Now that you have started your own business, you will need to have a general understanding of how South African Revenue Services (SARS) operate, as well as your obligations in terms of the tax laws.

By law, SARS is obligated to calculate and collect from each taxpayer only the correct amount of tax due, and that tax laws are administered correctly and fairly so that nobody is favoured or prejudiced. Here we discuss various tax issues surrounding the different legal entities, as well as VAT and PAYE.

Income Tax - Sole Proprietorships and Partnerships

While close corporations and companies have separate legal personalities, sole proprietorships and partnerships do not. With a sole proprietorship, the owner or proprietor must include the income from his or her business in his or her own gross income as he/she is responsible for the tax payments thereon in an individual/personal capacity. Similarly, in a partnership each partner is taxed on his/her share of the partnership profits. Sole Proprietors and Partners must register as provisional taxpayers with their local Receiver of Revenue.

Income Tax - Close Corporations and Private Companies

Close Corporations and Private Companies are legal entities and have separate legal personalities. They must therefore register as taxpayers in their own right as opposed to a partnership or sole proprietor. The taxable income of the company or close corporation is determined in the same way as that of a sole proprietorship or partnership. Unlike natural persons, however, a company or close corporation pays tax at a flat rate on its taxable income for the year of assessment. By law a company is required to appoint an auditor who will audit and sign its financial statements, while a close corporation is required to appoint an accounting officer.

Value-Added Tax (VAT)

VAT is an indirect tax levied on supply of goods or services by a registered vendor in the usual course of business, and is also levied on the importation of goods and certain services into South Africa.

Registering for VAT:
There are two categories of registration:

	Compulsory: any person who on or after 30 September 1991 carries on any business whose total value of taxable supplies exceeds or is likely to exceed R150 000 in any 12 month period
	Voluntary: any person who on or after 30 September 1991 carries on any business whose total value of taxable supplies does not exceed R150 000 in any 12 month period

Application for registration as a vendor under the Act must be made on form VAT 101 (available from SARS) within 21 days of becoming liable to register. Every registered vendor must submit a VAT 201 return to the Receiver by the 25th of the month together with any payments due.

For more information on VAT see www.sars.gov.za and click on the VAT link on the left.

Employees Tax

Employers are obliged by law to deduct tax from the salaries or wages that they pay to their employees to pay over to SARS on behalf of the employees, in order for employees to pay their tax throughout the year as it is earned, instead of as a lump sum. An employer must register any new employees with the Receiver, and at the end of each year of assessment you must issue an IRP5 certificate to each employee from with PAYE has been deduced as proof. If during the course of the year of assessment an employee leaves, you must immediately issue him or her with an IRP5.

(Note: see http://www.bizland.co.za/paymarkt.asp to see how Bizland's BizPay payroll system can submit PAYE and provide IRP5s on your behalf).

Information supplied by the South African Revenue Services, compiled by Bizland

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