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Provisional tax or starting a CC?

Posted 4 December 2015 under Tax Q&A


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TLab says:
3 December 2015 at 10:50

I am currently employed by a company and earn a fixed monthly salary. I have however started manufacturing and selling goods in my private capacity, completely separate from my company. A typical order would be to the value of R20 000 (turnover), with a total cost-of-sale of R10 000, leaving me with R10 000 profit. I can receiver anywhere from three to twenty orders in a year, with no guarantee of regularity. I have two questions:

1. Do I need to register as a provisional tax payer, or would it be more tax-efficient to register as a sole proprietor or a cc, taking into account the administrative time and costs (paying an accountant etc. )?
2. If I register as a provisional tax payer, do I declare the estimated profit I'm making (i. E. R10 000) on my IRP6 or do I estimate the turnover I'm making (i. E. R20 000) on the tax return? Basically, do I pay tax on my turnover or my profit?

Thanks in advance!

This entry was posted in Tax Q&A and tagged , , , . Bookmark the permalink.

TaxTim TaxTim says:
3 December 2015 at 15:46

How much is your fixed monthly salary?

TLab says:
3 December 2015 at 16:01

My fixed monthly salary is R28 000 before tax.

TLab says:
4 December 2015 at 6:37

My fixed monthly salary is R28 000 before tax.

TaxTim TaxTim says:
4 December 2015 at 12:44

Based on the earnings details you have provided, it would be more tax efficient to run your business as a sole proprietor in order to take advantage of the sliding scale tax rates for individuals (versus a flat rate plus dividend rate for companies). There is also significant red tape associated with running a company.

Therefore yes, you need to register as a provisional tax payer.
What is Provisional Tax? How and when?

You can deduct all business related costs from your sales and therefore you pay tax on your net profit only.

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