VAT Increase – Will this affect your Business?

VAT in South Africa increased by 1% at the start of April 2018.

The much complained about VAT increase from 14% to 15% has now been in effect for one month. Have you noticed an impact on your business? Will there be an impact on your business? Not sure? Continue reading, we’ve listed some points for you to consider.

What is VAT?

Just to recap, VAT is as the name suggests – a Tax on the Value that you (business) adds to a product before selling it to a customer!

Therefore, if you’ve added no value to the product no VAT is charged.

VAT’s effect on Business?

In theory, VAT should not influence business as it’s a non-impacting addition to what we are already doing.

In practice however, VAT has several detrimental effects on business, namely:

• Cashflow – as VAT is most often calculated on an invoice basis, the moment clients do not pay within 30 days of invoice the majority of SME’s experience a cashflow crunch. How do you overcome this?

• • Clients can be incentivised to pay sooner
  • Suppliers can be paid later
  • Margins can be increased to cover the shortfall

• Input costs – as a result of market forces many input costs will be increased. This could have an impact on your business if you’re unable to pass these costs onto your clients.
• Salaries – Consumers bear the brunt of VAT increases as they have no option to offset their effect, this often leads to demands for higher salaries. The higher salaries, ultimately has an impact on the selling prices of goods and services.

As you can see the VAT increase affects business in many ways. Make the time to sit with your accountant / business advisor to understand how your business is being affected and put the necessary steps in place to minimise its effect.

At Phezulu VBO we do more than just assist clients with Business Structuring, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558.

2018 Budget Speech

Entrepreneurs, we get it, you’re busy, so here’s the 2018 Budget Speech in a nutshell

 

The Finance Minister’s speech included the following:

• The budget deficit is projected to decrease from 4.3% in 2017/18 to 3.5% in 2020/21
• It is expected that gross debt will rise to 56.0% of GDP in 2020/21
• This year’s proposed tax measures will raise an additional R36 billion in 2018/19

What will you be paying more for?
• VAT is for the first time in our democratic history being increased: from 14% to 15%, effective 1 April 2018
• To promote eco-friendly choices, the plastic bag levy, car emissions tax and the levy on incandescent light bulbs will be increased
• Sugary beverages will now be taxed under a new health promotion levy from 1 April 2018
• The fuel levy has been increased by 52 cents/litre
• Alcohol and tobacco excise duties will be increased between 6-10%
• Estates worth more than R30 million will now be taxed at 25%
• Any donation in excess of R30 million in a tax year will be taxed at 25%

How will Government be providing financial support?
• Social development spend has been increased the most, by 9.2% over the MTEF
• Social grants will see R528.4 billion being spent over the MTEF
• The child support grant will increase from the baseline of R380 to R400 on 1 April and then to R410 on 1 October 2018
• The old age, disability and care dependency grants increase to R1 690 on 1 April and to R1 700 on 1 October 2018
• Higher education and training is receiving R324 billion in total over the MTEF
• Basic education, including infrastructure, learner and teacher support receives R792 billion
• For various purposes, including helping with the challenges of the drought, a provisional budget of R6 billion has been set aside. This includes short term disaster relief grants to the value of R473 million in 2018/19
• The HIV/AIDS and TB conditional grant receives R66.4 billion over the MTEF
• Subsidised public housing receives R123.3 billion over the MTEF

2017 TAX SEASON – IS OPEN!!

The 2017 Filing season has started. 1 July 2017 officially kicked it off for Efiling clients with manual filers joining the party on 3 July 2017. Despite the loathing many taxpayers have for SARS, many of them look forward to this time of year as they often get a little back from the fiscus.

So, what are the official dates for the 2017 Tax Season?

Channel	​Deadline	Type of Taxpayer​​
Manual – post or at SARS branch drop boxes​	​22 September 2017	​Non-provisional and provisional
eFiling or electronic filing at SARS branch ​	​24 November 2017	​Non-provisional
eFiling​	​31 January 2018	​Provisional

What information is required to complete your 2017 return?

For those people who confuse the calendar and financial year, please make sure that the Income Tax Return information you are working with is for the tax year 1 March 2016 to 28 February 2017.

