No entrepreneur likes doing tax. It’s complicated and it steals valuable work-time you could’ve spent on growing or running your business.
Unfortunately, all registered companies, in South Africa, need to comply with SARS, or they could face late-submissions penalties.
We called in local tax expert and head of Company Partners’s SARS departments, Jack Liebenberg, to give us the low down on business tax and accounting 2018.
Jack has over 30 years experience with SARS. He also created a new Company Partners Tax and Accounting Service, after realising most local entrepreneurs don’t have the funds to hire a full-time accountant.
This new service, the Tax and Accounting service, allows all South African businesses to pay an affordable monthly fee and get professional Bookkeeping and Tax Returns all year round.
Jack answers the most frequently asked questions South African entrepreneurs have on tax and accounting:
1. What are the most important Tax deadlines for small business owners for 2018?
Jack: Provisional Tax must be submitted during August and February and IT14 returns should be submitted within 12 months from the date on which their financial year ends.
2. For accounting purposes, is it better to declare dividends for yourself or to pay yourself a salary?
Jack: It’s better to draw a salary. Additionally, when your business is profitable – and you’d like to draw some of it, – you can decide whether you want to take an annual bonus, in line with your salary, or declare dividends.
You need to keep in mind that you can only declare a dividend if the company makes a profit.
After the company tax is paid, the dividend can be declared, and the company must pay additional dividend tax of 20% on these dividends.
3. Is it good for entrepreneurs to do their own accounting?
Jack: Entrepreneurs are not accountants. They have a vision and they’re equipped to build and grow a business, but most entrepreneurs don’t have the knowledge or the time to do the accounting as well – and to ensure the legal compliance of the company.
There are professionals who can assist you at a fraction of the price that you would pay if they have to appoint a full time professional.
4. Is accounting really necessary for companies who are just starting out?
Jack: There are various legal requirements, in terms of accounting and tax, that need to be adhered to by companies.
One of the requirements is: there must be sound financial records, and there must be annual financial statements compiled at the end of the financial year.
It is, therefore, advisable to have financial records since the start of the business, to ensure that all income and expenses are recorded.
Additionally, good bookkeeping can also assist your business’s growth.
Accurate financial records ensure that directors can gauge how the company is performing.
The available information can empower you to make informed decisions regarding your business’s strategy and its foreseeable future.