest: If the company fails to pay within the specified period, SARS may impose penalties and interest on the outstanding amount. Penalties can vary depending on the severity of non-compliance and the duration of the delay.
Collection and Recovery: SARS has the authority to take various collection and recovery measures to secure the payment of outstanding taxes. These measures may include, firstly, Attaching Assets: SARS can attach the company's assets, such as bank accounts, movable property, or vehicles, to recover the outstanding tax amount. Secondly, Issuing a Preservation Order: SARS may apply to a court for a preservation order to protect the company's assets from being disposed of while tax liabilities remain outstanding. Lastly, Instituting Legal Proceedings: SARS can initiate legal proceedings against the company to recover the outstanding tax debt. This may involve obtaining a judgment against the company, which could lead to further enforcement actions.
Third-Party Recovery: SARS can also recover the outstanding tax debt from third parties who owe money to the non-compliant company. This may include customers, suppliers, or other entities with financial obligations to the company.
Criminal Prosecution: In cases of deliberate tax evasion or fraud, SARS may pursue criminal prosecution against the directors of the company. If found guilty, the directors may face fines or imprisonment.

There are ways in which directors can limit their liability of being personally affected by the company’s failure to pay company taxes:

Directors need to ensure compliance with tax laws. They need to updated on tax laws and regulations applicable to the company's operations. By ensuring compliance with tax obligations, including timely filing of tax returns and accurate reporting, directors can reduce the risk of liability.
Directors can also delegate tax-related responsibilities to competent individuals or engage the services of professional tax advisors. While directors remain ultimately responsible for the company's tax affairs, delegating tasks to knowledgeable professionals can help ensure compliance and minimize the risk of errors or omissions.
Directors should exercise reasonable care, skill, and diligence when overseeing the company's financial affairs, including tax matters. This may involve regular review of financial statements, tax returns, and engaging in discussions with the company's financial team or tax advisors to gain an understanding of the tax position and any potential risks.
Directors can consult with tax professionals or legal advisors who specialize in tax matters. These professionals can provide guidance on tax planning strategies, available reliefs, and legitimate tax-saving opportunities, ensuring the company's tax affairs are managed efficiently and within legal boundaries.
Directors should ensure the company maintains accurate and complete records of its financial transactions, including tax-related documents. This includes keeping records of income, expenses, deductions, and supporting documentation, which may be required in the event of a tax audit or investigation.
Directors have a fiduciary duty to act in the best interest of the company and its shareholders. By fulfilling their duties and acting honestly and in good faith, directors may mitigate personal liability for the company's tax-related issues.

In some cases, directors who repeatedly fail to fulfill their tax obligations may face disqualification from holding directorial positions in the future. This can have long-term implications for their career prospects and their ability to participate in the management of companies. SARS generally prefers to resolve tax matters through voluntary compliance, communication, and negotiation. It is advisable for directors to ensure that their companies fulfill their tax obligations and comply with tax laws to avoid personal liability for the company's unpaid taxes.

No escape from SARS penalties for dormant companies

tmmbsonline — Fri, 21 Apr 2023 11:44:14 +0000

No escape from SARS penalties for dormant companies

The Tax Administration Act 28 of 2011 stipulates that SARS can issue administrative penalties for outstanding tax returns. Furthermore, SARS is authorized to charge penalties on companies that do not comply with tax laws, including companies that are dormant. Last year, SARS issued a notice stating that from 1 December 2022 admin penalties will be charged for late submission of income tax returns which are outstanding from 2007 to 2020. The recent implementation by SARS of late-submission penalties applies to all registered companies, whether actively trading or dormant.

By definition, a dormant company is a company that is registered with the relevant government authorities, in this case SARS, but is not actively trading or carrying out any business activities. In other words, it is company a company that exists in name only, without any significant operations, income, or expenses. Dormant companies are often used as a way to hold assets or intellectual property, to reserve a company name, or to prepare for future business operations. They are also used in situations where a company is temporarily not trading, such as during a period of restructuring or when awaiting the start of a project. Though not functional, dormant companies do not escape the responsibility to adhere to tax laws. In most jurisdictions, dormant companies are subject to less strict legal and regulatory requirements than active companies. However, they are still required to file certain legal and financial documents with the relevant authorities, such as annual returns, tax returns, and financial statements, even if they have no income or expenses to report.

