Tax paperwork can become overwhelming for anyone, let alone SME owners who tend to juggle many balls simultaneously. As a result, such admin tasks fall lower down on the list of priorities.
By Chwayita Deliwe, director at CN Outsourced Finance
Ensuring that you file accurate annual tax returns timeously should not be one of them if you want to avoid paying harsh cumulated interest and penalties.
If you intend to grow your business from micro to small to medium, you will need discipline and diligence, especially when it comes to your business’s finances.
There are a few things to keep in mind:
There is no one-size-fits-all so make sure that the qualified professional whose services you enlist tailor makes a solution suited to your tax submission requirements.
This typically includes the annual ITR14 SARS submissions required by all registered companies.
If it is your first time, this is when you declare income and expenses for SARS to calculate your business tax contribution, if any is applicable.
Rule of thumb of what to look for:
- A firm or a professional registered with recognised bodies such as The South African Institute of Professional Accountants (SAIPA) or the South African Institute of Chartered Accountants (SAICA), Southern African Institute for Business Accountants (SAIBA) or South African Institute of Taxation (SAIT).
- A firm or professional with good references and who has a good understanding of small and medium business needs.
What are the deadlines?
Each financial and tax year has deadlines and you would be wise to keep to these. As mentioned earlier, timeous submission means you can avoid penalties. This helps to keep the cashflow healthy which is imperative for the success of any SME.
That said, here are the deadlines to remember:
VAT
Manual submissions of the VAT201 and payment must be complete by the 25th of the month. Electronic submissions and payment of the VAT201 must be made by the last business day of the month.
PAYE
Submit the monthly EMP201 by the seventh of the following month or the Friday before if the seventh falls on a weekend or public holiday.
File the interim EMP501 reconciliations for the period of 1 March to 31 August between 1 September and 31 October.
File the annual EMP501 reconciliations for the period 1 March to 28 February between 1 April and 31 May.
Income Tax
You must file a compulsory provisional tax return six months from the start of the financial year and another at the end of the financial year.
You may make a voluntary submission and top-up payment six months after year-end.
You must file your annual income tax return within 12 months of the end of your financial year.
Provisional taxpayers (Sole Proprietors)
You must file the first provisional tax return and make one tax payment by the end of August.
A second provisional payment is due by the end of February (at the end of the tax season).
You might make an optional third payment at the end of September if the amount paid in previous payments was insufficient.
The tax filing season for provisional taxpayers usually begins in early June, with a deadline of 31 January.
Best kept secret: Turnover Tax
If you take nothing else from this article, take this: ask your accountant or financial manager whether you qualify and then registered for turnover tax.
Turnover tax is a simplified system aimed at making it easier for micro business (with an annual turnover of R1 million or less) to meet their tax obligations.
The turnover tax system replaces Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax for micro businesses with a qualifying annual turnover. A micro business that is registered for turnover tax can, however, elect to remain in the VAT system.
Turnover tax is worked out by applying a tax rate to the taxable turnover of a micro business.
Accurate record keeping
If you still use spreadsheets and physical bank statements, bills and receipts to track your company’s finances, then you will know how error-prone and time-consuming it is.
There are two ways to solve for this:
- Pay an accountant to capture and reconcile your transactions in a proper accounting system.
- Do it yourself
You can save time and frustration for yourself by outsourcing this function to your accountant. A qualified and experienced accountant will ensure that financial records are up to date, accurate and in compliance with laws and regulations. The accountant also serves as a trusted business advisor on how to manage cash flows and expenses.