We have touched on Public Benefits Organizations not so long ago on one of our #FunFactsWednedays video, let us to continue this chat.
What is an NPO?
We cannot assume you know, let’s get to understand what an NPO is. An NPO is a Nonprofit Organisation that plays a significant role in society, they take responsibility of the social and development needs of the country.
How to get started:
Just like any other business/organisation, there must be intent or purpose of starting. Start here:
1️⃣ Define your goal – before you could even register, you just at least know what your NPO will stand for. Knowing your WHY is important, it will help you navigate things more especially in cases where you need to go back to the drawing board. What exactly do you hope to achieve once you start the organization? Read more: What exactly do you hope to achieve once you start the organization?
2️⃣ Choose your board of Directors – selecting management of the NPO is probably the most fundamental step. Bring in like-minded people on board, it’s even better to get people from different industries who could come in with different perspectives during different situations.
3️⃣ Draft your memorandum – this is important as it proves your intention to register the organization as a “not-for-profit” company – followed by information about how the organization would be governed, owned, and other important things to note therein.
About registering your NPO
You can submit your non-profit organisation (NPO) application at your nearest provincial social development office or a local South African Revenue Service (SARS) branch office.
Benefits of registering is that its certificate:
improves your credibility and increases funding opportunities
it allows your organisation to open a bank account
helps your organisation with tax incentives.
The prerequisites of registering is that you must be one of the following:
non-governmental organisation (NGO)
community-based organisation (CBO)
faith-based organisation (FBO).
Do NPOs pay tax?
However these organisations are “nonprofit”, they do not automatically qualify for tax exemption, the organisations that meet the requirements set out in the Income Tax Act, 1962 must apply for this exemption. Only IF the exemption application has been approved by SARS, the organisation will then be registered as a Public Benefit Organisation (PBO) and allocated a unique PBO reference number.
These organisations can issue section 18A certificates – which allow for tax deduction to parties who make donations to such organisations. This becomes an attraction to donors because they get to enjoy these tax benefits therein by making donations to your organisation.
As a member of a Public Benefit Company/Organisation, familiarise yourself with the conditions of the section 18A or contact Accase Solutions and we will gladly assist:
The Individual Tax Season is upon us, many of you might have seen us share a lot about this. In this blog, we will not get into any technicalities, but rather share the administration side of things (or so to say).
Why You Need To File For Your Returns
As many like to say when starting a business that it is important for you to identify your WHY, and so it is for us to know WHY is it important to file for your returns.
1️⃣ The first, most general reason is that you are being a good citizen. Remember that if you don’t file, you are committing an offence as per Tax Admin Act, which is punishable by law.
2️⃣ For financing purposes, you need to be up to date with your taxes. When you apply for a home loan or car finance for instance, they will check your tax compliance status (as they do credit checks), it becomes an issue if you are not compliant with the South African Revenue Services (SARS). It communicates a message that you are not a god citizen who pays their dues.
3️⃣ You might have heard some people saying it’s Refund Season (although that is not necessary 100% true), but if you don’t file and SARS actually owes you a refund then you won’t get it due to non compliance.
4️⃣ Regarding your Retirement Fund – if you retire and your taxes are not up to date, it will be an issue for your funds to be released.
Just to mention, you have various opinions available to you, you are not bound to use a tax practitioner (for example) because it does come at a fee. Here are some of the options available to you:
1️⃣ You can use your SARS e-filing.
2️⃣ You can use your SARS Mobi App.
3️⃣ You can make an appointment (via SMS or online) with your nearest SARS branch.
4️⃣ Or you can use a certified tax practitioner: we have pointers on this on our blog previously.
Mistakes: Criminal Offences
In passing, we would like to share these few red flags/little things that gets you in trouble with SARS and are actually criminal offences:
➡️ Not updating your details (emails address, banking details, postal address, etc)
➡️ Not filing for your taxes
➡️ Failure to provide information as and when requested to do so by SARS
… and a few more as listed below:
Moving right along… let’s touch on Auto Assessments.
How it works:
Previously, you would get a certificate from your third party (medical aid, employer, etc), log in and slot in the details manually. But now, SARS is connected to these 3rd parties and sources/uses information from them to pre-populate your returns. When your employer sends you IRP5, it gets loaded. When your medical aid gives you your certificate, it gets loaded. Everything you get from different institutions automatically get loaded into the SARS portal and when you login, you will find all this information in one place.
So before you ACCEPT the auto assessment option, it is your duty to ENSURE that all the details are correct if you are doing it by yourself. If you find that something doesn’t make sense, you can decline the Auto Assessment and “Edit” it. Although you might find that having a tax practitioner makes things a lot easier because we know better and understand some of the technical things you might not understand.