No escape from SARS penalties for dormant companies

There are non-compliance penalties that are paid to SARS and these penalties will continue to re-occur until the submission of the unpaid tax returns. The penalties accrue monthly and are based on the estimated taxable income available to SARS, ranging from R250 to R16 000 per month and remain due to SARS for payment even after the submission of the tax returns. However, the payment of SARS penalties may vary depending on the specific circumstances including, the severity of the violation, the taxpayer's history of compliance, and any mitigating factors. For example, if a taxpayer has a history of timely compliance with tax obligations and can demonstrate that they made a good-faith effort to comply, SARS may be willing to reduce the penalty amount or offer a payment plan.

The solutions granted or available to dormant companies in the request for the remission of penalties, just to name a few are firstly, to dispute penalties if they believe they have been wrongly assessed, but this will depend on the specific circumstances of each case. Secondly, taxpayers have the option to deregister their company to evade extra tax penalties. Here is a step-by-step guide on how to close a dormant company:

Check the company’s status: Before you begin the process of closing a dormant company you should first verify that it is indeed dormant. This means that the company has not carried out any business activities such as selling goods or services, or generating revenue in the past financial year.
Notify the Companies and Intellectual Property Commission (CIPC): Once you have confirmed that the company is dormant you must notify the CIPC of your intention to close the company. This can be done via email or by submitting a form in person at the CIPC’s offices and the turnaround time is approximately 6 months. Supporting documents required are as follows:

Resolution/letter on company letterhead signed by all directors approving the intention to deregister the company-stating it is dormant and has no assets and liabilities.
Tax Clearance certificate.
Certified copy of each director’s ID not older than three months

Pay any outstanding fees and taxes: Before the CIPC can process your request to close the company you must ensure that all outstanding fees and taxes have been paid. This includes any annual return fees or taxes owed to the South African Revenue Service (SARS)
File the necessary documents: In order to close a dormant company, you will need to file certain documents with the CIPC. These include a ‘Notice of Intention to De-register a Company’ form and a ‘Notice of Resolution to De-register a Company’ form.

There is no escape from sars penalties for dormant companies according to the tax Administration Act 28 of 2011 which stipulates that SARS can issue administrative penalties for outstanding tax returns.

The process might seem like a simple one however, there are grounds for de-registration: A company or close corporation may be referred for de-registration:

upon application by any party subject to the requirements for a request for de-registration,
if annual returns are outstanding for more than 2 successive years, or
if the Commission believes that the company or close corporation has been inactive for 7 years.

Once the CIPC has approved your request to close the company you must publish a notice in the Government Gazette announcing the company’s de-registration as well as notify creditors and shareholders, should the company have any. This can be done through a notice in the Government Gazette or by sending a letter to each creditor or shareholder individually.

In South Africa, a company is considered dormant if it has not conducted any business activity or generated any income for a certain period of time. Even if a company is dormant, it still has to comply with certain legal and tax requirements, such as submitting annual tax returns and financial statements to the relevant authorities. However, there is a misconception that an entity is automatically precluded from taking steps to formalize its dormancy once it ceases to trade for whatever reason. The Companies Act 71 of 2008 stipulates how a company can formalize its dormancy. An entity can formalize its dormancy by way of a liquidation process, when there are still assets and creditors, or deregistration with the Companies and Intellectual Property Commission, when there are no assets or outstanding creditors. These assets are used to unlock finances to pay creditors, including the SARS. Once the dormancy has been formalized, Sars must be notified. The company must deregister for all the tax types for which it was registered, such as income tax, value-added tax, Pay-As-You-Earn, and customs and excise.

