Important Company Information
Don’t Waste Anymore Time And Money.
Firstly, we at Accuright Accounting Services congratulate you on your new company and wish you and your company the most profitable returns. We compiled this list with the legislation matters that we noticed are not always understood or known to directors of new companies. Listed below are the matters that we see as the most important ones that new directors struggle with. Kindly consult your accountants regarding additional matters of legislation, as there are too many to list in a single document.
Important information regarding CIPC (Companies and Intellectual Property Commission):
Each company has the obligation to submit an annual return supplying CIPC with the turnover of the company. There is also an annual fee payable upon submission of the annual return. The annual fee is calculated by means of a bracket used by CIPC depending on your turnover. The lowest annual fee is R 100.00. Together with the annual return, you need to submit annual financial statements or a financial accountability supplement, which ever one is applicable to your company.
What are the consequences if either of these are not submitted?
If you don’t submit and pay your annual returns, CIPC will commence with the deregistration process of your company. If the deregistration is finalized by CIPC, you may not trade with the company any further. A deregistered company can be reregistered, but CIPC has a short list of reasons why a company can be reregistered, and they reject reregistration request not falling within this criterion.
If you don’t submit your annual financial statements or financial accountability supplement, CIPC will issue a notice requesting these to be submitted. If the notice is ignored, CIPC will issue you a penalty of R 1,000,000.00 (minimum) or 10% of your turnover (maximum). Thus, its highly advisable to be compliant at CIPC.
Important information regarding VAT (Value Added Tax):
It’s important to remember that once your turnover reaches R 1,000,000.00 its mandatory to register for VAT (assuming you are not exempt from a VAT registration which would rarely be the case). For a voluntary VAT registration, you must be able to prove that you can accumulate R 50,000.00 turnover with the company, after which you can register as a VAT vendor.
Also take note of the requirements of a valid tax invoice as SARS (South African Revenue Services) is very strict on tax invoices, a valid tax invoice must;
1. Contain the words “Tax Invoice”.
2. Name, address (postal or physical) and VAT number of both your company and the supplier or customer.
3. Invoice number and date.
4. Accurate description of goods or services.
5. Quantity of goods or services.
6. Value of goods or services.
7. Value of tax (VAT) charged.
VAT has two types of registrations:
1. Payment basis – When using this basis, you only declare the income for VAT purposes once you received payment. SARS rarely registers VAT vendors on this basis.
2. Invoice basis – When using this basis, you must declare the income for VAT purposes once you received payment or issued the invoice, which ever comes first. This is the most common type of basis chosen by SARS.
Important information regarding income tax and provisional tax:
Once your company has been registered at CIPC, they will send the company information to SARS and SARS will then automatically register your company for income tax and provisional tax (these two tax types has the same tax number at SARS). Your company needs to prepare financial statements at financial year-end (as registered at CIPC, usually February) and needs to submit the income tax return on the last day of the financial year-end month, a year after the financial year-end. Using a February year-end as an example; your 2019 tax return (1 March 2018 to 28 February 2019) must be submitted on 29 February 2020. Provisional tax is paid on a bi-annual basis (every 6 months) and due six months after the financial year-end month and on the financial year-end date. Using a February year-end as an example; your first provisional tax return must be submitted and paid on 31 August and the second provisional tax return must be submitted and paid on 28 February, both containing the figures for the same financial year that they are submitted in. There is also a penalty for under provision of provisional tax, meaning that your provision for income tax must be as accurate as possible to avoid this penalty.
Important information regarding SDL (Skills Development Levy):
SDL is levied at 1% on the basic salary of each employee of your company and is payable by the employer, not the employee. SDL is payable to SARS on the EMP201 return along with the UIF and PAYE. Its mandatory to register for SDL once you notice that your basic salaries are going to exceed R 500,000.00 in the following 12 months. The emphasis is on “going to exceed” and not “already exceeding”.
Important information regarding UIF (Unemployment Insurance Fund):
UIF is levied at 1% on the basic salary of each employee of the company and is payable by both the employee and the employer, meaning 1% from both. The UIF has a current cap of R 148.72 per month from the employee and R 148.72 from the employer, meaning you will never pay more than the cap in a month per employee (each employee having this cap on their individual salary).
Important information regarding PAYE (Pay AS You Earn):
As soon as the company has one or more employees employed for more than 24 hours in a month, the company must register for PAYE. PAYE is the employer’s responsibility to deduct from the employee and pay it over to SARS. The PAYE will then reflect on the employee’s IRP5 or IT3(a) income tax certificates for their income tax declaration. These income tax certificates are generated once a year in April or May by the accounted with the supplied salary figures on each month’s payroll. The income tax certificates are generated when submitting the EMP501 employer’s reconciliation declaration. The EMP501 returns are submitted on a bi-annual basis, one in October (with 6 months figure) and one in May (with 12 months figure when the income tax certificates will be generated).
Important information regarding UIF (Unemployment Insurance Fund):
The company must also register at the department of labour for UIF as soon as the company has one or more employees employed for more than 24 hours in a month. Returns must also be submitted to the department of labour reflecting basic information regarding the employer, employees and the salary of the employees. The amounts paid over to SARS for the UIF, will then be paid over to the department of labour by SARS (uploaded to your reference number at the department of labour).
Important information regarding Workmen’s Compensation (also known as compensation fund):
As soon as the company has one or more employees employed for more than 24 hours in a month, the company must register at the department of labour at workmen’s compensation. Once a year the company must submit a return to the workmen’s compensation and then pay the outstanding balance.
The company must then obtain a letter of good standing stating that all return and payments are up to date. The compensation fund is there to pay for any injuries on duty of the employees. The amount payable per company varies, as they calculate the amount payable based on the risk of each company, meaning security companies will generally pay more than administrative companies, as their risk for injury are higher. Always remember that if the due date for returns and payments at SARS falls on a weekend or a public holiday, its due on the last business day prior to the deadline. Also remember that payments need to reflect in the bank account of SARS on the due date, thus, it’s always better to make payments a day before the due date. Always consult your accountant if you wish to provide your employees with any additional compensation or pay any of their expenses as each form of compensation has its own complications. If the company owns a vehicle and one of the employees drives with the vehicle for personal reasons, a fringe benefit will arise in the employee’s name and they will be taxed on this fringe benefit. In the case of the company providing a loan to the director (even in the form of merely paying the director’s personal expenses), interest must be issued on the loan. This interest will reflect in the company as a taxable income and in the director’s name as a non-deductible expense. Interest rates on these loans must be in accordance with SARS prescribed interest rates. A company may only trade under the circumstances of being a going concern, basically meaning that there are enough funds available in the company to exist in the future, meaning that the company will be able to pay all its creditors (suppliers) and its liabilities does not exceed its assets. As registered accountants we are bound to report all companies that are trading even though they are not a going concern that we are aware off.