Sole Proprietor vs. Pty by Chris Farquharson

! Sliding scale
! Starts at zero
! Equates to company rates at +_ R 480 000
income
! Rebate R 12080.00

Income'tax'rates'for'natural'persons'and'special'trusts
Year%of%assessment%ending%28%February%2014!
Taxable%income! Taxable%rates!
0!–!165!600! 18%!of!each!R1!
165!601!–!258!750! 29!808!+!25%!of!the!amount!above!165!600!
358!111!–!500!940!! 82!904!+!35%!of!the!amount!above!358!110!
638!601!and!above! 185!205!+!40%!of!the!amount!above!638!600!

! Two tiered tax system
! Initial tax at 28%
! Thereafter dividends tax is withheld at 15%
of remaining reserves which makes the
combined effective tax rate 37.4%

! Introduced by government to assist small
owner managed businesses.
! Applies to companies and CC’s
! Preferential tax rates
! Increased capital asset write off allowances
! In order to qualify
"  Must be the only CC or Pty held by each owner
"  The membership may only be natural persons
"  It cannot provide services of a personal nature
(unless 3 or more unconnected people are
employed full time in the SBC’s business)
"  Turnover must be under R 14 million (qualify)

!  The first R 67 111 income is tax free.
!  The next band of income between R 67 111 and
R 365 000 is taxed at 7%
!  The following band of income between R 365 001
and R 550 000 is taxed at 21%
!  Thereafter the normal company rate of 28%
applies
!  The effective tax saving between an ordinary
company and an SBC alone is R 94 297

!  Is literally ‘Value Added Tax’ and is a tax that is based on the
value add to a product/service.
!  You have to charge vat on everything you sell and are able to
claim it back on ever
!  i.e. if you buy a good for R 57 (incl vat of R 7) and sell it for R
114 (incl vat of R 14) you are adding value of R 50 (net) and
paying vat of R 7 over on this.
!  The obligatory vat registration threshold is R 1 million per
annum. (This works out to about R 82 000 per month)
!  You are allowed to voluntarily register for vat if your turnover is
under this.
!  It makes sense to register voluntarily if the bulk of your clients
are vat registered as they have no problem paying over the vat
and it will mean that you will be able to claim your inputs.
!  The downside is that you will then need to process your accounts
bi-monthly or at least every 4 months. (if you have been
processing them annually up to this point)

! This is a withholding tax on the employee’s
salary.
! You are paying it over on their behalf.
! It is paid monthly.
! What is an employee for SARS purposes
! Implications of non-deduction.

! Paid over by employees and employers.
! It is based on Gross Salary (limited to R
15 000) – 1% paid the by the employer and 1%
by the employee.

! This is 1% of gross salaries and is payable by
the employer.
! Note that it only applies if your total salary
bill (including wages paid to directors) is in
excess of R 500 000 per annum.
! Then depending on the SETA that you belong
to, you can look to send your employees for
training offered by the SETA concerned.

! Annual Payment
! Based on Gross Salaries
! It varies depending on industry
! For and professional services industry you are
looking at 0.13 of a percent – so with a salary
base of R 1 million, the cost for the year is R
1 300.
! This is often overlooked, but invaluable if
you do suffer a workplace injury.

! Company setup costs
! Processing
! Financials
! Tax return costs
! Personal assets and liabilities and personal
return costs

! Please note that the information provided is
for illustrative purposes only and cannot be
construed as advice. Should you wish to
discuss the specifics of your situation you can
contact Chris:
chris@truenorthaccounting.co.za
Tel: 021 510 2350

Sole Proprietor vs. Pty by Chris Farquharson

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