6 January 2016 at 21:36
I need guidance on what is required ito independent contractor (IC) tax & vat requirements. 1) If trading through my PTY LTD company as an IC, do I pay companies tax as well as personal income tax?
2) Do I deduduct all claims and deductions (medical aid, RA) prior to paying over tax, or only when I reconcile/ file tax?
3) How many times a year do I need to file tax returns?
4) Do I need to setup PAYE and UIF?
5) Income will exceed R1m per year, so vat should be registered. If true, When do I pay vat over to SARS and what paperwork is involved?
6) Do you assist with all paperwork wrt SARS or only major events like annual tax returns (if applicable). I don't mind paying for your service if you can assist with this and more questions. Do you offer consultation via email if I subscribe?
This entry was posted in Tax Q&A and tagged Salary / IRP5, Independent Contractor, Provisional Tax, Medical, Deductions, Commission, Rental Income, Retirement, Dividends, Penalties, Travel Allowance, Audit / Verification. Bookmark the permalink.
8 January 2016 at 7:34
Thanks for the compliment!
Below are answers to your questions:
1. You will need to file a company tax return and pay company tax on your company's profit. You will also need to file an individual tax return and pay tax on the income taxed in your personal capacity. This will include personal investment income (e.g. dividends, interest), salary drawn from your company and income earned from other sources in your individual capacity.
Please work through these questions to see if your company is a Small Business Corporation (SBC) and can therefore qualify for reduced corporate tax rates Is my Business a Small Business Corporation?
Please also check whether or not your company is a "Personal Service Provider", as then the tax treatment will be different.
2. Your company will need to register as a Provisional taxpayer and pay tax 2-3 times per year. This tax will be calculated based on your estimated taxable income for the year (i.e income less business related expenses). You will pay tax in your personal capacity on a monthly basis on the gross "salary" drawn from your company. Your tax benefits from Medical and RA contributions will be claimed when you file your annual tax return.
3. As a provisional taxpayer, your company will need to file a provisional tax return twice a year - Aug and Feb (with an option third one in September after the year end). The company will also need to file a Company Tax Return annually (within 12 months after the Company year end). As a individual and salaried employee, you will need to file a Tax Return annually. However, if you earn income from other sources (other than salary drawn from your company) you will also need to register as a provisional taxpayer in your personal capacity and file a provisional tax return 2-3 times per year.
Please read our blog on What is Provisional Tax? How and when?
Am I a Provisional taxpayer?
4. Assuming you are a Director of your company, any drawings/directors fees are deemed to be "salary" and your company is deemed to be an "employer". You will need to register your company for PAYE and UIF and withhold accordingly on salary payments to yourself and any other employees (if applicable).
5. You only need to register the company for VAT once the turnover exceeds R1m in a twelve month period. However, check the requirements for voluntary registration if you would like to do prior to the 12 month period. VAT tax returns are filed every second month. You will need to keep a record of all your income and expenses as well as all valid supporting tax invoices (in the event that SARS audits you which does happen regularly).
6. TaxTim currently assists with tax returns and provisional tax returns for individuals only, however we are building a product to assist with company tax returns in the future too. Please leave your details here so we can assist you with your business's tax return in the future.
Please check our Pricing Page to see our fees per tax return. Depending on the package you select, the fee may include answers to your questions too.
I hope this clarifies things for you.