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Tax Guide for Small Businesses - At your Service

Tax Guide for Small Businesses 2020/2021 Tax Guide for Small Businesses (2020/2021) i Tax Guide for Small Businesses Preface This Guide is a general Guide dealing with the taxation of Small Businesses such as sole proprietors, partnerships and companies not part of large groups. Some of the discussions in this Guide could, however, be applicable to any type of taxpayer. The aim is to discuss the typical taxation issues of an average business trading in South Africa. This Guide is not an official publication as defined in section 1 of the Tax Administration Act 28 of 2011 and accordingly does not create a practice generally prevailing under section 5 of that Act. It should, therefore, not be used as a legal reference. It is also not a binding general ruling under section 89 of Chapter 7 of the Tax Administration Act. Should an advance tax ruling be required, visit the SARS website for details of the application process.

Tax Guide for Small Businesses (2020/2021) i Tax Guide for Small Businesses . Preface This guide is a general guide dealing with the taxation of small businesses such as sole ... 10 March 2017 . Date of 2016/2017 issue : 8 November 2017 . Date of 2017/2018 issue : 30 January 2019 .

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Transcription of Tax Guide for Small Businesses - At your Service

1 Tax Guide for Small Businesses 2020/2021 Tax Guide for Small Businesses (2020/2021) i Tax Guide for Small Businesses Preface This Guide is a general Guide dealing with the taxation of Small Businesses such as sole proprietors, partnerships and companies not part of large groups. Some of the discussions in this Guide could, however, be applicable to any type of taxpayer. The aim is to discuss the typical taxation issues of an average business trading in South Africa. This Guide is not an official publication as defined in section 1 of the Tax Administration Act 28 of 2011 and accordingly does not create a practice generally prevailing under section 5 of that Act. It should, therefore, not be used as a legal reference. It is also not a binding general ruling under section 89 of Chapter 7 of the Tax Administration Act. Should an advance tax ruling be required, visit the SARS website for details of the application process.

2 The information in this Guide concerning income tax relates to natural persons for the 2021 year of assessment commencing on 1 March 2020 and ending on 28 February 2021; trusts in respect of years of assessment commencing and ending during the period commencing on 1 March 2020 and ending on 28 February 2021; and companies and CCs with years of assessment ending during the 12-month period ending on 31 March 2021. While care has been taken in the preparation of this document to ensure that the information and the rates published are correct at the date of publication, this document must be read with the relevant legislation pertaining to that rate, applicable to the tax, customs or excise concerned. For income tax purposes, this Guide has been updated to include the Tax Administration Laws Amendment Act 24 of 2020, the Taxation Laws Amendment Act 23 of 2020 and the Rates and Monetary Amounts and Amendment of Revenue Laws Act 22 of 2020 as well as the Budget Review of 2020.

3 For indirect tax purposes, all information has been updated to include amendments up to the date of the publication of this Guide . Should you require additional information concerning any aspect of taxation, you may visit the SARS website at ; visit your nearest SARS branch, preferably after making an appointment via the SARS website; have a virtual consultation with a SARS consultant by making an appointment via the SARS website; contact the SARS National Contact Centre if calling locally, on 0800 00 7277; or if calling from abroad, on +27 11 602 2093 (only between 8am and 4:30pm South African time); or contact your own tax advisor or tax practitioner. Tax Guide for Small Businesses (2020/2021) ii All guides, interpretation notes, brochures, forms, returns, tables and Government Notices referred to in this Guide are available on the SARS website. Unless indicated otherwise, the latest issue of these documents should be consulted.

4 Comments or suggestions on this Guide may be emailed to Leveraged Legal Products SOUTH AFRICAN REVENUE Service Date of 2009 issue : November 2008 Date of 2010 issue : December 2009 Date of 2010/2011 issue : February 2011 Date of 2012/2013 issue : November 2013 Date of 2013/2014 issue : 24 March 2014 Date of 2014/2015 issue : 27 March 2015 Date of 2015/2016 issue : 10 March 2017 Date of 2016/ 2017 issue : 8 November 2017 Date of 2017 /2018 issue : 30 January 2019 Date of 2018/2019 issue : 7 August 2019 Date of 2019/2020 issue : 21 August 2020 Date of 2020/2021 issue : 10 November 2021 Tax Guide for Small Businesses 2020/2021 iii Contents Preface .. i Glossary .. 1 1. Overview .. 2 2. General characteristics of different types of business .. 2 Introduction .. 2 Sole proprietorship .. 2 Partnership .. 3 Close corporation .. 4 Private company .. 4 Co-operative.

5 5 Other types of business entities .. 5 (a) Small business corporation .. 5 (b) Micro business (turnover tax) .. 5 (c) Personal Service 5 (d) Labour broker .. 6 (e) Independent contractor .. 7 (f) Small , medium and micro enterprises .. 8 3. A business and the South African Revenue Service .. 8 Introduction .. 8 Income tax .. 8 8 Registration .. 8 Change of address .. 8 Year of assessment and filing of income tax returns .. 9 SARS eFiling and SARS MobiApp .. 9 Payments at banks .. 11 Electronic funds transfer .. 11 Provisional tax (the Fourth Schedule) .. 11 Employees tax (Pay-As-You-Earn) (the Fourth Schedule) .. 11 How to determine net profit or loss of a business .. 12 Comparative profit or loss statements .. 14 Connection between net profit and taxable income .. 14 Determination of taxable income or assessed loss .. 14 General deduction formula .. 15 Tax rates and rebates.

