As a small business owner, ensuring that your business is tax compliant is of utmost importance. With the tax-year end just around the corner, it is crucial to be well-prepared and organized to submit the necessary documents to the South African Revenue Service (SARS). Whether you are a first-time business owner or need a refresher, this comprehensive tax filing guide for SMEs will provide you with all the essential information you need to know.

The guide is divided into four main sections, each addressing a critical aspect of tax compliance. Let’s take a closer look at what each section entails.

In the first section, we will provide you with a comprehensive guide to payroll tax-year end. This section is designed to take you through the essential steps of preparing for, processing, and being ready for the next tax year. Properly preparing for payroll tax-year end ensures that you have all the necessary information and documents required for the payroll reconciliation process. This section will cover critical steps such as verifying employee information, reconciling employee records, and ensuring that all the necessary reports and declarations are in place.

Moving on to the processing payroll tax-tax-year-endtion, we will delve into the actual process of submitting your annual employer reconciliation returns to SARS. This section will cover everything from submission deadlines to necessary forms, emphasizing the importance of accurate and error-free submissions.

The final part of the guide focuses on preparing for the next tax year. This section will assist you in developing a plan that helps you avoid any mistakes made in the previous year and provides tips on how to make the preparation process smoother and more efficient.

The second section of this ultimate tax filing guide for SMEs focuses on four mistakes to avoid when submitting your personal tax return. By highlighting these common errors, we aim to help you prevent delays, penalties, or even an audit. Mistakes such as forgetting to declare income, claiming expenses that are not allowed, providing incorrect information, and not using the right forms can have serious consequences, so it is vital to be aware of them and avoid making these errors.

The third section of the guide is dedicated to three tips that will make tax compliance easier for small business owners. Running a small business can be stressful, and tax compliance is often one of the most time-consuming and complex aspects. This section provides practical tips that can help you streamline your tax compliance process, reduce the potential for errors, and alleviate some of the burden associated with tax-related responsibilities.

Finally, the fourth section highlights four compelling reasons to partner with Sage this tax-year end. Sage is a leading provider of accounting and payroll software solutions for small businesses in South Africa. This section outlines the benefits of using Sage software to streamline your tax compliance process, save time, and ensure accuracy, ultimately making your tax filing experience smoother and more efficient.

In conclusion, tax compliance is an essential aspect of running a small business, and being well-prepared for the tax-year end is crucial. This ultimate tax filing guide for SMEs offers easy-to-understand language, step-by-step instructions, timely and accurate information, valuable tips and tricks, and resources and support to ensure that you can submit your documents to SARS accurately and on time.

Whether you are a first-time business owner or in need of a refresher, this guide will help you navigate the complex tax compliance landscape and streamline the process, allowing you to devote more time to running your business. If you have any further questions or require additional assistance, please do not hesitate to reach out to our team members. Let’s get started on ensuring your tax compliance success!

As a small business owner, it is essential to make sure that your business is tax compliant. With the tax-year end fast approaching, it’s crucial to ensure that you’re well-prepared to submit the necessary documents to SARS. Whether you’re a first-time business owner or need a refresher, this ultimate tax filing guide for SMEs will provide you with all the essential information you need to know.

The guide is divided into four main sections, each addressing a critical aspect of tax compliance. In the first section, we’ll provide you with a comprehensive guide to payroll tax-year end. This section will take you through the essential steps of preparing for, processing, and ultimately being ready for the next tax year.

Preparing for payroll tax-year end is crucial as it helps ensure that you have all the necessary information and documents required for the payroll reconciliation process. This section will cover the critical steps you need to take to prepare for tax-year end, including verifying employee information, reconciling employee records, and making sure all the necessary reports and declarations are in place.
In the processing payroll tax-year end section, we’ll dive into the actual process of submitting your annual employer reconciliation returns to SARS. This section will cover everything from the submission deadlines, necessary forms, to the importance of ensuring that your submissions are accurate and error-free.

The final part of the guide to payroll tax-year end is preparing for the next tax year. This section will help you develop a plan that will help you avoid any mistakes you might have made in the previous year. It also provides tips on how to make the process of preparing for the next tax year smoother and more efficient.

The second section of this ultimate tax filing guide for SMEs is focused on four mistakes to avoid when submitting your personal tax return. This section will help you avoid common errors that could lead to delays, penalties, or even an audit. These mistakes include forgetting to declare income, claiming expenses that are not allowed, incorrect information, and not using the right forms.

The third section of the guide is focused on three tips to make tax compliance easier for small business owners. Running a small business can be stressful, and tax compliance is often one of the most time-consuming and complex aspects of the business. This section provides practical tips that can help you streamline your tax compliance process and avoid potential errors.

Finally, the fourth section of the guide is focused on four reasons to partner with Sage this tax-year end. Sage is a leading provider of accounting and payroll software solutions for small businesses in South Africa. This section will outline the benefits of using Sage software to streamline your tax compliance process, save time, and ensure accuracy.

In conclusion, tax compliance is an essential aspect of running a small business, and it’s crucial to be well-prepared for the end of the tax-year end. This ultimate tax filing guide for SMEs provides easy to understand language, step-by-step instructions, timely and accurate information, tips and tricks, and resources and support to ensure that you’re fully prepared to submit your documents to SARS accurately and on time.

Whether you’re a first-time business owner or need a refresher, this guide will help you navigate the complex tax compliance landscape and streamline the process to allow you to spend more time running your business. If you still have any questions or need further assistance, don’t hesitate to reach out to our team members. Let’s get started!

