All companies in South Africa must submit income tax returns to the South African Revenue Services (SARS) according to the Income Tax Act of 1962. All companies with a registration number, must also according to the Companies Act 71 of 2008.
You know that SBS will always break it down for you ? Here’s what you need to know when it comes to company returns.
Annual returns
- The Companies Act in South Africa requires all companies with a registration number to submit an annual return to the Companies and Intellectual Property Commission (CIPC)
- Your company’s accountant will disclose that year’s revenue to CIPC and it will calculate the amount you have to pay based on your revenue.
- The return is due within 30 days from the anniversary of the date of registration of the company.
- If your return is late, there is a penalty for late submission
- If you have not submitted returns for a couple of years, this can result in your company being placed in the de-registration queue.
- When your company is placed in this queue, you cannot trade and will need to submit all your annual returns with penalties before the company can be removed from the queue.
- In extreme cases, the company is de-registered and cannot be registered again.
Income tax returns
There are two main types of income tax returns for companies – annual returns and provisional returns
The ITR14 (jargon buster ? aka annual income tax return)
- This return is due for submission 12 months after the year of a company.
- This means, if your company’s year-end is February 2021, then the annual return for that year, will only be due for submission by 28 February 2022.
- Accountants use the company’s financial statements to prepare the return
- The company’s income and expenses are input to arrive at the “income” that is taxable by SARS.
- Depending on a profit or loss, your company will either owe SARS or SARS will owe you.
- The seriously technical stuff usually includes SARS terms and conditions of what they will allow a business to deduct as “business expenses”.
- Remember, the more you can deduct as “business expense”, the lesser profit for tax purposes, the less tax you pay!
- Some important considerations that your accountant can further advise on, depending on your unique business:
- Repairs and maintenance – SARS is very fussy about this one, so make you check with your accountant to see what they will allow as a deduction (business expense)
- Consulting, legal and professional fees
- Donations – only those to s18A organisations are allowed by SARS – The certificates obtained from the public benefit organisation should be kept in case of an audit. Talk with your accountant about this.
- Wear and tear allowances specific to your business/industry
- Asset disposals – may or may not increase/decrease the tax your company must pay
- All said and done, this is the final tax return for your company for a specific tax year.
The IRP6 (jargon buster ? aka provisional income tax return)
The idea is that businesses must pay their taxes during the year and not wait for 12 months to pay them! How considerate, don’t you think? ?
- All companies must submit a “provisional” return every six months.
- For example, companies with a February year-end must submit a return in August and February each year.
- For the August return, the company’s accountant will estimate the amount of profit the business will make for the full twelve months.
- Tax is calculated and then divide by it by two to give the amount due for August.
- In the February return, a forecast of total profit for the full twelve months is done again.
- The tax payable is calculated and the tax already paid in August is deducted to get the amount payable in February.
- When the ITR14 is submitted, the final tax payable is reduced by the tax payments already made in August and February of the previous year.
- Your business will either need to make a top-up payment, receive a refund or not need to make any payment at all.
We’ve put together something on personal tax returns as well, so stay tuned for that!