Home (Office) Expenses Deduction
If you follow us on social media, you might have seen us touch on this. So this is relatively new to most taxpayers due to Covid19 and working from home conditions (it has always been available to commission earners), but be in the know that you are able to deduct your home office expenses IF you meet the requirements. Some of the requirements include but not limited to:
✅ Your home office is used SOLELY for production of income.
✅ If the employee’s remuneration is only salary, the duties are mainly performed in this part of the home. It therefore means you perform more than 50% of your duties in your home office.
✅ Where more than 50% of your remuneration consist of commission or variable payments based on your work performance and more than 50% of those duties are performed outside of an office provided by your employer.
NB: Only expenses relating to the premises must be allocated based on floor area (such as rent, interest on bond, cleaning, etc.). Expenses that do not relate to the premises (such as clothing and furniture) do not need to be allocated based on floor area.
If you qualify for a home office deduction; enter the expenses amount calculated next to the source code 4028 (Home Office Expenses) in the “Other Deduction” container on your Income Tax Return.
Medical Aid Rebates (Tax Credit)
How rebates work;
SARS will show you how much tax you’re supposed to pay for the year, and we consider the rebates which reduce your tax liability.
For example; if you’re supposed to pay SARS R20 000 for taxes, and your rebates add up to R10 000, this will mean that from the R20 000 you’re supposed to pay, your tax will go down by R10 000 and you will only owe SARS R10 000.
However, this is not “automatic”. The “refund” comes in when you did not owe SARS anything (sitting at R0), and the medical aid credits come in (as per example)…leaving SARS in a position of owing you money due to the rebates.
Note that these are not refundable credits in a sense that if you did not pay tax for the year but you have a medical aid, you will not automatically get a refund from the rebates. The rebates DECREASE your tax liability. So if you did not pay tax for the year, you are not going to benefit from the medical aid credit.
We hope that this blog enlightened you and answered some of your questions. Feel free to send us a DM on our socials if you need clarity, or drop a comment below.
Picking the right accountant is important for your business’s financial future. An accountant manages your finances and plays a significant role on the direction of your business. So it’s important to do thorough research before you hire an accountant.
An accountant can acts as your business’s financial guide by overseeing and/ or forecasting your company’s financial planning and recordkeeping. They can handle your bookkeeping, as well as help with tax planning and tax returns.
A question that may arise as you read this may be, how do I CHOOSE the right accountant/tax personnel for my business?
Avoid being scammed and learn by reading on 🧠📚🤓👇
If you follow us on our social media, you would remember us touching a bit on this subject. Just to recap, as per Tax Administration Act no. 28 of 2011, every person who provides advice to another with respect to application of tax principles or assistists with any tax matters for a fee must:
✅ Be registered with Recognized Controlling Body that’s registered with SARS.
✅ Be qualified.
✅ Undergo examination to evaluate their ability to competently perform functions of a tax practitioner
✅ Engage in continuing professional development.
1️⃣ Just to save you a bit of time, accountants in South Africa could belong to one of the other main South African accounting bodies:
If your accountant belongs to one of these organizations, then that’s security for you! If there is an issue, you will be able to lodge a complaint with the respective organization.
Accase Solutions is a company of Certified Tax Practitionership with accountants, tax and personnel involved in our tax accounting practice.
With all that said, we would like to top it off with a word that we are registered with the IAC, Institute of Accounting and Commerce as Certified Tax Practitioner since registration of Accase Solutions.
2️⃣ Your accountant needs to keep up with the ever changing technologies and should be using recent and relevant software solutions. Be it Sage Accounting Software, for instance, it’s important that they have the training and experience working with that tool.
3️⃣ What evidence is there to support that you can trust them to manage your finances? Are they even real? Do they have references? What important information is there on their website? You might wanna call and check with the references if need be.
Here are 3 reasons why you can trust Accase Solutions with your taxes and accounting:
✅ We are Certified Tax Practitioners, qualified and registered with Recognized Controlling Body.
✅ We are competent and can perform the functions of a tax practitioner & Accountants.
✅ We are professional.
If you would like to consult with us, reach out to us here:
Taxes? There’s no running away from it! Oh no wait, not only will it catch up with you but the new law says you are liable to jail time! But of course, there are legal ways to reduce taxes. Read on…
Firstly, let’s understand the difference; when you conceal (hide) income or information from tax authorities, it is called Tax Evasion and it’s illegal. Legally reducing your taxable income is called Tax Avoidance.
Deliberately understating sales or overstating expenses is also tax evasion so that’s not a strategy. Tax evasion is considered a punishable criminal offence and can have the consequence of penalties. A good tax avoidance strategy is if you use different ways to pay lower rates when it comes to taxes without breaking the law.
Two (2) guaranteed strategies to legally avoid paying tax:
1️⃣ Hire young job seekers
When you hire youth (18-35), you get ETI(employment tax incentives) for the first 24 months of the person’s employment (subject to terms).
