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Do I need to apply for a tax directive for my earnings received (private company)?

Posted 1 July 2015 under Tax Questions



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Lucy says:
23 June 2015 at 16:13

Is a tax directive necessary for my consulting firm - I have a private company with 1 employee (myself). I provide consulting services through another IT firm to their clients. I provide the firm with a Sales invoice for hours worked etc at the end of every month. They in turn pay the full invoice amount. I pay myself a fixed salary (PAYE & UIF deductions included) through my business. The remaining amount is profit to the business where we're liable to pay company tax (usually around 7% turnover dependent). Is a tax directive necessary for these lump sum payments? The invoices vary month on month dependent on hours worked etc.

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TaxTimTaxTim says:
23 June 2015 at 16:38

No you do not need to apply for a directive, however why are you only paying 7% tax on the company profits?


Lucy says:
23 June 2015 at 16:48

Great, so to confirm no tax directive is necessary - why is this so? I just need to correct justification for my client. To answer your question regarding the 7% tax rate. My business is categorised as a Small business and my profits are less than R365000 per annum. Is this not accurate?


TaxTimTaxTim says:
23 June 2015 at 22:58

Based on the information provided you would not be considered a SBC so you would need to be taxed at 28%. The directive would not be applicable given you are in fact a personal service provider which gets taxed at 28%. Do you pay yourself a fixed salary each month?


Lucy says:
24 June 2015 at 8:01

Thanks for the clarity. Yes I intend to pay myself a fixed salary every month as well as dividends on occasion.


Lucy says:
24 June 2015 at 8:02

What are the conditions for a business to be considered a SBC?


TaxTimTaxTim says:
28 June 2015 at 15:47

The conditions would be that you have more than 3 employees who are not shareholders or connected to the shareholder, the shareholder does not have any shares in any other private companies and that the service performed by the company is not one which you could personally perform yourself in the filed of any of the following:

accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science


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