By Yolandi Esterhuizen, Director of Product Compliance at Sage Africa & Middle East and a Registered Tax Practitioner

South Africa’s economy has yet to recover completely from the pandemic and faces record levels of load shedding, constraining South Africa’s growth potential. Taxpayers will be looking at the budget speech from Finance Minister Enoch Godongwana for signs of how the government aims to restore the country’s economic growth and boost employment in the year ahead.

They certainly face a difficult balancing act. Government is under growing pressure to find funds for social spending, including expanding the welfare system and funding healthcare for all. But with higher inflation, increased interest rates and energy costs, and lacklustre economic growth, taxpayers are under strain and don’t have much more to contribute to the fiscus.

Here are some things to look out for in the budget speech.

National Health Insurance

The long-awaited National Health Insurance (NHI) bill is expected to be finalised and tabled in parliament this year. Even after years of debate, there are many open questions about how the government plans to fund the NHI. At this stage, we can’t be certain how it will affect employers and employees via payroll taxes. Many hope the finance minister will shed some light in his speech in February.

Home office tax deduction

While we’ve seen many employers call their teams back to the office, many still work from home part or all of the time. These employees incur significant costs to work from home, including broadband, tech, office equipment, furnishing, and utility expenses. The requirements to claim these expenses are somewhat onerous and perhaps seen as unfair.

In the 2022 budget speech, National Treasury committed to publishing a discussion paper regarding this matter. However, nothing has been published subsequently, and the most recent taxation laws amendment act did not include any changes. It will be interesting to observe if there is an update in the budget this year or if the subject has dropped off the agenda.

Employment tax incentive (ETI)

One of South Africa’s most significant challenges is the high unemployment rate, especially among the youth. This issue can only be solved through sustainable economic growth. The government has tried to address the youth unemployment crisis in part through ETI. However, recent research indicates that it has an ambiguous influence. The scheme remains a great idea; however, if the government simplifies the administration of the ETI, it could encourage more employers to participate.

Unemployment Insurance Fund (UIF)

We have seen growing calls from organised labour and other quarters to place the UIF under administration due to concerns about inefficiency, corruption, and wasteful expenditure. I don’t expect an increase in the contribution rate this year. However, it would be good to see an update from the finance minister about how the government will ensure that the fund remains sustainable and able to pay claims in the future.

Personal income tax and VAT

In the midterm budget update, Minister Godongwana mentioned that revenue collection has exceeded projections in the 2022 Budget and that the gross tax revenue estimate for 2022/23 has been revised up by R83.5 billion to R1.68 trillion. Nonetheless, the IMF expects one-third of the global economy to be in recession in 2023, and the minister has said South Africa’s outlook is also grim.

Even so, I do not believe a VAT or personal income tax rate increase could be justified this year. I am not expecting major changes beyond adjusting tax brackets in line with inflation. In the 2022 budget speech, the government said it would review the approach of adjusting tax thresholds for inflation. Perhaps it will implement an automatic adjustment to cater for inflation.

The power crisis

High levels of Eskom’s load shedding are hampering economic activity. They are especially damaging to small and medium businesses operating on thin margins. We hope to see the President and Finance Minister provide greater detail on how the government will address this crisis. This might include making funds for diesel available to Eskom and fast-tracking reforms to the energy market.

With the regulator approving a steep increase in power prices, smaller businesses face the double whammy of frequent electricity outages but with higher tariffs. We can expect more consumers and businesses to invest in alternatives such as solar. It’s encouraging that the sunset date for the section 12L energy efficient saving allowance has been extended from 1 January 2023 to 1 January 2026.

However, this allowance mainly caters to large entities because the implementation costs are so high. We hope the government is considering a tax incentive or rebate for solar investments more tailored to people working from home and small businesses. Such interventions could make solar more affordable and relieve some pressure on the national grid. While the government is unlikely to introduce these incentives or rebates in the 2023 budget, mentioning their plans would be a step in the right direction.

For media queries:

Idea Engineers (PR agency for Sage)

• Itumeleng Mogaki
• Mobile: +27 (0)82 780 5002
• itumeleng@ideaengineers.co.za

About Sage

Sage exists to knock down barriers so everyone can thrive, starting with the millions of Small and Mid-Sized Businesses served by us, our partners, and accountants. Customers trust our finance, HR, and payroll software to make work and money flow. By digitising business processes and relationships with customers, suppliers, employees, banks and governments, our digital network connects SMBs, removing friction and delivering insights. Knocking down barriers also means we use our time, technology, and experience to tackle digital inequality, economic inequality, and the climate crisis.

Find out more: www.sage.com/za

UPDATE: This article was originally published in May 2015, but due to its popularity it was updated with brand new information on 09 February 2023.

One of the more important requirements of starting a business is making sure you have all the necessary associated permits and licences within your chosen industry. The food service industry is made of restaurants, hotels and inns, as well as catering and vending companies. The most important regulations that business owners in this sector have to comply with are health and safety permits, licenses for the selling of liquor and tobacco as well as zoning permit to operate in certain locations.

We speak to Cindy Leibowitz of CL Legal Consulting, who gives us a break down of these licenses and permits that are required when opening a new food service business.

What kind of licenses/permits do I need when starting a new small business in this industry?

Business licenses – In terms of the Businesses Act (1991), where a person is starting a business with the purpose of selling or supplying any foodstuff in the form of meals for consumption on or off the business premises, or any perishable foodstuff, then that business is required to hold a business license. Therefore, any person who wishes to start a new restaurant, even if it is a take-away restaurant, will need to apply for a business license under the Businesses Act.

There are certain instances where a restaurant does not need such a license. For example, a restaurant business which is carried on by an educational institution where the profits derived from the business are devoted to the purpose of that or another institution. Accordingly, a school tuck shop would probably not need a business license under the Businesses Act.

