SMME Connect #3 -July Edition

In the last edition, we raised awareness by providing clarity and certainty on the process of submitting employers’ reconciliation through digital channels. We also encouraged employers to submit their EMP501 returns on time, and advised them to reflect true and accurate declarations. In addition, we hosted a Pay-As-You-Earn webinar for SMMEs to assist small businesses to comply with their tax obligations.

Other relevant issues were the Corporate Income Tax (CIT) and a video on how to submit the ITR14 return, on when provisional tax should be paid. It also focussed on, Turnover tax and its benefits as well as a quick guide on how to deal with outstanding debt and returns to increase compliance and make it easy to obtain a tax compliance status.

The last quarter provided an opportunity for SARS to reflect on SMME tax compliance challenges, and how we intend to assist SMMEs improve their compliance. We are constantly working with other stakeholders to broaden our reach to SMMEs, traders, and travellers. This was accomplished in collaboration with the Black Business Council (BBC) and the Proudly South African platforms.

To celebrate youth month in June, SARS collaborated with National Treasury and the Small Enterprise Development Agency (SEDA) to provide an educational webinar in support of Youth Month’s theme “Promoting sustainable livelihood and resilience of young people for a better tomorrow”. The initiative aimed to empower young people and educate them on their tax rights and obligations.

Significantly, this edition comes at the start of the individual filing season. Thus, it will attempt to enlighten many SMMEs, especially those who opted to run businesses as sole traders and partnerships.  We will be providing information on Provisional tax payment for individuals, issues of women in trade in the upcoming Women’s month, developments in Customs and Excise and the renewed SARS Service Charter.

We believe all this content will make things easier for SMMEs to do the right thing. In response to the feedback received on challenges experienced by the SMME community and its representatives, including Tax Practitioners, SARS responded with a webinar to address issues on Registered Representatives.

Provisional Taxpayer

Provisional tax is not a separate tax from Income Tax. It is a method of paying the income tax liability in advance, to ensure that the taxpayer does not have a large tax debt on assessment. Provisional tax allows the tax liability to be spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on the estimated taxable income. A third payment is optional after the end of the tax year, but before the issuing of the assessment by SARS. On assessment, the provisional payments will be off-set against the liability for normal tax for the applicable year of assessment.

Companies automatically fall into the provisional tax system. There is no longer a registration or deregistration process to be a provisional taxpayer. The onus is on the taxpayer to determine if he/she is liable for provisional tax, and to request and submit an IRP6 return via eFiling.

What steps must I take to work out the amounts due?

The amount of provisional tax payable is worked out on the estimated taxable income for that particular year of assessment as follows:

  1. The First Period:
    • Half of the total estimated tax for the full year;
    • Less the employees tax for this period (6 months);
    • Less any allowable foreign tax credits for this period (6 months).
  2. The Second Period:
    • The total estimated tax for the full year;
    • Less the employees tax paid for the full year;
    • Less any allowable foreign tax credits for the full year;
    • Less the amount paid for the first provisional period.
  3. The Third Period (voluntary):
    • The total tax estimated payable for the full year;
    • Less the employees tax paid for the full year;
    • Less any allowable foreign tax credits for the full year;
    • Less the amount paid for the 1st and 2nd provisional tax periods.

How should it be paid?

The current process includes:

  • Register for SARS eFiling. The eFiling facility allows you to request for an IRP6 return, and make your submission and payments online. You can register once for all different tax types using the client information system.
  • If you are already an eFiler, simply add provisional tax to your profile so that you can access and file your IRP6 return online.

Note: The due date for provisional taxpayers to submit their annual returns is 31 January 2023.

Filing Season Changes (including admin penalties) for self-employed individuals and partnerships

Form changes being introduced:

  1. Recoupments (excl. wear and tear) (s8(4)) will be added to the “Local Business and Trading Income, Credit Adjustments, Recoupment of allowances previously granted” section of the return.
  1. Deductions, in respect of erection or improvement of buildings in urban development zones (UDZ) incentive, of Section 13quat of the Income Tax Act, has been extended to 31 March 2023.
  1. Venture Capital Company (VCC): Investment under source code 4051 will be de-activated from the 2021 tax year and onwards, as it is no longer applicable.
  1. Income from Local Farming Operations (IT48) will be updated to allow the taxpayer to select relevant paragraph in the First Schedule to the Income Tax Act if it applies.
     

An Administrative Penalty (Admin Penalty) is a penalty levied under Section 210 of the Tax Administration Act (TAA). The Act prescribes the various types of non-compliance, which are subject to fixed administrative penalties. Currently, the penalty is imposed only for non-submissions of tax returns in respect of individuals and companies. Regardless of whether you agree or disagree with the admin penalty, it is advisable to submit the outstanding return to stop further admin penalties. If you do not agree with the administrative penalty, a Request for Remission (RFR) can be submitted when a taxpayer disputes any penalty levied due to non-compliance. The taxpayer must provide reasons for the non-compliance for the request to be considered. Top Tip: Remedy the non-compliance prior to requesting the remission. 

VAT domestic reverse charge on valuable metal from 1 July 2022

The new VAT domestic reverse charge (DRC) on valuable metal came into effect on 1 July 2022. A VAT domestic reverse charge (DRC) on valuable metal was introduced in the Regulation published in Government Gazette 46512 on 8 June 2022, see Regulations on domestic reverse charge relating to valuable metal, issued in terms of section 74(2) of the Value-Added Tax Act, 1991 (Act 89 of 1991), Notice 2140.   For a comprehensive understanding of these Regulations, see the Explanatory Memorandum and Media Statement. For more information, visit the VAT Domestic Reverse Charge webpage or visit the SARSTV YouTube channel to view the webinar.