No escape on sars penalties for dormant companies

It is important for companies, even those that are dormant, to comply with tax laws to avoid penalties and potential legal action. If a company is unable to comply with its tax obligations due to financial difficulties or other reasons, it may be possible to negotiate with SARS for leniency or to make arrangements to pay off the outstanding taxes over time. If this is not executed, the penalty for late submission of annual tax returns is calculated as a percentage of the tax due, and the amount of the penalty increases for every month that the return is late . In addition, there may be penalties for non-compliance with other tax obligations, such as failing to register for certain taxes or not submitting monthly returns. If SARS is charging penalties on companies that are dormant, it may be because the companies are not meeting their tax obligations. For example, if a dormant company fails to submit its annual returns, SARS may impose penalties for non-compliance.

The leniency that SARS imposes is that, if you have had a dormant company, that hasn’t traded for a few years and is behind on submitting tax returns, SARS will implement a penalty based on the most recent tax return received. For example, a quick calculation shows that a company that has been dormant for 35 months (as per the penalty) and has not submitted income tax and VAT returns will have incurred minimum administration penalties of R18000 for income tax and R120 000 for VAT respectively.

The penalties that may be imposed by SARS on dormant companies that fail to comply with their tax obligations are as follows:

Late submission of tax returns: A dormant company may be penalized for failing to submit their tax returns on time. The penalty for the late submission of tax returns is a percentage of the tax due, and it increases the longer the delay.
Late payment of taxes: If a dormant company fails to pay their taxes on time, SARS may impose a penalty that is a percentage of the tax amount owed. The penalty for late payment of taxes also increases the longer the delay.
Failure to register for tax: If a dormant company is required to register for tax but fails to do so, they may be penalized by SARS. The penalty for failing to register for tax can be a fixed amount or a percentage of the tax due.
Failure to maintain proper records: SARS requires that all companies maintain proper records of their financial transactions. If a dormant company fails to maintain proper records, they may be penalized by SARS.

It's important to note that the specific penalties imposed on dormant companies by SARS can vary depending on the circumstances of the non-compliance. It's always best for a dormant company to seek professional advice to ensure that they comply with all tax obligations and avoid any penalties. If you ignore notifications from SARS, it will keep levying the administrative penalties and the company will have a non-compliance tax status. This not only affects the dormant company but also its directors and shareholder in their personal capacities.

Another upturn in tax revenue collection by SARS

tmmbsonline — Wed, 12 Apr 2023 07:20:05 +0000

Another upturn in tax revenue collection by SARS

The South African Revenue Service (SARS) has announced its preliminary revenue collection results for the year 2022/23 financial year which continues a significant growth trajectory over the past few years. It has collected more than R1.6-trillion in net revenue after Sars refunded more than R380 billion to taxpayers, despite economic headwinds, including the dire impact of loadshedding. This is R123-billion more than the previous financial year. According to SARS Commissioner Edward Kieswetter, public confidence in SARS is improving and the services operational efficiency has also improved tax morality and diligence by South Africans.

SARS is responsible for collecting taxes and other forms of revenue on behalf of the government of South Africa. This includes income tax, value-added tax (VAT), customs and excise duties, and other taxes and levies. The methods used by SARS to collect revenue includes, tax returns, audits, and investigations. Taxpayers are required to submit accurate tax returns and pay their taxes on time to avoid penalties and interest charges. SARS also works to prevent tax evasion and fraud through compliance activities, such as conducting audits and investigations. It is important for taxpayers to comply with tax laws and regulations and to keep accurate records of their financial transactions. This helps to ensure that revenue is collected fairly and efficiently, which is essential for the functioning of the government and the provision of public services.

Revenue growth was recorded in all forms of tax when compared to the 2022 revenue outcome. The numbers are as follows:

Personal income tax went up by 8.3% to R601.7bn
Company income tax grew by 7.6% to R348.0bn
Value-added tax (VAT) rose by 8.0% to R422.2bn
Customs and other taxes went up by 27.4% to R73.9bn.

