Tax returns should be filed annually regardless of the type of business entity (i.e. whether you are a sole proprietor or private company). Here’s what you need to know about filing your return.
The tax year for individuals covers 12 months and commences on 1 March of a specific year and ends on the last day of February of the following year. However, in some circumstances you may be allowed to draw up your financial statements for your business to a date other than the end of February.
eFiling
SARS eFiling facilitates the electronic submission of tax returns and payments by taxpayers and tax practitioners. Taxpayers registered for eFiling can engage with SARS online for submission of returns and payments in respect of the following taxes, duties, levies and contributions:
- Value-added tax (VAT).
- Pay-as-you-earn (PAYE).
- Income tax.
- Provisional tax.
- Skills development levy (SDL).
- Secondary tax on companies (STC).
- Transfer duty
- Unemployment insurance fund (UIF) contributions.
The following should, however, be noted:
- Taxpayers must retain all supporting documents for five years from the date upon which the return was received by SARS, should SARS require it for audit purposes.
- SARS will under certain circumstances, on request, still require the submission of original documents for purposes of verification.
- SARS will do extensive validation checks on the data submitted to ensure its accuracy, including validations against the electronic employees’ tax certificates (IRP5s) submitted by employers to SARS.
- SARS will issue assessments electronically.
Tax deductions
For business or operating expenses to be deductible they must have be incurred during the tax year in the production of income, not of a capital nature and laid out or expended for the purposes of trade.
Typical overheads could include:
- Accounting and bookkeeping costs
- Internet: Costs to run and maintain the system.
- Insurance costs.
- Licences: Those that apply to the business.
- Legal fees: Costs incurred when obtaining legal advice.
- Maintenance and repairs.
- Motor vehicle costs – Maintenance, repairs and licences (costs should be costed separately from personal running expenses).
- Postage: Stamps, mailing expenses, etc.
- Printing and stationery: Letterheads, business cards.
- Delivery and freight.
- Depreciation: For business assets that deteriorate while in use by a business.
- Entertainment: Expenses – normally food and beverages paid for by the business to entertaining people important to the business, such as customers and suppliers.
- Electricity and water: Costs associated with the business’s premises and the equipment use.
- Rent/Rates and taxes: For leasing your business’s premises.
- Rent: For any leased equipment, signage etc used by the business.
- Research and Development.
- Security: Costs for security services such as alarm monitoring, armed response, armed guards.
- Subcontractors: Other parties that have provided services for your business related to the product, services and sales.
- Telephone and Fax/Communication: Fixed line and cellular phone costs.
Working from home
You can claim all your business expenses but there are specific requirements for claiming a deduction for occupying a portion of your home for the purposes of trade. This means that a portion of your home must be specifically equipped for the purposes of your trade and must be used regularly and exclusively to run the business. Your duties must be mainly performed in that portion of your home.
What are “home office expenses”?
- Some typical home office expenses include:
- Rent on the premises
- Interest on the mortgage bond
- The cost of repairs to the premises
- Electricity, water, rates and taxes
- Cleaning costs
- Security
- Insurance
When you claim a deduction in for these expenses, they need to be apportioned pro rata to the floor area of your home office against the total floor area of your home. Keep an accurate record of all expenses, as SARS may want to check the information.
Use a tax specialist
You can also acquire the services of a tax specialist who can formulate an appropriate tax strategy that is aligned with your overall business strategy and the tax challenges facing your business. SARS tax consultants (either at their offices or via the phone) can help you calculate your tax and answer any questions that you may have regarding your business. Large accounting companies or smaller firms can assist depending on your requirements, but will charge for their professional services.
Useful resources
- South African Revenue Service: www.sars.gov.za
- eFiling: www.sarsefiling.co.za
