Contact: 073 777 4434 Email: mzukona@nyakaza.org.za

SARS Compliance as an SME is so VITAL!

By Mzukona Mantshontsho

Lots of people want to start their own small businesses or need help with their small businesses. So how do people go about doing this?

Biz Evolution provides online solutions for your business needs, whether you are a start-up, medium or large business.

Spoke to Co-Founder Nokulunga Mabu at Biz Evolution about the importance of being SARS compliant in South Africa today.

South African Revenue Services (SARS) compliance as an SME

Compliance means that the company is in a good standing with SARS. The organisation has registered for all the applicable tax types; it has no outstanding tax return, debt or verification supporting documents. The company can be compliant even if it has outstanding debt, as long as there’s a payment arrangement plan in place.

Importance of being compliant as an SME in South Africa today

To run a legal and successful business one has to comply with all the regulations of that country you intend to trade in. Clients want to work with a legit registered company as it gives them some sense of protection in case things don’t go as promised so they are able to hold the entity accountable. Big businesses and government departments require that the entity be registered and compliant before they can do business with it. So, one will struggle to do business with big organisations if the business is non-compliant, this will limit business growth.

Problems of not being compliant

Your business will be penalised by the relevant institution with the possibility of imprisonment, e.g. SARS will impose penalties up to the value of R16, 000 for not submitting tax returns, businesses that fail to comply with the Employment Equity Act could potentially face fines of up to R2, 7 million or 10% of annual turnover. CIPC will charge penalties and deregister the company if annual returns are not filed for two consecutive years, and the company secretary may face imprisonment due to failure to comply with the requirements of the Companies Act.

You will lose customers, you will limit your company’s growth, the company will lose money (by paying lot of fines/penalties) and your company can be shut down or liquidated.

General outlook of all SME’s towards being compliant

To run a successful business, one must ensure that the company is compliant at all times, be familiar with all the company compliance requirements. Legislation requires business owners to comply with the law or face far reaching consequences.

Insightful information including important dates to remember for the current SARS tax season!

Income Tax:

Every business liable to taxation, under the Income Tax Act, 1962, is required to register with SARS as a taxpayer.

VAT (Value Added Tax):

It is mandatory for any business to register for VAT if the income earned in any consecutive twelve-month period exceeded or is likely to exceed R1 million. Any business may choose to register voluntarily if the income earned, in the past twelve-month period, exceeded R50 00.

PAYE/ UIF / SDL:

According to law, an employer must register with the South African Revenue Service (SARS) within 21 business days after becoming an employer, unless none of the employees are liable for normal tax.

Tax Return submission for companies:

  • It is compulsory for registered companies to submit their income tax returns (ITR14) (including dormant companies). Companies are required to submit a tax return in the prescribed form twelve months after their financial year-end.
  • In addition to annual income tax returns, companies are required to submit provisional tax returns (IRP6) and make payment. These returns are to be submitted every six months (i.e. in August and February) and must contain estimated figures of total income earned for that period and taxes paid over in respect of the income estimates for that period.
  • If registered for PAYE: every month employers need to pay over their PAYE, UIF and SDL liabilities, where applicable, to SARS. This payment must be made by the 7th (or the last business day before the 7th if it falls on a weekend) of the following month to avoid incurring penalties.
  • If registered for VAT: VAT return must be submitted either monthly, bi-monthly or every six months (applicable to farmers), and the payment made to SARS by the 25th of the following month.

Co-Founder Nokulunga Mabu at Biz Evolution