Employment Tax Incentive - South Africa

The growing trend in South Africa is of school and university leavers not been able to find jobs in the work place. The lack of skills is often a concern to many business owners. One might question the reality of the skills shortage with the amount of education and additional courses these individuals attend, but the perception is there. 

Once again the draft Employment Tax Incentive Bill has been tabled. The bill proposes tax relief to the employee. This is expected to pass on to the employer by reducing the effective cost to company, thus enabling companies to employ staff at a lower cost. 

The incentive is applicable to all new employees under the age of 25 and employed after the 31 October 2013. The expected date of promulgation is the 1st January 2014 but is likely to be effective 1st March 2014.

The incentive will run until 1st of January 2017. 

Government is hoping this incentive will improve the unemployment gap of youth. This is possibly a move to appease the masses of dissatisfied youth in South Africa. There are concerns that the incentive will not work, due to the lack of demand in the local economy. Is there enough growth in the private sector to allow for the expansion of jobs at the school leaving rate? Where the incentive could help, is by reducing the minimum wage as a cost to company, but then these employees are already below the PAYE threshhold and so the inventive will not help the masses in lower income brackets.

Private sector business will welcome the incentive to try and save on employee costs. Let us be hopeful that the Employment Tax Incentive will create a positive economic stimulus. One that allows the private sector to see scope to expand their employment base and to improve profitability.

Make use of this time to assess business budgets. Work out whether this incentive will give your business the scope to employ new young staff. Factor in the cost of skills development that will be needed. Will it give you the ability to expand business and increase your customer base?

Walking with Elephants

Who said an accountants life was boring. 

Yes we work all the time, but these days accountants can choose where we work from. (Me in the middle, hard at work)

I had the privilege of spending the week at Imiri Game Reserve, for a client's annual general meeting. 

The highlight of the time away was to ride the elephants! Yes you read it correctly. To stretch your legs over the back of this enormous beast is a feat of bravery or madness. Once we settled in, the peace that exuded from the elephant bull brought a tranquility and stillness to us. For sometime I did not speak and listened. Surprisingly the elephant was quiet even when it walked. A team member commented that we could not hear their footsteps.

This special moment made us treasure our environment, and that we don't have to stretch our legs like that too often.

There were special encounters with black rhino, which are part of a breeding program on Imiri. As we stroked the rough hides of the rhino's, they voiced their cause with dinosaur like groans. We paused to consider the plight of the rhino and whether we would ever have such an encounter or see the sturdy rhino like this again. They are powerful and yet need our care to survive.

Imiri Game Reserve was a special place with a unique experience, and I worked hard too...

Payroll Reconciliation

Are you having difficulty with preparing your EMP501 payroll reconciliation? Each year there are changes in the program. Are you confused and cannot get it to work the way you want? We wrote a blog in May 2013 EMP501 in four steps. Read through the tips again and see if you can make sense of the process.

If you are still battling to reconcile your payroll for SARS, you are welcome to Contact us.

We have a trained team of experts who are submitting EMP501 reconciliations regularly. They are experienced and friendly to deal with.

We run a monthly Payroll Outsourcing System, preparing payslips for clients; submitting monthly EMP201 returns to SARS; and assisting with payroll queries.

Our efficient Payroll Outsourcing System is keeping our clients and their staff happy and cared for.

Business Soul Cares - Ndabezinhle Creche Road

Business Soul Accounting recently posted a blog on Ndabezinhle Creche. In the last blog we mentioned the road that is looking dismal. We are coming up to summer here in South Africa. That means the rainy season will start soon. When the rains come, this road will be a swamp.

We are getting together on 29 September 2013, from about 11:30. With our spades and wheelbarrows we are going to try and fill up the road with building rubble collected. Once compacted down this will hopefully help to solve Ndabezinhle Creche's immediate problems and allow access to the school.

We would love you to join us, from Business Soul Cares, and the team from Crossways Church, to fix the road. Every bit helps. Please contact us at Business Soul Accounting and we will give you more details.

Provisional Tax 20141

Following on from our last blog on Provisional Tax. The next deadline for provisional tax is just around the corner.

How profitable is your business this year?

Preparing your provisional tax return is a good time to assess the profitability of your business. Ask the questions:

Is the business making a profit?

