Tax complications got
you dangling by a thread?
Breathe easy with a CA(SA).
The complications that surround tax season are enough to choke the life out of any small business. From the top of your mind, do you know what your Compulsory VAT Registration Threshold is? What exactly does the Income Tax Act mean for a business like yours?
A CA (SA) can fill in the blanks…
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What is internal control?
It is the system of checks and balances to ensure the company’s financial records are accurate and reliable being the result of transactions that are carried out and recorded timeously, accurately and efficiently.
The effectiveness of internal controls is dependent on management’s attitude towards controls.
Indications of a strong internal control environment
- Employees possess the necessary skills and competence required
- Recruitment agencies or HR checks and verify the details in CVs properly.
- Proper inhouse training to staff
- Clear roles and responsibilities
- Separation of duties are in place between functions of initiation, authorization, recording and reviewing.
- Monitoring of staff performance
Strong document controls include:
- Easy to understand designed forms
- Sequentially pre-numbered documents to be able to track, record and reconcile documents.
- Orders and Invoices approved by management
- Payments approved by management
- Physical verification and inspections are performed
- Supporting documents accompany orders and deliveries
- Information on documents comply with VAT requirements
- Documents are filed regularly and in a logical manner
Strong Accounting and Admin controls include:
- Reconciliations between accounting records and source documents – bank accounts, supplier statements, customer statements.
- Overall review done by management.
- Statutory requirements such as VAT returns, Payroll returns, Tax returns reviewed by management.
- Filing are done in a logical manner i.e. monthly file for expenses and income.
Tax Clearance Certificates
Tax Compliance Status
SARS’s system makes it easier for taxpayers to obtain a Tax Clearance Certificate (TCC) and the system allows taxpayers to obtain a Tax Compliance Status PIN which can be used by third parties to verify your compliance status online via SARS eFiling.
To be tax compliant you need to:
- Have all outstanding returns submittedie. VAT returns, PAYE returns, Income Tax Returns
- All moneys owed to SARS must be up to date.
- Be registered for the tax products that you are liable for.
The taxpayer can view their status before requesting a certificate and identify non-compliance.
A Tax Practitioner can view your status on your behalf and assist to remedy any non-compliance.
A Tax Practitioner can request your Tax Compliance Status online via eFiling.
Benefits of using a tax practitioner.
- It enables the business owner to focus on his core activities while all administrative burdens are dealt with by qualified professionals.
- Tax Practitioners have a dedicated Call Center for specific taxpayer related queries.
- Tax Practitioners have dedicated offices for taxpayer related queries and can book appointments with SARS.
- They provide advice about the application of a tax Act.
- Complete or assists with the completion of a tax returns.
- A tax practitioner belongs to a regulatory body.
- Has to comply with SARS requirements for qualifications and experience.
- Participate in continuous professional development programmes to ensure their knowledge stays ups to date.
The Tax Administration Act (2011) has been amended requiring tax practitioners to register with a recognized controlling body, and with SARS.
The list of currently recognized controlling bodies:
• Chartered Institute of Management Accountants (CIMA)
• Chartered Secretaries Southern Africa (CSSA)
• Financial Planning Institute (FPI)
• Institute of Accounting and Commerce (IAC)
• SA Institute of Chartered Accountants (SAICA)
• SA Institute of Professional Accountants (SAIPA)
• SA Institute of Tax Practitioners (SAIT)
• The Association of Chartered Certified Accountants (ACCA)
• Association of Accounting Technicians Southern Africa (AAT(SA))
• Law Society of South Africa
• General Council of the Bar of South Africa, Bar Councils and Societies of Advocates referred to in Section 7 of the Admission of Advocates Act, 1964
• Independent Regulatory Board for Auditors (IRBA)
What are the requirements in order to register as a tax practitioner?
A tax practitioner, must meet the following requirements:
- Belong to or fall under the jurisdiction of a Recognised Controlling Body as referred to in 240A of the Tax Administration Act.