• Salary, Pension & Annuities:     IRP 5 certificates or IT 3(a) certificates
• Interest received or accrued (local and/or foreign):           IT3(b) certificates
• Travel Logbook:            Please note that from 2010 you may not claim your mileage if you did not keep a logbook.
• Other South African income:      Rental income, business/freelance income (if IRP5 or IT3 (a) not issued by employer) etc. If married in community of property, the rental- and investment income of your spouse must also be provided, as well as the foreign taxes (if any) paid by your spouse. If the source of this income was as a result of an inheritance specifically excluded from the joint estate, you do not have to provide this information in respect of your spouse.
• Dividends:        Details of local dividends (even though it is tax-free) and foreign dividends received or accrued.
• Lump sums:    Certificates reflecting lump sums received as a result of retirement from a pension fund and/or retirement annuity fund.
• Capital Gains Tax (“CGT”):      CGT became effective from 1 October 2001 and you are requested to provide the market value as at 1 October 2001, as well as selling price and date of sale of any item that qualifies for CGT, e.g. property which is not your primary residence, shares, bonds, Kruger Rands etc.
• Expenses incurred in the production of income:     Proof of all expenses incurred in the production of commission-, rental-, business-, and/or freelance income.
• Medical expenses:     Proof of medical subscriptions (if any) and expenses not recovered from a medical aid. (Note that non-prescribed medicine does not qualify). Proof of all expenses incurred as a result of permanent physical or mental disability, which could not be claimed from a medical aid.
• Home office:    Expenses in respect of an office at home may be claimed, unless a business is run from home.
• Contributions to Retirement Annuity Funds (“RAFs”):       Certificates reflecting contributions to RAFs.
• Donations:     Certificates/receipts reflecting donations (if any), these certificates must be issued in terms of section 18A of the Income Tax Act No. 58 of 1962.
• Retired individuals:    If you retired during the tax year, please provide Forms A and D which can be obtained from your employer/pension fund.
• Bank details:   Details of your bank account, i.e. name of institution, branch code, account number and type of account

At Phezulu we do more than just assist clients prepare for tax season, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information please visit our website http://www.phezulu.net or give us a call on 010 003 8558

Awards (Gifts) from Employers – Are they Taxable?

Awards are often provided by employers to employees for certain acts in performing their day-to-day duties, often as a gesture of appreciation or recognition of outstanding performance.

Types of awards include:

• Performance Awards – awards provided to employees for exceeding certain performance levels
• Long-service Awards – awards provided to employees for being employed for a certain period of time considered as “long-service”
• Bravery Awards – awards provided to employees for a particular act of bravery

While awards are usually not related to specific services, they are still regarded as remuneration as defined in Schedule Four of the Act (“Remuneration is as any amount of income which is paid or is payable to any person by way of any salary, leave pay, wage, overtime pay, bonus, gratuity, commission, fee, emolument, pension, superannuation allowance, retiring allowance or stipend, whether in cash or otherwise and whether or not in respect of services rendered” paragraph 1, Schedule Four of the Act).

As such, these awards are subject to employees’ tax and the employer is required to withhold employees’ tax on payment of such awards.

The taxable value placed on awards depends on the type of award:

• In the case of a cash award, the value of the award will be the full cash value and employees’ tax should be withheld on this full value.
• In the case of a non-cash award, the value of the taxable benefit will be the open market value of the benefit received by the employee less any consideration paid by the employee for the asset (i.e. if the employee is awarded a computer with a value of R 14 000.00 and is required to pay R 4 000.00 to the employer in order to receive the award, the taxable benefit shall be R 10 000.00).

The following exceptions apply in calculating the employees’ tax due in the case of a non-cash award:

• Awards for long-service – If the employee is awarded a long-service award, the taxable benefit of the award shall be reduced by the lesser of R 5 000.00 and the value of the benefit. Note that long service in terms of Schedule Seven should at least be an unbroken period of 15 years the first time such award is granted and a 10-year unbroken period thereafter and only applies in the case of non-cash awards.
• Awards for bravery – Bravery awards are treated on a similar basis as long-service awards, however, 15 and 10-year period of unbroken employment does not apply.

Conclusion

Awards given by employers to employee are subject to employees’ tax and employers have a responsibility to withhold employees’ tax on such awards.

At Phezulu VBO we do more than just assist clients with Payroll deductions, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

Compensation for Occupational Injuries and Diseases Act (COIDA) – What is it?

Of all the mandatory registrations that businesses face we have found that COIDA is the one that the majority are either unaware of or are uncertain that it applies to them.

The Compensation for Occupational Injuries and Diseases Act (COIDA) 130 of 1993 clearly sets out the legal requirements for tariffs, compensation and the limitations for claims for workers who are injured, or who contract illnesses and diseases while they’re at work.

Why must your company register with COID? 

It’s a legal requirement that all companies who employ people are registered with COID. Even if you only have one employee, you must register with COID (Section 80.1).

Yes, that means that the law says that you MUST register.

NB: if your company has more than one business, each business’ earnings must be registered separately (Section 80.2). For example, you have a restaurant franchise and a central kitchen, you would need to register these companies separately.

You may however register your companies under a single registration, however you must apply to the Compensation Commissioner in writing, who will give you written permission to do this, if he deems that it complies with the COID Act requirements.