Health and safety – Under The Health Act (1977), there are the Regulations Governing General Hygiene Requirements for Food Premises and the Transport of Food, in terms of which any person who handles food or permits food to be handled, such as a restaurant, is required to possess a certificate of acceptability.

Liquor licensing – If you plan on selling liquor in your restaurant, then you will need a liquor license. The granting of liquor licenses is dealt with at provincial level, which means that every province within South Africa has its own specific laws governing liquor licensing.

Sound and music – Further, if you plan on playing music in your restaurant, even if it is background music, then (depending on certain factors) you will need a license from The Southern African Music Rights Organisation (SAMRO) as well as a license from The South African Music Performance Rights Association (SAMPRA). These are two completely separate companies, and therefore two separate licenses. A license from SAMRO covers the copyright in the actual song (i.e. the composition and the lyrics), and the royalties payable by you in terms of this license will be distributed by SAMRO to music publishers and songwriters. On the other hand, a license from SAMPRA covers the copyright in the recorded version of the song, and the royalties payable by you in terms of this license will be distributed by SAMPRA to certain record companies. The requirements for a business license may differ from one local municipality to the next

Why do business owners need to obtain such permits and licenses?

A restaurant is required to hold a business license and a certificate of acceptability due to the impact which owning a restaurant and selling food may have on public health and safety if certain standards are not adhered to. In relation to liquor licensing, due to the socio-economic effect of alcohol abuse, it is essential that the supply of alcohol is regulated, and that restaurants are required to hold licenses to sell liquor.

Music licenses are necessary for the protection of intellectual property rights. A license from SAMRO is necessary to protect the intellectual property of composers and authors by providing them with adequate accreditation and compensation. A license from SAMPRA is necessary to protect the intellectual property of record companies by providing them with adequate accreditation and compensation.

Where can I apply for them?

The location of the restaurant will determine where you will apply for a business license, a certificate of acceptability and a liquor license. For a business license and a certificate of acceptability, you would need to apply to the local municipality within which your restaurant is situated. In relation to liquor licenses, each province has its own Liquor Authority/Liquor Board which is responsible for the granting of licenses to the restaurants within that province. For music licenses, you would need to contact SAMPRA and SAMRO directly to obtain licenses from each of them.

• See also: Everything You Need To Know About Enterprise and Supplier Development In South Africa

What are the requirements for each of the permits and licenses?

The requirements for a business license may differ from one local municipality to the next, so it is advisable that you contact your particular local municipality to find out the specific requirements applicable to your restaurant. For a certificate of acceptability, you will generally be required to provide information regarding the nature and type of food being handled on the premises, the nature of the handling (e.g. preparation, packing, processing etc), and certain other information.

In relation to liquor licenses, the requirements may differ from one province to the next, so it is advisable that you contact your local Liquor Authority/Liquor Board to find out the specific requirements applicable to your restaurant.
SAMRO and SAMPRA each have their own requirements for obtaining a license. In an application for a license from SAMPRA, for example, you would be required to inform SAMPRA whether the music used in the restaurant is played via TV, radio or other means; the floor space of the restaurant etc.

What are the repercussions that business owners may face if they do not have the proper documentation?

Where a restaurant does not hold the required business license, certificate of acceptability or liquor license, it is an offence under the applicable law. The offence may be punishable by way of a fine and/or imprisonment. Where a restaurant plays music without the required music licenses, then this may constitute a copyright infringement in terms of South African copyright laws, and the restaurant may be sued by the copyright owner.

What are some other laws and legal aspects need to considered when opening a restaurant?

One would need to be mindful of certain other laws when starting a business in the food service industry. The Tobacco Products Control Act (1993) contains certain requirements regarding smoking in public places, such as restaurants. In addition to this, as a restaurant owner, you fall within the hospitality industry, and there are certain labour laws which you may be required to adhere to in relation to your employees, and there are certain bargaining councils which operate within the industry.

Further, in terms of the Consumer Protection Act (2008), the customers which dine at your restaurant are entitled to good quality food and service, and you may incur a liability claim under the Consumer Protection Act if this is not adhered to. The good news is that, if you own a restaurant which is part of a franchise, then the Consumer Protection Act may actually work in your favour. In terms of the Consumer Protection Act, the franchise agreement between yourself and the franchisor must contain certain prescribed clauses, which protect you as a franchisee.

On the commercial side of the business, you will most probably be leasing premises out of which your restaurant will operate, and this will mean signing a lease agreement. It is also likely that you will need to sign supply agreements with the companies which supply you with the produce used in your business. It is advisable to ask an attorney to review these agreements so as to ensure that they do not contain any hidden clauses which may be detrimental to your business.

• This is a first in what will be a series of articles focusing on licensing and permit requirements for each industry.

What are the costs for a business license for a food business?

Depending on whether you are a hawker or informal trader, or you run another type of food business such as a takeaway or restaurant, or guest house, the tariffs differ for each. Anyone with a food business should either apply for a business license or trading permit – the application process can be done online or you can do a walk-in at your local municipality.

Hawkers and informal traders

Whether you are a hawker or informal trader who sells meals or perishable food, or you own an accommodation establishment (such as a hotel, guest house, lodge or bed and breakfast), you need to apply for a trading permit at your local municipality, according to the City of Ekurhuleni. The trading permit must get renewed on an annual basis. Trading permits can cost from *R200 for hawkers and *R850 for accommodation establishments. An occasional event trading permit can cost from *R250 per event.

Other food businesses

If you are selling or supplying meals/ food from a restaurant, a takeaway, tuck shop, spaza shop, fast food outlet, supermarket, grocery store, or wholesaler, you need to get a business license and can have it renewed every year. It can cost from *R850 for a business license.