Another upturn in tax revenue collection by SARS

SARS collected a lesser amount in terms of Value Added Tax. The commissioner explained that a lot of the amounts have to do with load-shedding and increased imports on improvements and repairs needed for certain companies. Generally, it could also show that there is some pressure on consumers when it comes to purchasing normal goods for themselves which then results in companies and the revenue authority getting less money from VAT.

With regards to the performance of provinces, Gauteng accounted for 58% of the revenue service's all-time high net collection of R1.69 trillion for the 2022/23 financial year, followed by KwaZulu-Natal with 18%, and the Western Cape with more than 15%. The Northern Cape recorded a revenue collection of 0.5% - the lowest among the nine provinces.

When looking at the contribution by the different sectors, the finance, insurance, real estate, and business service sectors contributed the most. The finance sector increased by R50 billion, 9.6% year-on-year to R572 billion. Furthermore, 34% of our revenue comes from the finance sector. While all the tax types showed some improvement, the SARS Commissioner stipulated that personal income tax showed the most.

A total of R528.3bn was collected from the large business unit and the newly established high-wealth individual unit, collectively.

With regards sectors, the mining sector moved from a positive contribution in the 2021/22 financial year to a 12% drop in the financial year under review, putting its contribution to revenue to R73.45bn. The sector suffered immensely from loadshedding. The biggest sector - the financial sector - increased by R50bn year-on-year to R572.43bn, representing a contribution of 33% to the overall tax pie.

Though loadshedding has and is affecting the economy, crime remains an issue in our country. Levels of tax and economic crimes remained unacceptably high with tax compliance being a major for the tax agency. The SARS Commissioner stipulated that the compliance actions administered by SARS focus on ensuring that they manage the risk to the National Revenue Fund and ensure that the country’s fiscal integrity is underpinned. The interventions created by SARS to combat tax crimes, include focused debt collection, a focus on criminal and illicit activities and declaration compliance from large businesses, inter alia.

Furthermore, South Africa had become attractive for criminal syndicates who use illicit and secondhand gold, illicit tobacco and fuel to commit crimes. These actions are not captured through the formal banking system or if they are, they are often masked. What is of particular importance is the flow of funds from and between these industries and entities. Based on the investigation results conducted by SARS, there is reason to believe that these illicit financial flows involve tax evasion and money laundering activities to further fund criminal activities. Money laundering in this regard, concerns cash that is generated from various means, including the sale of secondhand gold, fuel and tobacco sales.

Various bank accounts in foreign and local bank accounts are opened with the assistance of corrupt bank officials and by procuring the assistance of individuals who are used as fronts, including those in government and organizations, such as SARS, who can be co-opted and incentivized to be a part of this. In combatting crime, SARS has completed 8000 illicit trade interventions that resulted in seizures of R2.5bn, raised assessments to the value of R57.8bn, collected R16.8bn and preserved over R13bn of assets, handed over 110 cases to the NPA, and secured one conviction so far. Regarding state capture-related matters, 29 audit cases have been completed with an assessment value of R504.1 million. These interventions serve as proof that indeed SARS is at its top performance.

The big question is, seeing that South Africans are under a lot of financial pressure due to the consistent occurrence of inflation, could this affect the current financial year? Financial pressure experienced by consumers can potentially have an impact on SARS. When consumers are under financial pressure, they may be less likely to have the funds to pay their taxes on time or in full, which can lead to a decrease in tax revenue for the government. This can in turn affect the government's ability to provide essential services and fund important projects. In addition, financial pressure on consumers can lead to an increase in tax evasion, which is when individuals and businesses intentionally underreport their income or overstate their deductions in order to pay less in taxes. This can lead to a loss of tax revenue for SARS and can also undermine the fairness and integrity of the tax system. Therefore, it is important for SARS to be aware of the financial pressures that consumers are facing and to take steps to help taxpayers who are struggling to meet their tax obligations. This can include providing guidance and support to taxpayers who are experiencing financial difficulties, implementing targeted tax relief measures, and taking strong enforcement action against those who engage in tax evasion.

