tax-deductible

Tax deductible expenses for businesses in South Africa

Do you know the saying that says “money makes the world go round”? Well, so does tax – it makes the country go round. We have a couple of blogs that explain the tax system in South Africa, which we will link down below for you. In this blog, specifically, we will share with you various tax-deductible expenses in your business to help you lower your taxes. 

For context’s sake, TAX DEDUCTIBLE is an item you can subtract from your taxable income to lower the amount of taxes you owe. Let’s suppose you earned R100,000 during the tax year and spent R20,000 on company items. In this example, your taxable business income would be R80,000 instead of R100,000, lowering your tax bill for the year.

Day-to-day business expenses

These are general day-to-day office or business expenses, they are incurred as part of running your business, these include:

  • Employee costs and administration costs
  • Business/office rental costs
  • Office supplies
  • Phone costs
  • Travel and transport, including business vehicle costs
  • Uniforms (if needed)
  • Wholesale purchase costs for goods resold
  • Financial charges (such as bank fees), utilities
  • Legal fees
  • Insurance fees
  • Marketing, advertising, and promotion costs

Wear–and tear (in respect of certain assets)

Also known as depreciation, a wear and tear allowance may be deducted on movable assets used for the purpose of trade. There are no statutory provisions relating to rates of wear and tear, but the SARS has published a table of periods over which the assets may be written off. The rates of wear and tear, based on the cash cost, are calculated either according to the straight-line or diminishing-balance method.

Donations (to approved bodies)

Donations to certain charitable organizations approved as public benefit organizations are tax-deductible, up to a maximum of 10% of taxable income.

Bad debts

Bad debts are tax-deductible if they are owed at the end of the assessment year and they relate to an amount that has been included in the taxpayer’s taxable income in any tax year. Regarding questionable debts, a tax deduction is also offered.

If the loan was made as part of a money-lending business, any bad debts that result from it are deductible.

Education expenses

You can deduct the cost of schooling for yourself or your employees that are directly related to running your firm as a business expense.

Net operating losses

Any losses incurred in the same business in previous years can be carried forward as a tax deduction.

Bonus:

According to SARS, here are some deductions your employees can save from: 

Tax-deductible expenses for Salaries:

Pension fund contributions

Retirement annuity fund contributions

Provident fund contributions (only from 1 March 2016)

Legal costs – under certain qualifying circumstances

Repayable amounts – amount received for services rendered as refunded by that person

If you need any help with TAXES, don’t hesitate to get in touch with us:

Call: 0615238833Email: info@accasesolutions.co.za

Important things to know about tax in South Africa

Understanding the South African taxation system

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:

  1. Pay As You Earn (PAYE)
  2. Personal Income Tax
  3. Provisional Tax
  4. Capital Gains Tax
  5. 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.