Other licenses that you apply for and pay separate tariffs for including the provision of health facility or entertainment, inspection fee for Fire and Safety inspection, and the grading of the stalls or demarcated space for trading.

*Prices/ tariffs are set annually and are subject to change. You need to inquire at your local municipality about their tariffs.

The application process

According to the City of Johannesburg, the application will be forwarded to five departments to check that the requirements are met for:

• Environmental health
• Noise and air pollution control
• Public safety
• Urban planning
• Building control

Once all five departments have returned a recommendation for approval, only then your business license or trading permit will be issued.

What do you do if you are moving your food business?

For those who already have a business license in one province but would like to apply for a license for a food outlet in another province, you need to apply again at the local municipality that you want to trade-in. This is because the requirements can include having your landlord’s signed consent (where your food outlet will be), as well as consent from the Town Planning Department.

Facility standards you should adhere to on food premises

When providing food you are required to ensure that your facilities are hygienic and that the surface of any place where food is handled is smooth and its material is non-toxic. Utensils need to be stored in such a way that dirt does not accumulate on them. It is important to note that utensils and cutlery are not to be used if unclean or cracked in any way.

Any utensils, such as plastic cutlery, which are used once have to be kept in a dust-free container and can only be used once as intended. It is also important to note that any person handling food has to wear clean and suitable protective clothing so that food cannot be contaminated.

COVID-19 Opportunities: Delivery Services

The restaurant industry will experience major changes due to the COVID-19 pandemic with a shift to food delivery for many restaurants. 

We take a look at what regulations restaurants will need to adhere to when delivering food. 

Options available for delivery

1. Self-Delivery

Restaurants may deliver their own food, however according to a Food Focus article, ‘R638 Regulations Governing General Hygiene Requirements for Food Premises, the Transport of Food and Related Matters,’ regulation 638 of General Hygiene Requirements for Food Premises, the Transport of Food and Related Matters Gazette no. 41730 requires business owners to adhere to the health and safety regulations as set out in the Regulations Governing General Hygiene Requirements for Food Premises, the Transport of Food and Related Matters, taking into account standards and requirements for the transport of food. These include the prohibition of transportation of food:

• In a vehicle that has not been cleaned
• Together with contaminated or waste food
• Together with poison or harmful substance
• An object that may contaminate or spoil the food

2. Other options

Register your restaurant on one of the following food delivery platforms. They are beneficial as they have a large footprint and can expose your business to new customers. However, take note that these delivery platforms operate within a certain radius and take commission for handling delivery.

• Uber Eats
• Mr Delivery
• OrderIn

Access Unilever’s Food Delivery Template. Available here for download.

• Looking for a Professional Lawyer that can Help with Licensing Your Business? Find one on Startwise

• See also: RocoMamas Founder on Customers Genuine Love for the Brand

You can also see below, the Ultimate Legal Guide to opening a Restaurant in South Africa

About the contributor: Cindy Leibowitz (BA cum laude, LLB cum laude, Advanced Company Law I and II) is the owner of CL Legal Consulting. Cindy is an admitted attorney with 8 years’ experience in corporate, commercial law, drafting contracts, commercialisation of intellectual property, media and entertainment law, IT law, statutory compliance and providing general legal advice to clients.
This article contains generic references to some of the main licenses, permits, laws and legal aspects to be considered when opening a restaurant. This article should not be construed as a comprehensive overview of all of the legal requirements associated with operating a restaurant. It is advisable that you consult with an attorney in order to obtain more detailed advice.

All employees in South Africa  have certain rights that ensure that they are treated appropriately and are protected in the workplace. The laws that relate to workers’ rights include the South African Constitution which provides for basic rights, the Labour Relations Act (LRA) which expands on these rights, and the Basic Conditions of Employment Act (BCEA).

See also: The Legal Requirements of a Business In South Africa 

General employee rights in South Africa

Employees have the following rights:

• not to be unfairly dismissed or discriminated against
• to be provided with appropriate resources and equipment
• to have safe working conditions
• to receive the agreed remuneration on the agreed date and time
• to receive fair labour practices
• to be treated with dignity and respect
• to non-victimisation in claiming rights and using procedures
• to leave benefits and other basic conditions of employment as stipulated in the Basic Conditions of Employment Act

The Basic Conditions of Employment Act (BCEA)

The Basic Conditions of Employment Act 75 of 1997 deals mainly with, but is not limited to, leave days; the terms of your employment; working hours; remuneration; dismissals and resignations, and more. All these aspects are important for the operation of a compliant business.

1. Employment contracts

Employment contracts are not necessary to establish a valid employment relationship but they still serve an important purpose. Firstly, a contract establishes certainty in the employment relationship and binds employees to the company’s disciplinary codes. Contracts, also detail in writing, prescribed employment details, which is a requirement of the BCEA. Additionally, in the event of a disagreement a contract can protect either parties.

See also: Unpacking Labour Law For Employers 

2. Hours of work

The BCEA sets out statutory hours of work. Ordinary hours of work (i.e. not overtime) may not be more than 45 hours in a week or 9 hours in a day. For employees who work a 6-day week, it is 8 hours per day.

Any additional hours will be considered overtime for which qualifies for additional remuneration. Overtime is limited to a total of 10 hours per week and then too, may not exceed 3 hours of overtime per day.

Overtime work must be paid at no less than 1.5 times the normal hourly rate, or time off (equivalent to 1.5 times), or partially paid and partially paid time off.

