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Is income earned online taxable?

Posted 20 August 2012 under Tax Questions



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Would this apply as provisional tax ? I earn income from Cash Back advertising, Basically you purchase a $10 advertising package which promotes your website for 75 days and pays you 2% per day giving you a return of $15 or 150% after 75 days. Thanks for your website, I was totally clueless about tax before.

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TaxTimTaxTim says:
15 August 2012 at 16:48

If your taxable income is greater than R20 000 per year and you are not a salaried employee then you need to register for provisional tax. Essentially if you are earning extra income on top of your usual salaried income greater than R20 000 you will need to register. Is this your only income or do you generate income from the website?

Only a pleasure, glad we could help you understand more about tax!


Mano says:
15 August 2012 at 18:51

I will earn from various websites and I am currently a salaried employee but my (working related income) is not taxable yet. Will I then need to pay Provisional and PAYE tax?


TaxTimTaxTim says:
15 August 2012 at 19:27

Is your working related income less than the taxable threshold? PAYE is only applicable for remuneration, such as salaries and is withheld by an employer. Where someone does not have PAYE withheld, they would meet the definition of a Provisional Taxypayer so no PAYE is applicable for the website income.

Where your other income exceeds R20 000 per annum then you need to register as a provisional taxpayer and declare all your estimated income including from employment. The PAYE, if any, withheld here would be taken into account in the calculation of provisional tax payable.

The reason for the provisional tax payment is to ensure that you are not paying all your taxes at year end and rather split it out over 3 periods. Whereas a salaried employee pays tax on a monthly basis.


Mano says:
15 August 2012 at 23:08

Yes it is just a few hundred below the threshold 57600 per year. What about registering as a LLC - Limited Liability Company Is that possible in RSA? I have read that there are allot of benefits concerning tax (USA Related).


TaxTimTaxTim says:
16 August 2012 at 15:45

You could register a (Pty) Ltd in South Africa which could manage the business, they are taxed at a much lower rate than individuals and other companies, you would need to see if you comply however.

LLC's are generally registered in places like Delaware in the USA and attract no corporation tax. However if you are a South African resident and the company is owned by you then in most cases all the profits are taxable in your hands at your marginal rate of tax and many deductions are not allowed. International tax planning is a specific area of tax law, if you would like more information you are welcome to email tim@taxtim.com and we will direct you onto one of our specialists.

Registering a small business corporation is probably the best way to go as income under R350 000 is taxable at 7% and this certainly better than the 18% threshold you are about to reach. Remember as well that all costs related earning that income can be set off against the income before tax is calculated.


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