If after registering, your information changes, you have 7 days in which to change your information and notify the Compensation Commissioner of the changes (Section 80.3). For example, you have registered and you have stated that you employ 7 people whose combined salaries/wages is R15 000.00, and after registering, you employ 3 extra people, you now have 7 days to change the number of employees and the salary/wage quota or you will be fined.

If you don’t comply with COIDA, you will be guilty of a criminal offence (Section 80.6).

As all companies are required to submit tax returns for their employees, the commissioner receives this information from SARS (South African Revenue Services) and compares it to the information on your registration form. Where there are discrepancies, the commissioner investigates and uses the outcomes of the investigation to compare your actual employee list and salaries/wages with your registration information.

At Phezulu VBO we do more than just assist clients with COIDA registrations, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

Coming Clean with the Tax Man – What are my options?

Very few business owners we’ve ever met consider the SARS a friend. In fact, given the option, the majority would happily overpay their taxes if it meant that they never heard from the Tax man.

So, if you’re one of the unlucky few who’s tax affairs are not in order, what options are open to you?

If it’s a simple case of non-submissions of Income Tax, PAYE, VAT, forms etc. for a dormant business, then hurry down to the SARS and submit the required NIL returns and be done with it. If you don’t want to wait in the very long queues, then pay a professional to do this for you.  

Failure to submit will unfortunately still lead to a summons as this is the only way the SARS is able to compel you to adhere to the law.

If, however your non-submissions or inaccurate submissions are as a result of monies owed to the fiscus (SARS), then the route to redemption is a little more complicated.

Traditionally those fearing prosecution, would submit amended returns showing their full exposure to the SARS and then fall on their mercy or the mercy of the courts to avoid very stiff penalties and or prosecution.

Fortunately, in recent years the SARS has proven itself a friend to business by initially introducing a Voluntary Disclosure Programme and now more recently a Special Voluntary Disclosure Programme.

So, what’s the difference, I hear you asking? 

Well essentially:

 

Our experience has shown that just like snowflakes, each tax payers circumstances are unique, therefore do not attempt your application as a DIY project, rather consult a professional.

At Phezulu VBO we do more than just assist clients with tax planning, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

BUDGET 2017! – Has it done enough to help Small Business?

Only the most optimistic among us would declare Budget 2017 a Small Business friendly budget!

There are however those who make the point that it could have been worse, so maybe we should celebrate none the less.

So, what are the positives?

• VAT as many speculated, did not increase.
• Company Taxes remained the same
• R3,9 billion allocated for SMME’s and Cooperatives over the next 3 years

The negatives?

• Limited bracket creep to take into account inflation
• Dividend withholding tax increased to 20%
• New super Tax bracket of 40% for those earning more than R1,5 million per annum
• 30c per litre increase in Fuel levy
• 9c per litre increase in Road Accident Fund levy

Despite the pro small business leaning of the budget speech, the clear facts are that business ownership for all entrepreneurs is going to carry more “penalties” than many might think the risks warrant!

So how can these penalties be mitigated? The best way, is to ensure your business qualifies as a small business corporation (SBC) as this still allows for a little breathing room from the new tax increases.

How, you may ask?

The table below illustrates the different outcomes on R1,5 million profit and shows that being an SBC is clearly the best option.

Income Type	PAYE	SBC Tax	Co Tax	Dividend Tax	Total Paid
All Salary	R533 625	0	0	0	R533 625
SBC Mix Sal / Tax / Div.	R308 124	R59 098	0	R98 180	R465 402
Co. Mix Sal / Tax / Div.	R308 124	0	R154 000	R79 200	R541 324
SBC All Dividend	0	R59 098	R266 000	R234 980	R560 078
Co. All Dividend	0	0	R420 000	R216 000	R636 000

At Phezulu VBO we do more than just assist clients with tax planning, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

Raising Funds! – Who pays out the Fastest?

Unless you’re one of the fortunate few entrepreneurs who started saving very young or were born into a healthy trust fund, sooner or later you’re going to need to raise funds to begin a business or to cash flow yourself out of a tight spot.

In this Blog we’ll look at some of the more common types of funding available to entrepreneurs and what the estimated pay out timelines look like?

The types of funds listed below are the more common ones generally available to entrepreneurs:

• Own Funds – This is what funders call “skin in the game”. You backing your own venture, often says a lot about the faith you have in its potential. These funds are immediately available, but limited to what you can scrape from your bond or credit card.

 

• Friends/Fools/ Family – This is generally the easiest and quickest form of funding to raise. The repayment periods are the most generous and interest is generally waivered. The downside however is it’s often limited to small sums of cash.

 

• Invoice/Debtor Factoring – Cash Flow is generally the biggest issue facing SME’s, fortunately there are companies around that will advance you money on the strength of your debtor’s book and then only expect payment when these debtors settle their invoice. The set-up process is simple and funds are generally available within 48 hours.

