Last time we discussed the basics of personal or individual tax and how it works in the South African context, this week we will turn our focus on company corporate or organizational tax.
What is organizational/Company Corporate Income tax
In simple terms the government says, go out there, work hard to operate your business and make some money and then give me 27% of your profit.
(SARS Definition) Corporate Income Tax (CIT) is a tax imposed on companies resident in the Republic of South Africa i.e. incorporated under the laws of, or which are effectively managed in, the Republic, and which derive income from within or outside the Republic.
Non-resident companies which operate through a branch or which have a permanent establishment within the Republic are subject to tax on all income from a source within the Republic. Companies are expected to submit their financial performance (Returns) twice a year.
Returns are submitted based on the financial year end of the organisation. Upon submission of the return, the liability is calculated and payable. It is important to note that the amount payable is based on your profit/Loss.
What is Value Added Tax (VAT)?
Just like Corporate Income Tax the government is saying, charge them whatever you want and then charge them 15% more for me.
The Value-Added Tax Act 89 of 1991 among others intends to indirect tax on the consumption of goods and services in the economy. IT is a consumption tax paid when goods are purchased and services rendered (SARS Definition).
For the purpose of this article, I will not talk about the impact of VAT on sales tax act, stamp duties act and transfer duty act. (We can elaborate on this should the need arise)
It is compulsory to register for VAT if the company’s annual turnover exceeds R1m. Companies are allowed to voluntarily register for VAT when annual turnover exceeds R50k. The administration for VAT can be quite exhausting as returns are submitted at least bimonthly.
Below grocery items are zero rated
- Vegetable oil.
- Cultured milk.
- Brown wheaten meal.
Mr. Tebogo Moselakgomo, a Tax Consultant and a member of South African Institute of Tax Practitioners clarifies the language used by most taxpayers. Tebogo is the founder and Managing Director of KCP Consulting.