If your business is making a profit at the end of July 2013, this is a good sign for the year end results. Does the profit fall within the targets you have set? Consider the budget you have for the year and whether you are going to be able to maintain or improve your profits. Set new targets.

Is the business making a loss?

A loss in your income statement may be great for saving tax but a loss is not what you want. Rather make profits and save for the tax. One forced saving is paying provisional tax. Turn the loss into a profit by tackling the tough questions. What is causing the loss? Don't look at the obvious indicators e.g. fewer sales. Dig deeper. Why is income not covering your fixed costs? Are the markups on products correct to cover both fixed and variable costs? Is your marketing team performing? What expenses can be cut? What expenses need to increase to bring in more income? Now is a good time to turn the company around and work at making a profit for the year.

What is our strategy?

Use this time of preparing provisional tax as a strategy tool to assess profitability for the year. Correct your budgets and targets.

Your business can make profit

Business Soul Cares - Ndabezinhle Creche

Ndabezinhle Creche holds a special place in the heart of Business Soul Accounting cc. We have been supporting the creche as a part of our social upliftment 'Business Soul Cares' program. Education is important to us.

Ndabezinhle Creche has been running in Imbutshane, Sweetwaters, KwaZulu-Natal, South Africa. Nelly Ngubane, the principle, saw a need in the community to help children who were been left to wander the streets. Parents had to work and did not know what to do with their children doing the day. Nelly received proper training and bravely started the creche in the community. Her passion and love for the children touched us.

A word from the Principal, Ms Nelly Ngubane: “Ndabezinhle Crèche serves the people of Imbutshane which is a small place with a big need. It suffers with lots of poverty. Most of the teenagers have got children. Some of the children are orphans. Others grow up in a bad space where they get lots of abuse by parents and relatives. I teach my pupils values of good life and all about God, discipline, caring and love. They develop skills, and are prepared for big school. If Ndabezinhle Crèche was not there, one 3 year old child would have stayed with only a dog all day; another only had a Granny who couldn’t feed her; and another lives with an unemployed mother. Our crèche provides all our children with breakfast and lunch.”

Imbutshane is an area where 1/3 of the people are employed, 1/3 unemployed and 1/3 unemployable (according to government statistics). Parents really battle to pay Crèche fees, but are encouraged to contribute something. It costs about R352.00 per child per month to operate the Crèche, and we enroll about 30 children annually.

This photo shows the road to Ndabezinhle Creche. The children walk here everyday along this road. This is a winter photo, when it is dry. Imagine the same road after the heavy and consistent rain we have in these parts. The area becomes a muddy swamp, with pools of water. We are working on improving this road before summer.

Ndabezinhle Creche is a registered non-profit organisation. We at Business Soul Accounting are privileged to be able to contribute into these young peoples lives. We are so blessed to see there joyful development and Nelly's faithful service.

Withholding Tax

What is withholding tax?

Withholding tax, also know as non-residents tax or retention tax, is defined by the nature of the tax. Governments require the bank or the payer of the funds, the withholding agent, to retain a percentage of the funds paid to foreigners. The withheld amount is then paid, by the withholding agent, to the countries tax authority. The payer is therefore responsible for withholding the funds and not the payee.

The payee, or recipient of the funds, would need to be resident in a different country from where the payment is being made. This non-resident could be an individual having received employment income or a company having rendered services. The service rendered would need to have taken place in the country wanting to withhold taxes.

Put simply, if you provide a service in another country you will have to pay withholding tax.

There are certain exemptions from withholding tax. These differ in each country.

Can you claim back withholding tax?

Make sure you obtain the withholding tax certificate from the payer. This certificate can be used to reduce your income tax in your country of residence. For example: You provided a service to a company in Tanzania. You are a resident in South Africa. When the company pays you, or your company, for the service rendered, the withholding agent retains 20% of the invoice to pay to the local tax authority.

When your tax return is submitted, you can declare the foreign tax credits and withholding tax credits and thereby reduce your tax due on taxable income.

Remember withholding tax is levied on Turnover/Fees, so the effective tax deductible from tax on profits is higher than expected.

What are the withholding tax rates in East and Southern Africa?