- Have the minimum qualifications and experience set by your Recognised Controlling Body.
- Have no criminal convictions for the offences described in s 240(3) of the Tax Administration Act.
- Participate in continuous professional development programmes set by your Recognised Controlling Body.
Wessels & Associates is a SARS Registered Tax Practitioner.We can submit the following statutory returns via e-filing or other portals on your behalf:
Back to Basics: Accounting for Assets
Assets versus Expenses
When you process payments into your accounting software the decision must be made there and then whether the payment should be categorized as an asset or an expense.
It is therefore important for the processor to understand what the difference is at the input stage to avoid corrections to be made later or to avoid losing track of assets that was purchased.
How to identify an asset
Assets are resources controlled by a business as a result of past events and from which future economic benefits or service potential are expected to flow to the business.
The most obvious difference between an asset and an expense is that that an asset gives you a long-term benefit whereas an expense gives you only a short-term benefit. Assets are usually used over more than 12 months whereas expenses are used up immediately or over a shorter period.
How to identify if it is an expense
If it is not an asset, then it can be classified as an expense.
In Summary: How to identify an Assets
It is a resource
• Something you can use
• You have control over it
• You have access to it
• Has a value
There was a past events
• It was bought or donated or built
There will be future benefits or service potential
• Services to the company or rentedout of income.
Examples of assets:
• Office equipment
• Furniture and fittings
• Motor vehicles
• Plant and equipment
The Cost of an Asset
What should be included in the cost of an asset
Initial Costs is the costs directly attributable to bringing the asset in its location and condition as intended such as:
• Purchase costs
• Import duties
• Non-refundable taxes
• Less any discount or rebates
• Site preparation and development
• Initial delivery and handling costs
• Installation and assembly costs
Later costs incurred
To capitalise the cost incurred later on an existing asset depends on what it the cost will do for the asset:
Cost will be capitalised if :
It extends the useful life of the fixed asset
It increases the economic value of asset
It Increase capacity/production of asset
If it is an upgrade or refurbishment
Expense the later cost if:
It is incurred to restore asset to a working condition for example fixing or maintaining it.
Asset Register is a record of information on each asset that supports the effective financial and technical management of the assets.
The asset register should also facilitate proper financial reporting.
Please contact us on firstname.lastname@example.org to request a free consultation.
What information needs to be on a Tax Invoice
- The word “Tax Invoice” must be clearly indicated.
- The supplier name, Address and VAT no
- Tax Invoice Number
- Date of Invoice
- Recipient name, address and VAT number of recipient (if it is a registered vendor)
- Description of goods
- Price per unit and quantity
- Total Sale value (Indicate the currency)
- VAT Charged (indicate the VAT percentage)
- Total value including VAT
For tax invoices below R5000
- The recipient details need not appear on the invoice
- There are no requirements to show the units or volume
- The description need not be full.
Value Added Tax (VAT)
Who should register for VAT?
Any person that carries on a business may register for VAT.
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.
VAT increased from 14% to 15% from 1 April 2018.
How to register for VAT?
The VAT 101 application for registration must be submitted in person at the SARS branch nearest to the place where your business is situated or carried on.
A registered tax practitioner can register your business for VAT on your behalf.
Registering For Employees’ Tax [Pay-As-You-Earn (PAYE)]
Who should register as an Employer?
An employer must register with the SARS within 21 business days after becoming an employer, unless none of the employees are liable for normal tax.
What is Employees Tax?
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 from remuneration as it is earned by an employee is commonly referred to as PAYE.
Monthly submissions to SARS by Employer
The amounts deducted or withheld must be paid by the employer to SARS on a monthly basis, by completing the Monthly Employer Declaration (EMP201). The EMP201 is a payment declaration in which the employer declares the total payment.
Employer Annual Reconciliations
Employers are required to submit their Employer Annual Reconciliations by 31 May to SARS, confirming or correcting payroll tax amounts which were declared in respect of the tax period.
Who should register for Unemployment Insurance Fund (UIF)
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.