Entrepreneurs who want to start a business need to be aware of the tax obligations of running a business whether it is in the form of a legal entity or in a personal capacity. It is also important to note the various options with regard to reducing some of the administrative requirements to make tax compliance easier as well as the different tax incentives and rates that may apply in certain instances.
Once you have decided on the type of business entity that is to be established and it is a legal entity, you must register with the Companies and Intellectual Property Commission (CIPC). See their website at www.cipc.co.za.
The following legal entities are required to register at CIPC and as a taxpayer for corporate income tax purposes:
- Listed public companies
- Unlisted public companies
- Private companies
- Close corporations (Note that from 1 May 2011, no new close corporations will be registered)
- Non-profit companies
- State owned companies
- Collective investment schemes
In the case of starting a business that is not a legal entity, it can be done in the form of the following:
- Sole proprietorship (taxed on profits in an individual capacity)
- Partnership (note that each partner is taxed on their share of taxable profits in an individual capacity, as a partnership is not registered separately for income tax purposes)
If you are a close corporation, co-operative or a private company, you may qualify for certain tax incentives and preferential rates in terms of the small business corporation (SBC) incentive. Alternatively, if you are a natural person or a company and you meet specific requirements, you may qualify for the turnover tax system.
For information on the types of business you can establish and the tax implications for each one, click here.
You can also call the SARS Contact Centre on 0800 00 SARS (7277) for more information or assistance with a specific query.