Withholding taxes are applied at different rates depending on what is being taxed. Services, sale of immovable property, dividends, interest and royalties. All need to be considered for the different rates. The table below is an example of withholding tax rates on services rendered, without any exemptions applied.

Country	Rate	Website Link
Botswana	15%	Botswana (BURS), Withholding Tax
Kenya	20%	Kenya Revenue Authority (KRA), Withholding Tax
Malawi	20%	Malawi (MRA), Withholding Tax
Mozambique	20%	Website not accessible at the time of this article.
South Africa	15%	South Africa (SARS), Withholding Tax, page 41
Swaziland	15%	Swaziland (SRA), Withholding Tax
Tanzania	20%	Website not accessible at the time of this article.
Zambia	15%	Zambia (ZRA), Withholding Tax
Zimbabwe	15%	Zimbabwe (ZIMRA), Withholding Tax

SADAC Region exemptions

There is a drive on between the SADAC region countries to reduce or remove restrictions on trade within the region. This has led to certain exemptions or reductions in the withholding tax of SADAC region countries. For example, withholding tax on trade between South Africa and Mozambique is agreed to be 5%, provided all the necessary documentation has been filed with the respective revenue authorities. Similar agreements are emerging and are likely to be in place across the SADAC region in the next few years.

Take a look at a recent article on the new Double Tax Agreement South Africa and Mauritius. New DTA

EMP501 in Four Steps

Don't be flustered and confused about EMP501 easyfile reconciliations. There are four things to remember:

1. Create certificates for each employee. If you use a payroll system, you can import the payroll information. If not, edit employees and add the certificate. Once you have completed each employees certificate for the relevant year, move onto step two.

2. The Declaration, is to reconcile submitted and paid returns from the year. Print the SARS statement from efiling. Compare the statement to your payroll and EMP201's submitted. Check the amounts paid. Once complete, click Self Assess and then Ready to Submit.

3. Submit to SARS. Check that all your information is correct. Tick the relevant year. Click the submit button. You will need to put your efiling user name and password in. The entire reconciliation is sent to SARS.

4. Generate IRP5's. Under Utilities look down the menu to find Generate IRP5. Tick the correct year. Then click Generate. This process will save the IRP5 certificates onto your computer.

Keep with these for basic principles. Hope your filing season goes well.

Budget 2013/2014

The Budget Speech 2013, by Finance Minister Pravine Gordhan, was presented on the back drop of difficult international economic times. South Africa needs to prove, to the international community, that it has sound business practices and the ability to carry them out over the medium to long term.

With unsettled workers in many industries and the incessant call for nationalisation over the past year, the international community has had concerns about investing in long term capital investments in South Africa. This has hampered job growth and caused further unrest.

National Development Plan (NDP)

From the outset of his speech Mr Ghordon reffered to the National Development Plan (NDP) as the means of an increased GDP and tried to allay fears of nationalisation with much emphasis on the need of the private sector.

There will be a reshuffle of expenditure to fall in line with the NDP thus preventing the need to increase overall taxes.

A strong warning was issued to government departments to implement infrastructure plans and spend the funds allocated to these development projects. At the same time mention was made that any new plans will have to be two years old before being considered. Is this a way of delaying further development for two years to save funds?

Does South Africa have a plan, the international community has asked? The Finance Minister has answered yes, the NDP. Heavy emphasis was placed on the need for the private sector in our economy. The NDP and the economy needs the private sector to succeed.

Small Business Incentives

Small business incentives have been improved. An additional bracket has been added. 

0            - 67,111              0%

67,112    - 365,000           7%

365,001  - 550,000           20,852 + 21% of taxable income above 365,000

550,000 +                         59,702 + 28% of amounts above 55,0000

Employment tax incentives will be tabled this year before parliament for implementation this year. A drive is on to grow private business in South Africa and create more jobs.

