VAT, Budget Speech, and Cashflow Planning - March Updates 😊
/Happy new tax year our lovely Anlo community. Everyone worked really hard to get all the 2021/2022 tax returns submitted on time as well as the submission of the provisional tax returns that was due end of February.
We start a new tax year, and working towards getting financials and returns calculated early so that we stay on the good side with SARS but also have some time to do some cashflow planning.
If your situation has changed or you have moved or have new contact details, please get in touch so that we can update your details where it is appropriate.
VAT
If you are registered for VAT, we would like to remind you about the principles of VAT to ensure there are no surprises 😊
Only goods and services exclusively in the course of making taxable supplies can be used as a VAT claim. In layman’s terms, if the expense isn’t incurred in the business, the VAT can’t be claimed.
This means if any portion of the expense is for personal use or not for business use, the VAT portion should be apportioned, and VAT can only be included on the portion that is business use. For example, if the business cellphone bill is paid through the business, and a portion of the expense is for private calls, the % of the personal element should be apportioned to have no VAT on.
It has recently come to our attention that SARS can decline a VAT input claim if the supporting documents provided when a VAT audit is done results in one of the VAT vendors not being registered for VAT or if their (the suppliers) VAT returns and liabilities are outstanding. This seems unfair and completely out of SARS’s cope but we investigated and they have the right to decline VAT inputs.
This is significant because you as a VAT vendor might include a suppliers invoices as VAT deductible input claim, and SARS can decline the input and issue an additional assessment and force you to make sure that your suppliers VAT affairs are in order before using them.
We want to encourage our clients to look up if a VAT vendor is VAT registered by following the link on SARS website >> VAT Vendor Search (sarsefiling.co.za).
If you are unsure if a supplier is VAT registered ask for the invoice and use the VAT details to verify the VAT registration. Also, please remember that a VAT number always starts with a 4 so if you see another number that doesn’t start with a 4 and isn’t 10 digits long, please re-confirm this with the supplier.
Please also remember that the VAT registered vendor must not claim input tax for non-qualifying items such as motor cars and entertainment (which includes meals and refreshments), as such was not used, consumed, or on-supplied for the purpose of making taxable supplies.
We would like to encourage clients to send their VAT receipts and invoices to Hubdocs to ensure that proper documentation is kept of the transactions.
Ask one of lovely staff if you are unsure and want to find out more.
Budget Speech
Some good news about the budget speech is that companies tax rates are going down from 28% to 27% from the 1st of April 2023.
Capital Gains rates have stayed the same at a 40% inclusion rate for individuals and 80% for companies with a yearly exemption for individuals of R40 000. This means an effective tax rate for Individuals of 18% and 21.6% for companies.
The Primary rebates and tax rates are:
And the rate of income before you start paying tax for individuals have increased to R95 750 from R91 250 which is a 4.9% increase. This means R7 979.16 per month before tax or deductions.
There was no changes in the VAT rate (15%), estate duties (20%), donations tax (20%), dividends tax rate(20%) or taxation on trust (40%).
There will probably be changes to the interest free loans provided to trust but this has not yet been announced.
There is an increased focus on trusts from SARS’s point of view, and they are looking for non-compliant trusts. If you have a trust and haven’t maintained the accounting records, please get in touch with us as soon as you can.
Holdings Companies Explained
A Holding Company is perfect for entrepreneurs looking to branch out to new business prospects that don’t quite fit into their existing companies. It’s also great for business owners who want to compartmentalize different departments, services, or products.
Anyone looking to limit the financial risk of having various trades within one company can opt for a holding company to keep risky elements limited to specific divisions or company.
A Holding Company also makes it less risky to team up with business partners in new ventures because you won’t have to expose your existing company to the risk of failures of the new business.
The dividends paid from the subsidiaries to the holding company is also exempt and will only be taxed as dividends when it leaves the group to be paid out to the shareholders. Refer to >> Dividends Tax | South African Revenue Service (sars.gov.za)
The disadvantage of a holding company The paperwork and start-up costs and will be slightly higher. You will have to register every business you’d like to run as a Subsidiary Company to your Holding Company.
Also, if the Subsidiary Companies to your Holding Company have various owners, it can be difficult to close a Holding Company, as there are multiple owners to consult.
Cashflow Planning
We have thought of five things that you can start doing which should help you get payments in more quickly.
Hope this helps 😊
Set out your payment terms in writing.
Make sure your payment terms are in writing and accessible to your team and to your clients. It might be assumed that everyone knows payment is expected in for instance 15 days. However, make a point of getting it in print and making people aware of it. This will make the rule more concrete and remove any doubt about what’s expected. It will also help ensure your customers are getting a consistent message.
Offer an early payment discount to your customers and make it easier for customers to pay you by using Paypal, payfast etc
Promptly send out invoices as soon as the work is done and make sure the automatic payment reminders are set-up.
Take quick action on unpaid invoices. Phone your customers and make sure you get in contact to make sure you have the correct details and that they did receive the invoice.
Make sure you check your bank transactions and follow up on outstanding invoices. If you don’t do this regularly then you will find it difficult to allocate payments accurately but also it will feel like a task.
Please feel free to contact us if you have any questions.