3. Leaves

According to the BCEA workers are entitled to the following leaves:

• Paid leave – You can take no less than 21 consecutive days per completed year of employment (or 1 day for 17 days worked, or 1 hour for 17 hours worked), on full pay.
• Sick leave – Employees are entitled to 30 days paid sick leave for every 36 months worked (the leave cycle), on full pay.
• Family Responsibility leave – Three days paid leave during each twelve month leave cycle to discharge family responsibilities.

4. Minimum wage

The current national minimum in South Africa is R23,19 for each ordinary hour worked. The increase came into effect from 1 March 2022.

The minimum wage is only a benchmark for lowest-paid workers. Employers may pay more than this amount.

5. Health and safety

All workers are entitled to a workplace that does not place a risk to their health and safety. The Occupational Health and Safety Act, requires that employers ensure that the “workplace is free of hazardous substances, such as benzene, chlorine and micro organisms, articles, equipment, processes, etc. that may cause injury, damage or disease.”

The Act specifies the following if this is not possible: “the employer must inform workers of these dangers, how they may be prevented, and how to work safely, and provide other protective measures for a safe workplace”.

A small business may qualify as a small business corporation (SBC) if it meets certain requirements. SBCs are a new class of company/close corporation recognised for tax purposes and was introduced to reduce the tax burden on small businesses. According to the South African Institute of Professional Accountants (SAIPA) “it is designed to provide tax relief which improves the liquidity and cash flow of businesses”.

Some of the benefits of registering as a SBCs include access to additional tax incentives and a reduced tax rate, as well as accelerated depreciation allowance for movable assets. 

Find out more about requirements for Small Business Corporations and its tax benefits below. 

Small Business Corporation Requirements

Not all small businesses qualify as SBCs. It is a requirement that SBCs be a company or close corporation. This rules out holding companies and trusts. 

To qualify as a Small Business Corporation companies must meet all of the following requirements:

• All shareholders or members are natural persons.
• All shareholders hold no shares in any other private company.
• All members hold no members’ interest in any other Close Corporation.
• Gross income for the year of assessment does not exceed R14 million.
• Not more than 20% of the gross income and all the capital gains consist collectively of investment income and income rendering a personal service.

Investment Income includes any annuity, rental income, royalty or any income from investment or trading in financial instruments, marketable securities or immovable property.

Personal Service includes any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draughtsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, which is performed personally by any person who holds an interest in the company or Close Corporation, except where such small business corporation employs three or more unconnected full-time employees for core operations.

Tax benefits

The rate of tax you pay will depend on taxable income as the rates for a SBC are progressive (the higher the taxable income, the higher the tax rate).

Most companies pay income tax at a flat tax rate of 28% on their taxable income. SBCs on the other hand can benefit from a reduced tax liability if their taxable income does not exceed R550 000 in a year of assessment. 

The table below illustrates the savings for SBCs :

Taxable Profit                      Small Business Tax                     STD Business Tax                    Tax Saving

0 – 70 700                                                0                                                    19 796                                            19 796

70 700 – 365 000                          20 601                                                   102 200                                             81 599

365 001 – 550 000                        59 451                                                    154 000                                            94 549

Above 550 000                               28%                                                         28%                                      Nothing from this point

Credit: Findanaccountant.co.za

When a company’s gross income exceeds the R20 million threshold it will, from the commencement of that year of assessment, be taxed at the flat corporate income tax rate of 28%. 

Related: Starting a Business in South Africa 

When it comes to planning your small business taxes, you will need to take VAT into consideration. Small business VAT is mandatory for some businesses, although you can also apply for it voluntarily. Registering for VAT comes with its benefits, but it also means adding to your prices and filing extra returns.

We’ll cover everything you need to know about small business VAT in our guide below, including when you need to pay it and how it affects your business.

Can a Small Business Register for VAT?

Any business can register for VAT. In fact, all businesses must register for VAT if they earn an income of R1 million over the course of twelve months. If the small business expects to earn this much revenue in a year, it is mandatory to register for VAT.

Small business VAT registration can also be done voluntarily if the business earns an income of over R50 000 in the past twelve-month period.

Registered micro businesses under the Sixth Schedule of the Income Tax Act are also able to register for VAT.

So it is possible for most small businesses to register for VAT and submit returns every four months, although it is not a necessary requirement for all small businesses.

Who Must Register for VAT in South Africa?

Small business VAT registration is only necessary for businesses that earn or expect to earn a revenue of R1 million over the course of twelve months. While it is possible for other small businesses to register for VAT, it is not mandatory if their income falls below this.

Can a Sole Proprietor Register for VAT in South Africa?

Yes, sole proprietors are required to register for VAT in South Africa if their business falls under the necessary requirements. Small business VAT registration is not based on the structure of the business, but rather on the business’s income.

See Also: Your Guide to Tax Invoice Requirements

How Does VAT Work for Small Businesses in South Africa?

If your small business is required to or has chosen to, register for VAT, you will need to submit VAT returns and payments every four months. These returns are due on the last days of June, October, and February.

When your small business is registered as a VAT vendor, you will need to charge VAT on all of the goods and services you sell to your customers. Although, certain goods are zero-rated, or exempt from VAT. The VAT charge, or output tax, is 15% of your goods and services sale price.

This means if you are a VAT vendor, your products or services will be more expensive for your customers. However, it also means that your business is entitled to claim input tax on all of the goods or services rendered by the business. Essentially, by claiming back this input tax from SARS, you can reduce the cost of any goods purchased or services rendered.

So small business VAT has a big advantage because non-registered VAT vendors cannot claim back these taxes or charge VAT.

What are the 3 Types of VAT?

