There are various tax types that must be taken into account by the person and business. If tax and payment are not managed properly, it could cause the company’s cash flow to incur additional costs (taxes unnecessarily paid or fines) and, in some cases, the end of the business.
A good knowledge is therefore indispensable for the entrepreneur and, failing that, a tax consultant with the necessary knowledge and experience.
Below is a brief description of the most common tax types:
PERSONAL INCOME TAX: Will be charged on the taxable income earned by a person in a tax year at the sliding rate announced annually during the budget.
BUSINESS INCOME TAX:
Are charged on the taxable profit of an enterprise of a specific tax year. The different forms of enterprise are taxed at different rates, eg:
- Company tax at 28%
- Trust tax at 40%
- One-man business – The profit of the sole proprietor’s business is deemed to be part of the taxable income of a person as defined above in PERSONAL INCOME TAX
- Small business Corporation tax at 0% to 28%, subject to certain requirements.
TAX ON ADDED VALUE (VAT)VAT is an indirect tax which is charged at 14% of an entrepreneur’s selling price. The amount to be paid to SARS every 2 months is the difference between the VAT collected with sales and the VAT paid on purchases.
EMPLOYEE TAX (LBS / WFD / VHF): According to the tax act, every employer is SARS’s “agent” for collecting employee taxes, which is the following:RUNNING PAYMENT SYSTEM (LBS)It is the income tax deducted from employees’ salaries and paid to SARS by the employer on a monthly basis. The PAYE serves as credit in the calculation of PERSONAL INCOME TAX as defined above.
UNEMPLOYMENT INSURANCE FUND: Employer pays 1% of the employee’s gross and the employee pays 1%
SDL: Employer contribution of 1% of gross salaries, which is compulsory when the annual salary account exceeds R500,000.
OTHER TAXES: There are several other taxes, eg. estate duty, dividend tax and other.
Finkor can assist you with the minimum cost of payment by the tax court.