Starting a business isn’t always easy but there is a wealth of assistance available for SMEs, including for taxation needs.
Tax requirements are based on the kind of business entity. Small businesses typically have their own ways for preparing taxes.
The key to tax preparation for SMEs is knowing when to ask for help. As a business owner, don’t be afraid to ask for referrals. Find out about services, fees and the personality of professional tax experts. Doing this can help you avoid wasting money as a result of penalties due to incorrect filings.
Do your due diligence by asking for their SARS practitioner number. Most fees charged by tax professionals are based on the complexity of the tax return. Keep in mind that it’s highly unethical for a tax practitioner to calculate their fee based on a percentage of the tax refund they can get from you.
It’s important to understand the different classifications that apply. In South Africa, for example, SARS often asks a range of questions in order to determine how much tax a business is liable for. These include questions such as:
- Is your business turnover less than R20 million per year?
- Do you own one business?
- Does less than 20% of your turnover come from “investment” income?
In South Africa, companies registered as a Small Business Corporation (SBC) pay no income tax on the first R78 750 of taxable income. If a business is not yet generating an income, it must still be registered as a tax payer and submit a zero return.
Company Income Tax is charged at a rate of 28%, while micro businesses qualify for Turnover Tax.
The key to tax preparation for SMEs is also to be organised. By knowing what you are preparing for as a business owner, then you are more likely to ensure that all is in order, such as the necessary paperwork.