There are three different categories of supplies that VAT vendors can make. These are:

• Standard-rated: Standard goods or services in which VAT is levied at a rate of 15%
• Zero-rated: Supplies of goods or services on which the output VAT is levied at a rate of 0%. Any input VAT incurred while purchasing the goods or services needed for zero-rated supplies can be claimed against output VAT that needs to be paid to SARS
• Exempt: Output tax cannot be levied on these supplies, and input VAT incurred on these expenses cannot be claimed against output VAT

What Documents are Needed to Register for VAT?

To register for small business VAT, you will need to supply the following documents:

• Copy of your business’s certificate of incorporation
• Copy of your trust deed and authority letter
• Copy of your original ID
• 3 months bank statements
• A letter from your banker, or an original stamped statement from the bank
• Your latest month’s invoices to be used as proof of trading
• Proof of your business address (Municipal account or rental agreement)

Conclusion

There’s a lot to consider when registering a small business in South Africa, including registering it for VAT. Small business VAT can be compulsory or voluntary. If planned carefully, it could offer a major cost-saving benefit to your business.

It’s important to understand VAT requirements and how exactly VAT works before you start trading. This is necessary for keeping your business on track with tax and operating efficiently.

The following content is paid for by Sage.

With the shift to remote working, more businesses are using the gig economy (or platform economy) and turning to contingent workers to fulfil their talent needs. It might seem simple to run your business with a workforce that is essentially required to manage itself, but employers are not completely absolved of responsibility.

Contingent worker compliance needs to be top of your priority list if your business plans to use independent contractors.

There are several advantages to using a contingent workforce instead of a team of permanent employees, including:

• Flexibility: An external workforce can be helpful for businesses that need to scale their workforce up or down in accordance with seasons or economic conditions.
• Global talent pool: Companies can access skills from anywhere in the world.
• Cost: The ability to hire talent as-needed helps businesses reduce labour costs and offers access to specialised talent on demand, which is far more affordable than paying for this expertise year-round. Employers also save on benefits typically due to permanent staff, such as paid time off and retirement fund contributions.
• Reduced administrative burdens: Using contingent workers, who may only require short-term, job-specific training and little administration, reduces the time and costs associated with recruiting, hiring, training, and managing regular employees.

There are, however, disadvantages and risks to consider, too.

Contingent workers could initially require more hands-on management as employers are hesitant to trust non-employees who do not know their systems or standards. Companies are also required to place a lot of trust in contingent workers who have access to confidential information. This could potentially lead to sharing of trade secrets or the compromising of protected data.

Hint: Protect yourself by getting contingent workers to sign non-disclosure agreements.

A contingency workforce must be implemented and managed correctly. Non-compliance can cost your business a lot of money, so keeping updated with the HR laws and regulations governing contingent workers is vital.

The workforce: Who’s who?

Typically, a contingent worker is an employee who is hired for a set period and includes independent contractors, freelancers, part-time, and temporary workers.

Contingent workers are a rapidly growing segment of the workforce. According to Statista, the number of temporary workers in South Africa increased from 2.6 million in 2017 to 3.9 million in 2018.

Due to the loss of permanent employment, or the need for a ‘side hustle’ to make ends meet, the gig economy has grown significantly since the COVID-19 pandemic. Given the push for better work-life balance by Millennial and Gen Z employees and the remote work flexibility accelerated by the pandemic, it’s clear that most businesses will need to include these kinds of workers in their future.

One of the most significant barriers to employers expanding their contingent labour base is the additional layer of compliance considerations that comes with it.

The modern workforce’s diversification has resulted in a complicated web of legal requirements that can be difficult for employers accustomed to dealing with a primarily full-time workforce. Keeping track of the reporting, tax considerations, and employment law requirements for a workforce that includes full-time employees and contingent workers needs a clear, well-organised strategy – and the correct technology to support it.

Managing the flexi-force

While contingent workforce compliance is essential, so is understanding how to manage that workforce. Employee talent management software can help you navigate the complexities of managing this flexible workforce. Automating areas of your business can also make it easier to stay compliant with your contingent workforce.

Many businesses are implementing broad management strategies, which generally include developing standardised, cross-functional business processes, policies, and roles across business units and regions, aided by a single information technology platform where possible.

A critical foundational element of any contingent workforce strategy is tracking and administering contingent workers in a single integrated system. Numerous options are available in the market for monitoring and managing contingent workers, ranging from traditional ERP human resource management systems (HRMS) to SaaS-based HRMS providers who offer integrated solutions.

Involving HR, talent, strategic procurement, finance, and IT in managing this workforce helps businesses mitigate risks and encourages accountability from the company as a whole. 

Embracing modern payroll processes

Thanks to the gig economy and remote working, employees in one country can easily work for companies in another, and companies can explore opportunities in new markets they weren’t able to access before.

From a payroll perspective, this means businesses will be required to deal with the challenges of making cross-border, multi-currency payments. To meet these global payroll demands, companies will need to invest in agile payroll software that will support them quickly and accurately and keep them compliant regardless of where their employees are in the world.

Earned Wage Access platforms, such as Floatpays, are also forcing the evolution of traditional payroll practices as the workforce increasingly uses on-demand payroll systems. Employees are now also favouring alternative ways of receiving payment, including via digital wallets like Apple Pay, Google Pay, PayPal, e-wallet, and more.

Reading the rights

Contingent workers have specific legal rights when they enter into an agreement with your company.

For example, they have the right to local wage standards, such as minimum wage, overtime pay, and standard working hours. This means that you cannot force an independent contractor to work more than eight hours per day, or 40 hours per week, without compensating them for the extra time.

Contingent workers who deliver their service on-premise are entitled to the same workplace health and safety protections as permanent employees.