6 16 (a) Taxable income (excluding any retirement fund lump sum benefit, retirement fund lump sum withdrawal benefit or severance benefit) of any natural person, deceased estate, insolvent estate or special trust .. 16 (b) Taxable income of trusts (other than special trusts or public benefit organisations, recreational clubs or Small business funding entities that are trusts) .. 19 (c) Taxable income of companies .. 19 Special allowances or deductions and recoupment .. 20 (a) Machinery, plant, implements, utensils and articles [section 11(e)] .. 21 (b) Inventions, patents, designs, trade marks, copyrights and knowledge [sections 11(gA), 11(gB) and 11(gC)] .. 21 (c) Expenditure incurred to obtain a licence [section 11(gD)] .. 23 (d) Scientific or technological research and development (sections 11D, 12C and 13) .. 23 (e) Machinery, plant, implements, utensils or articles or improvements thereto used in farming or production of renewable energy (section 12B).

7 24 (f) Aircraft and ships (section 12C) .. 25 (g) Manufacturing assets (section 12C) .. 26 (h) Certain pipelines, transmission lines and railway lines (section 12D) .. 27 (i) Rolling stock (trains and carriages) (section 12DA) .. 28 (j) Airport assets (section 12F) .. 28 (k) Port assets (section 12F) .. 28 (l) Additional deduction for learnership agreements (section 12H) .. 29 (m) Allowance for land conservation of nature reserves or national parks (section 37D) .. 30 Tax Guide for Small Businesses (2020/2021) iv (n) Additional investment and training allowances for industrial policy projects (section 12I) 31 (o) Deduction for expenditure incurred in exchange for issue of venture capital company shares (section 12J) .. 32 (p) Deduction in respect of energy-efficiency savings (section 12L) .. 32 (q) Deduction of medical lump sum payments (section 12M) .. 32 (r) Deduction in respect of improvements not owned by taxpayers (section 12N).

8 33 (s) Deduction in respect of improvements on property in respect of which government holds a right of use or occupation (section 12NA) .. 33 (t) Industrial buildings (buildings used in a process of manufacture or a process of a similar nature) (section 13) .. 34 (u) Buildings used by hotelkeepers (section 13bis) .. 34 (v) Urban development zones (section 13quat) .. 35 (w) Commercial buildings (section 13quin) .. 35 (x) Certain residential units (section 13sex) .. 36 (y) Deduction for sale of low-cost residential units on loan account (section 13sept) .. 36 (z) Residential buildings (section 13ter) .. 37 (aa) Environmental expenditure (sections 37A and 37B) .. 37 (ab) Environmental conservation and maintenance expenditure (section 37C) .. 39 Tax relief measures for Small business corporations (section 12E) .. 39 Tax relief measures for micro Businesses (turnover tax) (sections 48 to 48C and the Sixth Schedule).

9 41 Tax relief measures for qualifying companies within a special economic zone (sections 12R and 12S).. 41 Deduction of home office expenditure [section 11(a) read with section 23(b)] .. 42 Deductions in respect of expenditure and losses incurred before commencement of trade (section 11A) .. 42 Ring-fencing of assessed losses of certain trades (section 20A) .. 43 Prohibited 44 (a) Domestic or private expenses [section 23(a) and (b)] .. 44 (b) Bribes, fines or penalties [section 23(o)(i) and (ii)] .. 44 (c) Other prohibited deductions [section 23(d), (e) and (g)] .. 44 Film owners (section 12O) .. 44 Exemption of amounts received or accrued in respect of government grants (section 12P) .. 45 Exemption of income in respect of ships used in international shipping (section 12Q) .. 46 Capital gains tax .. 47 (a) Introduction .. 47 (b) Registration .. 47 (c) Rates .. 47 (d) Capital gains and capital losses.

10 48 (e) Asset .. 48 (f) Disposal .. 48 (g) Proceeds .. 49 (h) Base cost .. 49 (i) Exclusions .. 50 (j) Small Businesses (paragraph 57 of the Eighth Schedule) .. 50 Withholding of amounts from payments to non-resident sellers on the sale of immovable property (section 35A) .. 51 Withholding tax on royalties (sections 49A to 49H) .. 51 Taxation of foreign entertainers and sportspersons (sections 47A to 47K) .. 52 Withholding tax on interest (sections 50A to 50H) .. 53 Donations tax (sections 54 to 64) .. 53 Dividends tax (sections 64D to 64N) .. 54 Value-added tax .. 54 Introduction .. 54 Tax rates .. 54 Collection and payment of VAT .. 55 Application of value-added tax to supplies and imports .. 55 Zero-rated supplies .. 56 Exempt supplies .. 57 Registration .. 58 (a) Compulsory registration .. 58 Tax Guide for Small Businesses (2020/2021) v (b) Voluntary registration .. 58 Refusal of voluntary registration.


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