Overall, the increased collection of tax revenue by SARS is a positive development that can lead to several benefits for South Africa's economy and society. The increased collection of tax revenue by the South African Revenue Service (SARS) means the following for South Africa:

Improved service delivery: With increased tax revenue, SARS can invest in improving their services and making the tax collection process more efficient. This can lead to a better experience for taxpayers and improved compliance rates.
Increased government revenue: Increased tax revenue means more money for the government to invest in critical areas such as healthcare, education, and infrastructure. This can lead to better social and economic outcomes for the country.
Reduced budget deficit: Increased tax revenue can also help reduce the government's budget deficit. This means that the government can reduce its borrowing and debt levels, which can lead to improved economic stability.
Enhanced credibility: A well-functioning tax system can enhance the credibility of a country's economy and government. This can lead to increased foreign investment and improved economic growth.

South African taxpayers’ perceptions influence their attitudes towards tax compliance. It is important that SARS should concentrate on changing taxpayers’ perceptions with regard to taxation in order to achieve a more positive attitude towards tax compliance. It is important for government to build a close relationship between themselves and taxpayers. This can be achieved by alleviating poverty and corruption in order to earn and preserve the trust of taxpayers.

2023 Budget Speech

tmmbsonline — Mon, 27 Feb 2023 08:48:46 +0000

The fundamental changes and its implications: revenue and tax proposals

Finance minister Enoch Godogwana delivered the 2023 budget speech on 22 February 2023. He touched on multiple points, including the current state of the country’s economy and its growth estimates; Impact of load shedding on small growing businesses; the social wage as well as the new tax proposals. When delivering his speech, the finance minister was trying to strike a balance between spending priorities and the limited resources available to the National Treasury.

With the country facing its current challenges, i.e., unemployment, inflation, poverty, Eskom’s power cuts amongst other things, according to economic analysts and researchers, there has been a growth in the country’s economy. However, with the International Monetary Funds projects decreasing from an estimated 3.4% in 2022 to 2.9% in 2023 including the ongoing war in Ukraine, therefore causes global economic risks which have the potential of impeding the country’s economy.

When looking at the revenue and tax proposals stipulated within the budget speech, there has been a change welcomed by consumers and businesses alike. With SARS being under the leadership of Commissioner Edward Kieswetter, there also has been gross tax revenue projections which have been revised upwards by over R10 billion. This therefore serves as a testament that SARS has improved significantly in its tax collection efforts thus bearing fruit.The increase of the tax-to-GDP ratio from 25.4% to 25.7% is marginal but this does not mean that ultimately more revenue will be taken out of the hands of businesses and consumers in terms of the GDP.

2023 budget speech

What this means is that there were no major tax proposals for the year 2023.

The finance minister stipulated that the personal income tax bracket will be fully adjusted for inflation which will increase the tax-free threshold from R91.250 to R95.750.
With regards to the promoting investments in renewable energy, the general fuel levy together with the Road Accident Fuel levy will not be increased this year. This will take effect from 1 April 2023 for 2 years. This is viewed as a ‘tax relief’ intervention.
Medical tax credits will be increased by inflation, to R364 per month for the first 2 members, to R246 for additional members.
The retirement tax table will be adjusted upwards by 10%. What this means is that the tax-free amount that can be withdrawn at retirement increases to R550 000. This is good news for the country’s retirees who will enjoy moderate retirement fund lump sum withdrawal benefits with inflationary adjustment- this brings welcomed relief for the man on the street.
Transfer duty will be increased by 10%, allowing properties under R1.1 million to avoid any transfer duty payments.
For renewable energy, two tax incentives has been introduced to encourage both individuals and businesses to invest in renewable energy and help the power utility Eskom by increasing the generation of electricity. In the SONA, President Cyril Ramaposa stipulated that people will get a 25% rebate on the cost of installing rooftop solar panels at home. The rebate in this regard is capped at R15 000. This therefore can be used to reduce their tax liability in the year 2023-2024. As of 1 March 2023, businesses will be able to reduce their taxable income by 125% of the cost of an investment in renewable energy. Businesses can deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 megawatts, biomass and photovoltaic projects above 1 megawatt. There will be no thresholds on the size of projects that qualify. This incentive will therefore be available for two years to stimulate investment in a short term.
The government intends to publish a revised draft legislation on the two-pot retirement system. This system will be implemented from 1 March 2024 and any withdrawals from the accessible “saving pot” will be taxed as income in the year of withdrawal.
Finally, there will be an increase in excise duties on alcohol and tobacco of 4.0% which is in line with inflation.