Keeping it classified

When you hire an independent contractor, strict rules must be followed because misclassifying a worker can result in significant compliance issues.

Workers classified as independent contractors are responsible for paying most of their taxes, providing their own benefits, and other responsibilities. If you classify a worker as your employee, you will need to provide benefits and pay taxes for that worker.

Misclassifying full-time employees as contingent labour or independent contractors is in direct contravention of labour laws. It negatively impacts the employee through loss of benefits and the government through loss of tax revenue and UIF collections.

Clearly, staying compliant with contingent labour employment laws demands a significant amount of effort, knowledge, and coordination. Automating your human resources functions can help you reduce risk associated with scheduling, classification, and other key compliance issues. When weighed against the financial and reputational risks associated with improper management of contingent workers, a cloud-based compliant HR software solution is a wise investment.

Data security: Shhh, it’s our secret!

Payroll departments handle massive amounts of sensitive information, and data protection laws heavily regulate the storage, use, and transfer of this data.

It’s no wonder that even though 91% of HR and payroll professionals say their organisations are fully compliant with POPIA and the General Data Protection Regulation (GDPR), 48% still worry about compliance, and 63% are concerned about securely sharing personal employee information.

According to Sage research, the top compliance concerns among payroll professionals are:

• Protecting data (24%),
• Information leaks and theft (15%) and
• Cyberattacks (12%).

One of the main risks when hiring contingency workers is that they will leak sensitive information or breach data security.

As businesses increasingly use contingent workers, cybersecurity must top the list of payroll priorities. Cloud-based payroll systems offer increased data security, and an astounding 88% of survey respondents who are already using them say their systems are more secure than ever before, and 65% note that they benefit from safer data processing and storage.

A new era of work

A contingent workforce is becoming an increasingly important component of a comprehensive workforce strategy. Under business and talent market pressure, this category continues to grow in terms of both spend and headcount as a percentage of the total workforce. With increased regulatory pressure and enforcement, businesses are moving quickly to stay ahead of this trend by managing the inherent risks of recruiting non-employee talent.

Leading organisations are making targeted investments in developing the operations capability required to support this population of talent, including integrated cross-functional processes, well-developed, integrated technology, and aligned business functions to drive accountability. This enables the company to gain access to specific resources from a greater talent pool to meet their business needs while reducing costs and managing risks.

The following content is paid for by Sage.

A new year is typically a stressful start for many small to medium-sized enterprises (SMEs) that are already feeling the hot breath of the tax year-end (TYE) on their necks. This year’s crunch-time is compounded by complexities related to the COVID-19 pandemic and the recent spate of changes made to payroll legislation.

To remain compliant, business owners (or their payroll and HR function, if they have one) must stay up to date on how legislative changes impact their TYE processes.

It’s not easy. In fact, in the recent Sage Payroll and HR in SA: Rising to the challenges of change report, 77% of respondents say they battle to grasp complex payroll taxes, and 50% struggle to explain tax calculations to their employees.

Time is already in short supply for many SME owners as they juggle multiple roles from payroll and HR to being the in-house barista. The need to keep up with regulations means more hours checking and double-checking PAYE, UIF, medical aid, and pension fund figures – to name just a few. This leaves little to no time to pursue business benefits such as Employment Tax Incentives (ETIs) and the Skills Development Levy, which help lower hiring costs through reduced PAYE contributions.

Only 52% of SMEs currently take advantage of ETIs. Throw in COVID-19, the global shift to remote and hybrid working, the increased need for data security, and the penalties for incorrect payroll taxes, and complying with TYE can seem like an impossible task.

Fear not. These four tips will help protect your business from costly fines and possible litigation – and sail you through this year’s tax year-end.

1. Consider outsourcing

Understandably, outsourcing payroll is not always viable for a cash-conscious small business. Nonetheless, if you don’t have an accountant or payroll expert in-house, it’s well worth looking into the cost of an outsourced payroll vendor.

Consider the following benefits of having such a resource on your team:

• Keeping employee records up to date
• Submitting tax remits
• Filing tax returns
• Processing payroll in line with current legislation
• Identifying discrepancies
• Providing advice (like how to sign up for ETIs)

The COVID-19 pandemic has made many employees remote or hybrid workers, which adds layers of time-consuming complexity for payroll and HR practitioners. The research backs this up, with 83% of respondents to the Sage Payroll & HR research saying they spend most of their time dealing with manual tasks, such as repetitive administration and employee data maintenance.

Chances are you’ll realise that not having an outsourced payroll function is costing your business more.

2. Keep employees engaged and informed

Ensuring payroll compliance is primarily – but not solely – your responsibility. Your employees have an essential part to play in helping your business stay compliant with current legislation.

For example, they need to follow your company’s expense policy to the letter and keep accurate records of their time and expenses. It’s the kind of administrative stuff that easily slips off people’s radars, so be sure to walk your employees through what’s required of them and provide regular refresher training.

If you don’t have a comprehensive policy to guide your employees on all practices that affect their pay, now is the time to put one together. Not only will it help keep your company compliant, but it will also provide a helpful resource for employees who wish to know more about additions to and deductions from their earnings.

Remember to double-check your payroll data before you submit your year-end tax return. Ensure your employees’ full names are spelt correctly and that their ID or passport numbers and mailing addresses are correct. It’s easy for typos to creep in when employee information is inputted manually, which can cause all sorts of problems down the line.

3. Adopt a self-service platform for employees

Checking and double-checking employee data is time-consuming, so why not set up a self-service platform for employees to do it themselves?

