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?
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.