 

• Bank Overdraft – If your business account is in good standing with your bank getting approval for an overdraft should be a pretty painless exercise. The good news is it’s often available within 48 hours, the down side is it’s often limited to a percentage of the funds that pass through your business account.

 

• Bank Loan – Strangely enough, after own or family/ friend’s funds, approaching banks is often the next stop for most entrepreneurs. Accessing these funds generally takes a lot longer to approve as there are several criteria that banks would like you to meet. The old adage of “prove you don’t need our money, before we lend to you” still seems to apply!

 

• Governments Grants – Luckily there are several grant schemes available, the negatives are that the application process is often lengthy and generally requires that you contribute some form of funds in order to access the grant.

 

• Angel Funds – Still in it’s infancy in South Africa, but if you’re pitching the right product, you may get lucky! Timelines to funding vary and access is often by invitation only.

 

• Venture Capital – Although a well-known form of funding, you definitely need a winning product/concept before they will part with their time and money. If selected though, we warned the process is not a quick one as they will want to satisfy themselves that they have planned for every negative eventuality.

So, there you have it, as you can see there are several forms of funding entrepreneurs can access regardless of the stage their business is at. The trick though is to have all your information ready at a moment’s notice, because so often it is the entrepreneurs lack of preparation that stymies 90% of funding applications regardless of the source.

At Phezulu VBO we do more than just assist clients with raising funding, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

Financial Year End – You and your Business!

So, in case you weren’t aware of it, 28 February signifies the end of the financial year for all individuals, trusts and most companies.

Ever wondered why the Financial year end is so close to Christmas? It’s the SARS’s way of extending the season of giving! In their minds preferably from you to them, rather than the other way around J

Now, with this very important date rapidly approaching, what should you be aware of to ensure the “season of giving” is skewed in your favour?

Individuals

 

• Log Book – If you get a travel allowance make sure your logbook is up to date by recording your closing kilometres for the year on 28 February.
• Retirement Annuity – Is there an option for you to make a “top up” payment?
• Donations – Are your deductions tax deductible? If they’re made to Section 18A organisations they are.
• Section 12J Investment – This is a new one, but any investments into a S12J company are 100% tax deductible.

 

Companies and Trusts

 

• Small Business Corporation – Check if your business qualifies as an SBC and benefit from a sliding scale of tax as well as accelerated depreciation benefits.
• Donations – Are your deductions tax deductible? If they’re made to Section 18A organisations they are.
• Section 12J Investment – This is a new one, but any investments into a S12J company are 100% tax deductible.

 

At Phezulu VBO we do more than just assist clients with planning for their financial year end, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558

The New Year and your Business – What you need to know!

So, the holidays are over – you’re a little heavier, your wallet is a lot lighter. You’re eager to open your business doors and start the year but after last year, you’re a little sceptical about how 2017 might turn out!

Well, the first thing you need to know is:  Worrying will not solve any of your problems!!

If you’d like 2017 to be a kicker of a year then we suggest you concentrate on the following over the next few days:

Cash Flow – At this time of year cash flow is probably the biggest concern of all small businesses. Make a list of your debtors and what they owe and begin calling them – not emailing – but calling them. Let them know you’re counting on their payment to keep providing the great services / products they’ve become accustomed to.

2016 Hangover – No we don’t mean an alcohol hangover, but rather a hangover of incomplete work from 2016! It has the same effect of leaving you uninspired for what lies ahead, so just knuckle down and get it out the way so 2017 can live up to your expectations.

Sales Channel / Deal Flow – The year has barely begun and you’re already worrying where the next sale / deal will come from. That’s a good sign, but you’d be a little less concerned if you had prepared for this at the end of last year. All is not lost though, you still have enough time to rescue the situation.

We always suggest contacting all the clients you’ve done work for over the past year (including prospects, who you quoted but never heard from again) and let them know you are around and ready to amaze them again this year.

This should be a good starting point but listening to your clients’ needs when chatting to them will keep the work coming throughout the rest of the year.

Administration – Or Red Tape as we like to call it! J  Use the next few quieter days, to get on top of your administration. Make a list of expiry / due dates for items like BEE & Tax Clearance certificates, CIPC Annual returns, etc. and put them in your calendar with reminders so you have enough time to action them.

Mentor – Find a mentor who can guide you and hold you to account when you miss targets. Have your accountant help you prepare a budget and management accounts for the coming year and then discuss these with your mentor.

That’s it, follow these 5 essential steps over the next few weeks and your 2017 will definitely get off to a flying start!

At Phezulu VBO we do more than just assist clients with planning for New Year’s, we are your “one stop SME shop”, assisting with everything from Accounting, Business Management, BEE, Consulting, Company Registration to Payroll and Mentoring.

For more information, please visit our website or give us a call on 010 003 8558