These incentives you can apply towards PAYE that the company has to pay. For example if your total PAYE payable for the month is R3500 (for every employee in the company), but due to that one young person you hired, say you get ETI worth R1000 every month (this figure differs based on terms, as mentioned above. Then the company will only pay PAYE of 2500 instead of 3500).
2️⃣ Donate to a SARS registered charity
According to SARS, donation does not have to take the form of money – it can include a physical asset or something that has a deemed value. Donations tax is calculated at a flat rate of 20% on the value of the donation up to R30 million, and at a rate of 25% on donations over and above R30 million. However, Sars makes provision for a donations tax threshold of R100 000 below which no donations tax is payable. Meaning you can make multiple donations throughout the year on a tax-free basis as long as the cumulative total does not exceed the R100 000 threshold.
Although passing your personal expenses through business has very limited personal advantage (since there’s not much you can buy), but you can’t buy what doesn’t make sense to your business. But you may also take advantage of this. For instance; if you are in a type of business where you use your phone to create content, you can buy the latest iPhone 12 and register it through your business. It makes sense because you do make use of a cellphone to deliver your service at best.
Some key components to remember when planning and avoiding TAX:
To put it in simple terms, tax is a compulsory contribution to state revenue, you must pay South African taxes if you work in South Africa or own a South African business. South Africa uses a residence-based taxation system, non-residents are taxed on South African-sourced income.
Tax money does not only pay for public goods and services, it is also key in the social contract between citizens and the economy. Paying taxes fosters economic growth and development. This is the government’s sources of funding for social programs and public investments.
Understanding taxes: types, filing for returns, refunds from SARS:
There are many different type of taxes. Just to mention a few, some include:
Pay As You Earn (PAYE)
Personal Income Tax
Capital Gains Tax
Value Added Tax
Ordinary taxpayers are those who earn a salary from an employer. Your employer should deduct Pay As You Earn (PAYE) from your salary monthly and pay that to SARS on your behalf.
Here’s an example of how your Net Income will look like after taxes
Why SARS issues refunds:
If for instance you take an unpaid leave at work, the payroll administrator has to adjust your tax therein. If the adjustment is not made, it means that your company deducted more tax as it was based on a wrong annual income. In this case, SARS is liable to give you a refund.
The whole point of filing for tax returns is for SARS too determine all your tax, and if you have paid, they conclude on the right amount. If you have overpaid them, they will definitely give you your money back. Understand that, you only get a refund IF you have overpaid because you filed for returns.
Income Tax VS Provisional tax.
Provisional taxpayers have multiple sources of income such as a salary and commission or are business owners or self-employed including freelancers and contract workers. This means that you need to pay taxes even from other activities like renting out a room in your home (e.g. Airbnb), you will have to declare those to SARS when you do your tax return.
SARS has what we call Provisional tax payment which is paid in advance, every six months. This means you pay provisional tax twice a year before your year ends. Just after the year ends, you compare what you have paid already to what you should have paid, and if underpaid there’s a third provisional payment/top-up due 6 months after year-end.
You could be asking, what happens when you pay SARS more than you should have?
…well, that’s okay because SARS will give you a refund after you’ve submitted your year end returns which is due 12 months after your year ends.
On Value Added Tax (VAT) VAT in South Africa is levied on the consumption of goods and services, the rate is currently 15%. When you bill someone, you charge them VAT and that portion is not your money – you have to pay it to SARS. Businesses must register for VAT in South Africa if their annual turnover exceeds R1 million within a 12-month period. Taxpayers can, however, register on a voluntary basis if their annual supplies exceed R50 000.
When you buy from VAT vendors, you pay the VAT (which belongs to SARS), you’re supposed to get it back on your side because you paid VAT vendors. If for instance you sell items whose VAT element is R1000, and the material is R2000 worth of taxes, it means you paid more VAT than you have charged your customer. You can therefore claim excess herein, and SARS becomes liable to giving you a refund. SARS may request some verifications before paying the refund as the onus to prove such details is on the taxpayer.
A read from Expatica explains that tourists and diplomats visiting South Africa can claim a refund of the VAT they paid on goods purchased in the country. To qualify, you’ll need to be a non-resident foreign passport-holder or a South African passport-holder who is now a permanent resident of another country. You can reclaim VAT when leaving the country by declaring the goods in question to a customs official.
We will, for now close it here. Do reach out to us to learn more about taxes, filing for returns, and compliance.
Accase Solutions | Official
Accase Solutions is a 100% black owned and managed company providing a range of professional accounting & related services to start-ups, small-medium companies, corporates.
We prioritize quality and ensure that all our clients receive consistently best service.
We offer tailor made solutions to companies, at the most cost effective options.