2023 budget speech

Furthermore, the zero increases in corporate tax, personal income tax, VAT, fuel levy, and Road Accident Fund will go a long way to help ease cashflow pressure on businesses. Over the last 18 months, businesses have had to navigate challenging economic conditions including worsening loadshedding and increasing interest rates. Having the necessary support and assistance from the government to stimulate the economy is key to survival.

Tax season readiness for businesses

tmmbsonline — Mon, 25 Jul 2022 20:47:46 +0000

What could possibly be the two least favourite certainties? Taxes and death. For business owners, tax season can be a difficult time. If you don't have anybody to help you gather all of your information, it may be even more unpleasant. Making sure you have all your "ducks in a row" as early in the year as possible is probably the most crucial step. It's evident that no business owner is really excited about tax season. It's just an undesirable element of the work that must be completed in some capacity, ideally with an accountant's or tax practitioner’s assistance, if you can afford one. Tax season is a year-round event that requires your attention throughout the year for businesses of all sizes. You must always be ready for that inevitable day: tax day, from gathering and organizing receipts to completing out papers from independent contractors.

Do you frantically compile the necessary paperwork, calculate your business expenses, and look for your receipts at the last minute? If so, preparing your tax return in this manner is ineffective. Unavoidably, you will overlook deductions, enter inaccurate data, or, if you're feeling really anxious, you might even forget some of the more important documentations. Let's face it: keeping track of, organizing, and storing company receipts is far simpler said than done. Not only do you need to save, file, and maybe submit receipts for tax season, but you also need to gather and store your company's records safely.

Maintaining good books will make submitting your taxes much simpler. Business owners can minimize errors and get the most out of deductions by working with accurate figures. There are bookkeeping apps that can assist in managing and tracking your business activity if you don't have an accountant or cannot afford one. It is important to keep track of the following records and maintain them on a regular: Bank statements, invoices, slips of petty cash, statements for company accounts and credit cards, work travel receipts (plane tickets, fuel costs), etc

Beware of your deductions: Every tax jurisdiction has its own list of allowable and prohibited deductions, but in general, anything connected to your business can be deducted on your tax return. Nevertheless, in order to reduce your tax liability, it is crucial to understand which deductions your company can fully utilize. It's crucial that business owners maintain their personal accounts and banking information separate from that of the business. This can be a terrific way to cross-reference your spending for usage at tax time if your business credit card was used for all of your expenses.

How to reduce the tax burden:

For small businesses to grow and possibly receive funding, they must maintain tax compliance by meeting their tax obligations. Over time, the South African Revenue Service has made it simpler to do so. Along with tax benefits, there are also considerable depreciation allowances that business owners can take use of to lower their tax liability and maintain operations during these challenging times.

Various SARS exclusions are available to small businesses, depending on their size and yearly turnover category. Make sure you are aware of these exemptions. Across the nation, small companies that specialize in project work frequently employ a large number of temporary workers. To prevent errors and SARS fines, employers must be aware of the tax rates for temporary workers under various income bands.

Finally, even though many SMEs use accountants, it is the responsibility of business owners to educate themselves on tax matters. Business owners can stay clear of SARS penalties by closely monitoring operations and ensuring that taxes are paid on time and in a timely manner. Small businesses cannot afford to make mistakes during challenging times when demand is low and cash flow is tight. Efficiency, cost-cutting, and emergency savings should be prioritized.