Paying business income tax

GET TAX AFFAIRS IN ORDER Have a sound financial management system that keeps track of all financial dealings.

The new year always brings new ideas, such as starting other businesses or expanding existing ones into new markets. But before you spend all your profit on new ventures, you must remember that early in the year it is also the South African Revenue Services’ (Sars’) busiest time, because it is then when Sars starts collecting, i.e. when you are required to pay your business income tax.

In South Africa February 28 has generally been considered the non-official financial year end for most companies, although a business can choose to have its financial year end anytime during the year. But if your financial year end is February, then before or by the 28th you must submit income tax returns and pay whatever amounts due to Sars, if any are determined of course. Remember income tax is paid only when you make a profit and that profit is subject to percentages and, as a small business, it also depends on whether you’re registered for tax turnover or not.

But not to get too technical, the point to note is that a deadline is looming and you must get your tax affairs in order – or risk penalties and interest that could eat into your profits and hinder your progress in 2018. Call your accountant or whoever helps you with your books, start going through all the information gathered in the reporting year and submit.

A note to remember is that the deadline of February or whichever month you use is for 2016 income tax returns and not 2017. Many confuse that small detail which becomes a big detail if not considered. Sars gives a full year for a company to submit, although you are free to submit 2017 now or during the course of the year.

That is why you should have a sound financial management system that keeps track of all financial dealings and makes it easier to compile relevant data for tax purposes when they are due.

There is no excuse in this day and age not to have accurate, ready-to-go financial information, because there is an array of accounting software that makes financial management much easier.

Therefore the way to handle tax is to have all records ready at any time, otherwise it will cost you a fortune when Sars requires audited financials and you have to hire an accountant to try and make sense of transactions that took place two years ago.

Munya Duvera is Duvera Elgroup CEO