Please find below, our newsletter for this period.
Provisional tax season
Our tax department is currently busy with non-February year end provisional tax returns. February Provisionals will be implemented during July and into August, with a deadline of end of August. Jacqueline and Gert will be contacting you shortly to begin the process.
If you could respond timeously to requests from our staff for documents and authorisation to file these tax returns, as, as usual, this is a high-pressure period.
Note, that there is some COVID-19 relief for provisional tax payments, with regards to deferring some of the first payment to later in the year. Jacqueline will advise closer to the time
Tax season 2020
Note, that the 2020 annual tax season, has been pushed back to September 2020. More information on this later in the year.
Capital Gains Tax
With the ever-increasing value of residential properties, you are reminded that properties sold for greater than R2m, will be subject to CGT on that portion of profit, greater than R2m.
With this in mind, we recommend you implement the following:
- Declare the sale of a property in your tax return,
- Keep records of improvements made to the residential property over the life of ownership of that property, in order to increase the base cost of the property.
SARS will disallow any improvements claimed, if not substantiated with documents or bank statements, regardless of when they were incurred.
Employee versus Independent Contractor
We once again remind you of the distinction required between an employee and an independent contractor. This is vital if the IC is claiming deductible expenses against income earned.
See below for information:
TO PAYE OR NOT TO PAYE? THE EMPLOYEE VERSUS INDEPENDENT CONTRACTOR SAGA
A South African employer is legally required to deduct employees’ tax from remuneration paid to its employees – with the effect that such employee will pay income tax as he derives income. In determining whether an employer is required to deduct employees’ tax, it should therefore be determined whether “remuneration” is being paid to “an employee”.
What is an “employee”?
An “employee” is broadly defined to include, inter alia, any person deriving remuneration. Specifically included in the definition of an employee is a “personal service provider”.
A “personal service provider” is defined as a company or trust where a connected person in relation to such company or trust renders personal services and:
- such connected person would be regarded as an employee of the client if he/she rendered the service directly to the client; or
- the services are rendered mainly at the premises of the client and subject to the control of the client; or
- if less than 80% of the income of such company or trust is derived from a single client.
Should, however, the company or trust employ 3 or more third party employees on a full-time basis, the company or trust would not constitute a personal service provider.
What is “remuneration”?
“Remuneration” is very broadly defined as any amount of income paid or payable to any person by way of salary, leave pay, overtime, bonus, gratuity, commission etc., whether in cash or otherwise and whether or not for services rendered. The definition of “remuneration” further contains specific inclusions and exclusions.
Remuneration specifically excludes any amount paid in respect of services rendered by any person in the course of any trade carried on by him/her independently.
Accordingly, payments made to persons carrying on an independent trade would not constitute remuneration and accordingly, no employees’ tax is required to be deducted from such payments.
When is a person regarded as carrying on independent trade?
- NOT regarded as carrying on an independent trade if services are rendered at the premises of the client and is subject to the client’s control.
- WILL be regarded as carrying on an independent trade if employ three or more third party employees on a full-time basis.
If the above statutory tests are not conclusive, consideration should be had to the common law dominant impression test in determining whether an independent trade is carried on. The main aim of such considerations is to distinguish between the acquisition of a worker’s productive capacity (in the event of an employee) or a result (in the event of an independent contractor).
SARS’s Interpretation Note 17 (Issue 4) of 14 March 2018 sets out in detail the various considerations forming part of the common law dominant impression test. The table below sets out some of the indicative considerations in this regard:
The 2020 Annual Financial Statements (AFS) season is now in full swing and Steve and Sharon complete these statements and distribute for your review and sign off.
Note that the AFS is used not only for filing company tax returns, but with CIPC as part of the annual return filing.
Other stakeholders, such as Banks and Shareholders are key users of these statements.
Remember, to ensure that your Close Corporation or Company, has a compliant Fixed Asset Register, as we find SARS is requesting this more frequently, as they focus on wear and tear (ie tax depreciation) allowances.
Operating Cash – After adjusting for cash tied up in Working Capital, the resultant figure will determine the cash generated from operations – a key indicator of the business’s pricing and cost control efficiency (or lack thereof).
Review this figure in your AFS, – if negative (in brackets) this is a red flag that the company cannot generate adequate cash to cover operating activities.
Download article on 25 cash flow tips in a crisis.
Our webinar training sessions continue to be extremely popular, as are our self-study online courses.
Remember, being aware of your business’s financial position and performance, is your responsibility – it’s your livelihood and future after all.
Estate planning and trusts
We remind all our clients of this offering – we have a highly experience lawyer working with us backed up with solid infrastructure.
Estate planning is vital for the protection of your wealth at time of your death, as the cost of estate management at time of death can be large. If you have assets that you or your trust own, you need to contact us asap.
Please contact us for more information and ensure you have plans in place. Death can come very quickly and unexpectedly
Ensure you have a valid will in place – now!
Gavin Beretta – Finsolve Group