It’s a fully transparent and easy way to ensure that all your personnel data is accurate. Employees also benefit as they’re able to track their personal information, including sick leave, holiday requests, and timesheets, from anywhere at any time. You can also upload important company information to the self-service platform, such as policy updates to keep your employees up to speed.

Self-service HR and payroll is an all-round winner because it saves you and your payroll team time to focus on other crucial tasks. In fact, 56% of respondents say that digitising payroll and HR data could save them a ton of valuable time and effort.

4. Implement automation

Cloud-based, automated HR and payroll software is a game-changer. Built from the ground up for specific business needs, it eliminates errors from manual data entry, syncs with local legislation, and updates in line with changing regulatory requirements.

In addition to helping your business stay up to date on legislation, automation also:

• Keeps your business prepared for an audit,
• Classifies employees and contractors correctly, and
• Ensures on-time payments.

All the above impacts your tax return, which makes them priority areas to address. Simply put, bolstering your business with automated software will make it even harder to make mistakes with payroll that could affect your compliance.

Upping the ante even more, a whopping 96% of respondents agree that automated payroll and HR systems should be integrated with accounting software to enhance accuracy and compliance even further.

Don’t wait for TYE

There is no need to spend the beginning of every year stressed to the hilt as you wade through your employee and payroll data to submit on time. The goal for any SME owner is to prep for tax year-end all year-round. Enlisting the support of cloud-based HR and payroll software does this automatically and enables seamless integration with your accounting systems.

With year-end tax tasks simplified and taken care of, you can lift your head and focus on the things that aren’t so simple – like the human aspect. It takes time and effort to attract, engage, and retain the best talent to drive your business’s growth.

One thing’s for sure: a company that doesn’t make mistakes with employee data or fall short on legislative compliance is an attractive place to work.

Visit tax.sage.co.za for the latest expert advice, tips and support to help you stay ahead this Tax Year-End.

As a small business owner, employing your first employee can be both an exciting and daunting experience. Part of figuring everything out as a small business owner is understanding the employment law and compliance perspective, which could be enough to cause one to reconsider the whole thing.

However, growing your team is a vital part of growing a successful business, so here is employment law 101 that every small business owner needs to keep in mind.

1. Employment Contracts:

While an employment contract is not necessary to effective employment, having one in place is always a good idea and a legal requirement. Section 29 of the Basic Conditions of Employment Act (BCEA) sets out what must be included in an employment contract.

Outside of a contract of employment or in situations where employment is in dispute, Section 200A of the Labour Relations Acts (LRA) sets out the conditions under which one is presumed to be an employee. Those condition are as follows:

1. “the manner in which the person works is subject to the control or direction of another person;
2. the person’s hours of work are subject to the control or direction of another person;
3. in the case of a person who works for an organisation, the person forms part of that organisation;
4. the person has worked out for that person for an average of at least 40 hours per month over the last three months;
5. the person is economically dependent on the other person for whom he or she works or renders services;
6. the person is provided with tools of trade or work equipment by the other person; or
7. the person only works for or renders services to one person.”

PS: this means that independent contract might not be an independent contractor after all. It is important to note that the above (s200A of LRA) is not automatically applicable to those that earn above the earning threshold (#GoogleIt).

2. Understand your rights and obligations as an employer as well as those of your employees:

Section 23 of the Constitution of the Republic of South Africa states the following:

1. Everyone, both employee and employers, have the right to fair labour practice
2. Every employee has the right
   (a) to form and join a trade union;
   (b) to participate in the activities and programmes of a trade union; and
   (c) to strikeEvery employee is obligated:
   (a) to report to duty and render a complete service
   (b) render service in good faith
   (c) to be respectful and obey lawful instructions
3. Every employer has the right:
   (a) to form and join an employer’s organisation; and
   (b) to participate in the activities and programmes of an employer’s organisationEvery employer is obligated:
   (a) to remunerate employees (this include having all UIF and PAYE status in order)
   (b) to provide safe working environment/conditions (this includes mental health)
   (c) to treat employees with dignity and respect

As if all of the above isn’t complicated enough for small business owners to navigate, there is another accepts of common law that all small business owners should be aware of when it comes to employing people, and this is vicarious liability.

See also: Unpacking Employment Law For Employers

Simply put vicarious liability is where someone (the employer) is held responsible for the actions and omission of another (the employee) committed during the course and scope of their employment.

A good example of this would be an employee of a laundry service while carrying out their duties burns a client’s shirt while ironing it, in such a case the employer would be vicariously liable to the client for any loss or damages suffered (silly example but you get the drift).

Therefore, it is important for small business owners to understand such nuances and ensure that they have the necessary cover to mitigate for vicarious liability.

Well, that brings us to the end of today’s lesson. Growing your team as a small business owner is one of many rewarding challenges one faces in the pursuit of growth and success, however equipping yourself with the right knowledge, systems and practices makes such challenges a little less daunting and a little more exciting.

About the author: Kulani Shiluvane is the founder and chief solutionist at Shiluvah. She is an accomplished business development professional with a post-graduation qualification in Management and Labour Law from the University of the Witwatersrand and the University of Johannesburg respectively.

She is a skilled operation, logistic and strategic professional with experience in strategic planning and implementation, stakeholder engagement, human resources and public relations. Kulani severed as Chief Operations Officer in a medium-size organisation in Johannesburg for 4 years and in 2017 she established Shiluvah.

Shiluvah is a Human Resource and Labour Law Consultancy which offers dynamic, customised and integrated people management solutions. Kulani has a keen interest and experience in human resource, conflict resolution, problem solving and organisational relations. Accredited as a mediator by Conflict Dynamics in 2018, her mediation interest areas are: commercial disputes, workplace, management and labour related matters.

See Also: What is Business Law?