Tax Tables

Individuals Tax Tables have been adjusted as follows:

Taxable Income (R) Rate of Tax (R)

0 – 165 600 18% of taxable income

165 601 – 258 750 29 808 + 25% of taxable income above 165 600

258 751 – 358 110 53 096 + 30% of taxable income above 258 750

358 111 – 500 940 82 904 + 35% of taxable income above 358 110

500 941 – 638 600 132 894 + 38% of taxable income above 500 940

638 601 and above 185 205 + 40% of taxable income above 638 600

Rebates of Tax

Primary                                           R12 080
Secondary (Persons 65 and older)   R6 750
Tertiary (Persons 75 and older)       R2 250

Tax Thresholds

Age Tax Threshold
Below age 65           R67 111
Age 65 to below 75 R104 611
Age 75 and over      R117 111

Private Sector

The private sector plays an important role in stabilising and growing the South African economy. As entrepreneurs we need to grow our business and be confident about our economy. The best time to develop a business is when the economy is in a slow down. Interest rates are low and poorly run business' are failing. Entrepreneurs with integrity and good business practice have the opportunity to grow their market in these exciting times in South Africa and the developing Africa. Be encouraged to grow and have your own Business Development Plan (BDP). Let us know if you need help developing your BDP.

Reform Audit Support System

The Reform Audit Support System (RASS) has been sponsored and supported by the Attorneys Fidelity Fund (AFS) since inception. The project was originally piloted by the Kwazulu-Natal Law Society. The AFS has officially taken over RASS as a permanent project. So what is this project and will it assist you as an attorney?

What is the Reform Audit Support System?

The program was initiated to assist attorneys and the attorneys fidelity fund to:

• reduce the cost of audits;
• reduce the risk of fraud and the theft of trust funds;
• assist attorneys in understanding the applicable Law Society Rules and sections of the Attorneys Act and how to apply them in their attorneys trust accounting.

Audits verses RASS inpections

RASS was established as an alternative to audits offered by auditing firms. The RASS project is funded by the Attorneys Fidelity Fund. This means that an attorney would not need to pay to have inspections done by RASS. If an attorney were not on the RASS program, they would have to pay for the audit of their firm's trust accounts. RASS is free.

With the amendments in the companies act, which minimise the audit requirement of incorporated companies, their are great advantages of moving to the RASS project and not needing your auditor any longer.

Should you be scared of RASS?

If you have stolen trust money, best you own up quick.

RASS is a system to help attorneys to comply. Our experience with RASS has been positive. They try to assist attorneys to correct any errors in trust accounts.

How can you join RASS?

To join the Reform Audit Support System you will need to complete their application form and be placed on their waiting list. We would be happy to assist you in this process.

How can Business Soul Accounting assist?

We are very experienced in attorneys trust accounting. In fact, Sheldon Conway, our director, was a senior member of the Reform Audit Support System. We have a good understanding of the RASS system and the requirements that need to be fulfilled.

Since 2001, we have been assisting attorneys with their trust accounting. As professional accountants and tax practitioners we can help prepare your business annual financial statements, management accounts and tax returns. With our intricate knowledge of attorneys trust accounting we can help solve any problems you may have and resolve any concerns in the correct manner.

State of the Nation Address South Africa 2013

President Zuma, presented his State of the Nation Address to South Africa on the 14 February 2013. The historical celebrated Valentines day. No love story was given. In this usual fashion he continued with business.
GDP growth is expected to be down to 2.5 from 3 of last year. A program for development is once again on the cards.

Expectation was in the air about how he was going to deliver on job creation to stimulate the economy and satisfy the throngs of young people desperate for work. Unfortunately in the four years of President Zuma serving in office, progress has not been quick enough to satisfy the demand. This year he has confirmed R3 billion has been approved for job creation incentives. These incentives are expected to be paid out to business owners who can employ new youth as part of the scheme.

Education was another hot topic on the agenda. Has enough been done to attend to the education needs of our children? Concerns over the state of schools in rural areas continues to be a problem. Our concern should not be the schools and what they look like but rather that whether the children are receiving the education they need to prepare them for life? Are we growing young entrepreneurs for the future who can create the jobs? 98 new schools have been repaired and established replacing mud schools. Emphasis was placed on the Grade 12 pass rate which is on an upward trend. More to improve Maths, science and technology are high on the agenda. These skills need to be developed in schools. Education is an essential service for our nation. We need to take education more seriously. Remuneration investigations of teachers salaries, has become a priority.

Health care was a focus in the last year and hospitals around the country are being upgraded. Unfortunately the service levels within most hospitals remains low. Are we educating and equipping our nurses with the self-motivation to care for their patients? President Zuma commented on the implementation of the national health plan in 2013. There have been 533 clinics developed and improved in 10 in pilot areas.

