Taxes – what types there are and what you need to know
Tax. What is it and what do I need to know?
Generally when people hear the word tax, there is a sense of foreboding and uncertainty followed by a deep sigh or increasing levels of anxiety.
Tax doesn’t have to be complicated or stressful. We recommend that business owners and individuals take the time to familiarize themselves with the types of taxes there are and what applies to them. With that in mind, I always suggest that people keep reminders on either their calendars, e-mail or phones for the various tax deadlines as it ensures that you never forget a deadline (even if you have a tax practitioner) and ensures that you can tackle any issues well before it becomes urgent. Tax is one of those facts of life that none of us can avoid … so let’s take the frustration out of the equation with a breakdown of the major types of taxation in SA… What is it? Does it even apply to me? When is it due?
INCOME TAX RETURN
What is Income Tax?
Exactly like the name suggests, it is the taxation that you declare on the income earned.
Who does Income Tax apply to?
Individuals (natural persons), companies, corporate entities, CC’s and trusts.
All entities have to submit an income tax return on an annual basis. For an individual, if you meet ALL of the following criteria, you will not have to submit an income tax return:
- Your total employment income / salary for the year (March 2017 to February 2018) before tax (gross income) was not more than R350 000; and
- You only received employment income / salary for the full year of assessment (March 2017 to February 2018) from one employer; and
- You have no car allowance/company car/ travel allowance or other income (e.g. interest or rental income); and
- You are not claiming tax related deductions/rebates (e.g. medical expenses, retirement annuity contributions other than pension
When is Income Tax due?
The individual (natural person) deadline is in accordance with the tax season as stipulated by SARS. The tax season normally opens on the 1st July of each year and as per the provisions of 2018, will close for non-provisional tax payers on the 31st October.
The deadline for everything other than an individual is one year after your financial year-end.
For example… your year-end is 28 February 2018 then your income tax return is due 28 February 2019… but be careful here as there is another deadline that you need to be aware of… The Companies Act requires companies to compile their annual financial statements within six months of the year-end.
PROVISIONAL TAX RETURNS
What are Provisional Tax Returns?
Prov tax, as the name suggests is just a provision on income tax. It is not a separate tax and for explanatory purposes, think of it like a declaration and payment of your income tax in advance broken down into two instalments every six months (with an optional top-up). It is based on your estimated taxable income.
Who does Provisional Tax apply to?
All corporate entities (companies, CC’s, Trusts) are automatically registered as provisional tax payers.
Any person who receives income other than a salary or whom derives remuneration from an employer who is not registered for employees tax should also register as a provisional taxpayer.
When isProvisional Tax due?
Every six months after your financial/ tax year-end.
For example:
- 31st August 2018
- 28 February 2019
- 30 September 2019 (top up)
VAT RETURNS
What is VAT (Value-Added Tax)?
Value-Added Tax is commonly known as VAT. VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for government by requiring certain businesses to register and to charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as the agent for government in collecting the VAT.
Who does VAT apply to?
Any person that carries on a business may register for VAT. The term person is not only limited to companies but also includes, amongst others, individuals, partnerships, trust funds, foreign donor funded projects and municipalities.
It is mandatory for a person to register for VAT if the taxable supplies made or to be made is, in excess of R1 million in any consecutive twelve month period.
A person may also choose to register voluntarily if the taxable supplies made, in the past period of twelve months, exceeded R50 000.
When is VAT due?
| Payment method | Return due date | Payment due date |
| Payments at ABSA, Albaraka Bank Limited, Bank of Athens, FNB, HBZ Bank LTD, Nedbank and Standard Bank. |
25th | 25th |
| Electronic Fund Transfers (including internet banking) | 25th | 25th |
| eFiling of return and payment via either SARS eFiling or Electronic Funds Transfers (internet banking) | Last business day | Last business day |
Aren’t sure if you should be VAT registered? Keep an eye on our blog for the article that breaks down all the nitttie gritties of Value Added Tax.
EMP 201’S- EMPLOYEES TAX / PAYE (PAY AS YOU EARN)
What is EMP or PAYE?
Employees’ Tax refers to the tax required to be deducted by an employer from an employee’s remuneration paid or payable. The process of deducting or withholding tax from remuneration as it is earned by an employee is commonly referred to as PAYE.
An employer who is registered or required to register with SARS for PAYE and/or Skills Development Levy (SDL) purposes, is also required to register with SARS for the payment of Unemployment Insurance Fund (UIF) contributions to SARS. You can register once for all different tax types using the client information system.
Who does EMP / PAYE apply to?
Employer’s!
When is EMP / PAYE due?
It must be paid within seven days after the end of the month during which the amount was deducted. If the last day for payment falls on a public holiday or weekend, the payment must be made on the last business day before the public holiday or weekend.
For example… August 2018 salaries are paid out and the corresponding EMP return and payment thereof are due by the 7th September 2018.
Aren’t sure if you should be EMP registered? Keep an eye on our blog for the article that breaks down all the nitttie gritties of Employees tax.
EMP501- RECONCILIATION
What is EMP501?
As the name would suggest, it is a reconciliation of the employees taxation submitted.
Who does EMP 501 apply to?
When is EMP 501 due?
Reconciliation declarations should be submitted twice during year of assessment, for the:
- Interim period – which is for the six month period 1 March to 31 August
- Annual period – which if for the full year 1 March to 28/29 February.
Now that you have an idea of what Tax is about, speak to IGC Accounting to help you with your Taxes!