International SMME Day    

On 27 June 2022, the global community celebrated International SMME Day. The United Nations General Assembly first announced International SMME day back in 2017, which means this year was the 5th anniversary of this prestigious day. Some countries term it SME Day (small and medium enterprises), whiles others MSME Day (Micro, Small and Medium-sized Enterprises). What is common is that the world uses this same day to recognise, applaud and create awareness of the Small Business contributions to the global economy. Small Medium and Micro Enterprises (SMMEs) are the backbone of societies everywhere, as they account for 90% of businesses, up to 70% of employment and 50% of Gross Domestic Product (GDP). They contribute to local and national economies, and sustain livelihoods, particularly among the working poor, women, youth and groups in vulnerable situations. Small businesses are more than ever in need of support, as they navigate the triple impacts of the Covid19 pandemic, conflicts and climate crisis. They were, and still are the hardest hit by these multiple shocks. It is therefore critical for countries and their development partners to continue to support and empower SMMEs to unlock their full potential. There is an international call for policymakers to move beyond recovery, and consider ways to lower and eliminate barriers faced by SMMEs, improve the business environment and access to finance, markets and technology in these fragile times.  In conclusion, this year’s theme as announced by the United Nations could not be more befitting “Resilience and Rebuilding SMMEs for the Sustainable Development at the forefront of building back better and stronger from the impacts of Covid19 pandemic, Climate Crisis and Conflicts”.                                                         

Women in Trade World Bank / SARS collaboration

The publication of our newsletter this quarter coincides with Women’s Day and Women’s Month commemorations in South Africa, as a tribute to the more than 20 000 women who marched to the Union Buildings on 9 August 1956, in protest against the extension of Pass Laws to women. The Government of South Africa declared August women’s month, and 9 August women’s day. In working with the South African Government, the South African Revenue Services (SARS) is committed to putting efforts in place to ensure that the benefits of the South African Constitution are enjoyed by all, and no groups of people should be at a disadvantage, prejudiced, or be faced with any challenges or risks, especially when embarking on a journey to improve their livelihoods. The World Bank Group (WBG) is the largest international financial institution, whose goal is ending extreme poverty and increasing shared prosperity in a sustainable manner. On the other hand, the World Customs Organisation (WCO) as the “Mother of Customs Organisations “is focused on promoting better trade facilitation globally, fairer revenue collection, and better protection of societies. It is no wonder that these 3 big giants came together and collaborated on working together to achieve their common objectives. One of the priority items on their list is the issue of Gender Equality, and how best to support, promote and advance Women in Trade. Trade is an engine of economic growth that creates better jobs and reduces poverty. A Trade Facilitation and Gender Survey was conducted to get a deep understanding of the challenges and risks faced by various groups, particularly women. On 14 April 2022, the Commissioner for SARS extended an invite to the public to view the virtual launch of this report, which can be viewed on the SARS TV YouTube channel

We urge all women and men to familiarise themselves with this report, to understand what are the risks and challenges unique to different groups, particularly Women in Trade, and how these can be addressed. You will also get an update on what SARS has been doing in-house, aside from this collaboration and many others, to address the plight of Women in Trade.

New developments in Customs & Excise

  • We get most queries on how to register for import and export licenses, and SMMEs are encouraged to note the ongoing uptake in the electronic Registration, Licensing and Accreditation System (RLA system). Please ensure to read the letter sent to Trade
  • The imposition of monetary penalties for those who do not submit Cargo reports will start on 1 August 2022, more information is available on the letter to Trade.

New Service Charter

SARS adopted a new Service Charter on 1 April 1 2022, that clarifies its service commitment to taxpayers and traders for tax, customs, and excise. The Service Charter demonstrates our commitment to service excellence, as we strive to constantly improve our service to taxpayers and traders.

The Service Charter outlines your rights and obligations as follows:

You have a RIGHT to:

You have an OBLIGATION to:

Clarity and certainty (to be informed) of obligations to SARS

Timeously engage, register and comply with legal obligations

Excellent service, irrespective of the method of engagement with SARS

Co-operate in full, and provide accurate, truthful information through efficient and timeous engagement via appropriate channels

Be heard, make a complaint and lodge disputes that are resolved timeously

Provide all supporting documentation and information within the required timeframes, as requested

Be treated without fear, favour, or prejudice by SARS in a confidential manner, within the relevant legislative framework

Act honestly, and respect the tax system

Assist in deterring non-compliance by reporting tax fraud and non-compliance with tax legislation

Be represented by a professional

Accept personal responsibility and accountability for all your tax affairs

Be respected by all SARS officials

Respect the work done by all SARS officials

Did you know?  

SARS is digital! We have made it easy for you to interact with us via eFiling and SARS MobiApp. You forgot your eFiling password?

Go to the SARS website and click on Forgot Password or Forgot Username, and follow the prompts to have your password reset or your username sent to your security contact details, or use SOQS which does not require any login details Use our Digital Channels | South African Revenue Service (sars.gov.za)

Available Tax Education materials

Please click on the links below for education materials useful to SMMEs:

To see the Mobile Units schedule, click here.

Free tax workshops in regions are continuously published.

For the latest SARS tutorial video and webinar on specific tax and trade topics, see our SARS TV Channel.

Or see our SARS eFiling guide.

 

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