Land reform is a highly immotive topic in South Africa. One that needs to be resolved within constitution. We need to be mindful of food security and farmer training when implementing land reform, said President Zuma. The government has no been able to meet land reform targets. The willing buyer willing seller system will be done away with. An adequate compensation system will replace this. 

Almost in the same breath, President Zuma raised the fact that urbanisation increased to 63 percent of the population. He seemed to intimate that it is more crucial to develop urban areas than it was to implement land reform. Due to the fact that most young South African people are more interested in business in urban areas than having to work on rural farms. He emphasised the need to help municipalities develop urban areas.

Rail development was a major point from the previous State of the Nation address. There has not been much visible effect since last years speech in the development of rail in South Africa. Majuba rail is to begin soon. Initial work on port in Durban has begun. A plan is still in place to develop rail. R860 billion has been spent on infrastructure in the past year. Other ports development has begun. Airport development has also begun. There is however talk of long term plans to develop rail throughout Africa to connect the country. Using natural resources in Africa to power such an effort. How is Africa going to pull together to make this strategy a reality?

Electricity infrastuture is developing at the same time, with some green energy in the basket.

The focus this year is on implementation.

President Zuma commented that the mining sector has had a difficult period. Nationalisation concerns have been laid to rest. A tax system review will be done, to see that it supports public spending requirements. This will include a review of the mining sector taxes.

 
International companies are going to need to invest and work in Africa to develop the infrastructure required. Is South Africa ready for trading companies of international status or is Mauritius going to take the lead in the SADC region with more favourable tax regimes? South Africa has previously mentioned implementing more favourable tax systems to become the trading hub of Africa but we are yet to see a competitive proposal.

The president still has a long term, 20 year, infrastructure development plan for South Africa. The country has to keep on track from year to year to achieve this. This years budget speech appeared to have less promise and more of let's get down to business. Implementation is the key.

Provisional Tax 2013

Provisional tax returns are due shortly for companies and individual provisional taxpayers with a February year end.

What is provisional tax? 

Unlike income tax, provisional tax is an estimate rather than an accurate calculation of income tax for the year. The estimate is determined by review your year to date income statement, to take a good guess at what your profit will be for the year. Provisional tax is then calculated off the estimated profit at normal tax rates.

How often do we submit the returns?

Provisional tax returns are submitted twice a year. Normally August and February. A top up payment can be made in September of the following year, if needs be.

What should we consider when preparing the estimate?

The are a number of expenses at year end that are not in the accounts when reviewing the income statement for provisional tax. Consider:

• What creditors you will still need to pay that are not posted; 
• Depreciation of fixed assets;
• Interest on loans not yet posted; 
• Bonuses not yet paid;
• Bad debts that need to be written off.

Each business will have different expenses to consider.

Why pay now?

Consider provisional tax as a forced savings. Unfortunately the interest rate is not great. If you overpay your provisional tax you will be refunded. So save the tax now while the cash is still around.

If you need help with your provisional tax, please contact us.

Trade Marks

Trade Marks protect the interest and brand of your company.
Your companies reputation depends on the strength of that brand.

See this article posted today by the CIPC.
Please contact us if you need assistance with registering your Trade Mark.

Dear CIPC Customer Are you aware that enterprise registration does NOT give you protection to use your enterprise name as a TRADE MARK? To protect your trade mark you need to lodge a separate application for a trade mark registration. What is a trade mark? A trade mark is a brand name, a slogan, a logo, or any combination hereof that you use in trade, to distinguish your business and the goods you sell or the services you provide, from the goods or services of others. Registration of a trade mark will present the following benefits for your business: You can be sure that no one else will be allowed to use your trade mark in relation to your specific business and will protect your reputation in, and rights to, the trade mark; Use of your trade mark can be licensed to others, thus creating franchising opportunities, Trade marks are an important tool for building a company's reputation; and Trade marks play a vital role in the branding and marketing strategies of companies

Personal tax deadline

http://www.fin24.com/Economy/Sars-warns-of-e-filing-tax-deadline-20130123 Sars warns of e-filing tax deadlines (via @News24)