Category Archives: Business Legislation

Basic Registrations and Compliance for Businesses

PIC3It is a challenge for any business in South Africa to stay abreast of all registrations and compliance prescribed by law and other regulations. Following is a summary of the most common registrations and compliance applicable to most businesses.

1. Annual returns and annual duties (Companies): Any company that wants to remain registered with the CIPC must annually, in the company’s birthday month, submit a return with required information to the CIPC (www.cipc.co.za) and also pay the accompanying annual duties.

2. Income tax:  Any entity conducting business, whether it be an individual/one-man business, company, trust or any other person, must register as a taxpayer with the South African Revenue Service (SARS). The entity must annually complete and submit an income tax return (ITR12 or ITR14). In addition, provisional tax must be calculated and a return (IRP6) submitted every six months and, if necessary, a payment must also be made. Non-compliance can result in significant penalties. (www.sars.gov.za)

3. Value-added tax (VAT):  If the entity’s annual turnover will exceed R1 million it must register for VAT.  Voluntary registration can be done if the annual turnover will be more than R50 000. VAT returns must usually be submitted every two months and, if necessary, payment must also be made. (www.sars.gov.za)

4. Unemployment insurance:   If an entity employs staff it must register as a employer for unemployment insurance. Monthly returns for payment must be submitted. The employer must contribute an amount equal to one per cent of the salaries of its employees while a further one per cent must be contributed by each employee.  (www.labour.gov.za).

5. Employee tax:   If any employee’s remuneration exceeds the limit prescribed in the Income Tax Act, the entity must register as an employer for the purposes of PAYE (Pay As You Earn system). PAYE deductions must be made monthly from the remuneration of such employees and submitted with the required returns to SARS. Twice annually a PAYE reconciliation (IRP501) must be compiled and submitted to SARS. IRP5 certificates for all employees must also be prepared annually together with the PAYE reconciliation (www.sars.gov.za).

6. Skills development levy:  If an entity’s total annual salary account exceeds R500 000, or if the entity has more than 50 employees, it must register as an employer for the skills development levy (SDL) and monthly submit returns together with the required levy. (www.labour.gov.za / www.sars.gov.za).

7. Compensation Commissioner:  Any entity that employs staff must, regardless of the remuneration paid to its employees, register as an employer with the Department of Labour, for workmen’s compensation. The entity must annually submit a return to the department and is then assessed at a percentage of the total salary account of the entity. Employees who are injured on duty may then claim compensation from the fund. (www.labour.gov.za).

8. Employment equity:  An entity that employs more than 50 people or that exceeds the set limit for annual turnover applicable to the sector in which it trades, must compile an employment equity plan every two years and submit it to the Department of Labour. (www.labour.gov.za).

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Directors could be liable for company’s tax debts

Main02Although companies or close corporations, as legal entities in their own right, bear the responsibility of debts incurred, and although directors, shareholders and members of these entities generally are not personally liable for such debts if the entities should become incapable of settling them, the Tax Administration Bill, 11 of 2011, contains several provisions in terms of which directors, shareholders and members can incur personal liability for such entities’ tax debts. Section 180 of the bill stipulates as follows:

A person is personally liable for any tax debt of the taxpayer to the extent that the person’s negligence or fraud resulted in the failure to pay the tax debt if (a) the person controls or is regularly involved in the management of the overall financial affairs of a taxpayer, and (b) a senior SARS official is satisfied that the person is or was negligent or fraudulent in respect of the payment of the tax debts of the taxpayer.

Accordingly, personal liability is not limited to income tax, but extends to “any tax debt”; the trigger for such personal liability is “negligence or fraud”; such negligence or fraud must have been the cause of the failure to pay the tax debt; potential personal liability extends to any person who “controls or is regularly involved in the management of the overall financial affairs of a taxpayer”, and a senior SARS official must be “satisfied” that such negligence or fraud occurred.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.