TEN TIPS TO MAKE YOUR HOLIDAYS LESS FRAUGHT AND MORE FESTIVE

Holidays are a time of high stress. Despite the delight of not having to work for several days or even weeks, holidays come with pressures.

These can include catching up with family, giving gifts, consuming to keep the economy buoyant, and having enough fun to see us through to the next holiday.

Here are ten tips for enjoying things that little bit more without all the stress and after-effects.

Don’t go into debt

Each Christmas season, the media will, like clockwork, report on Christmas spending.

This is the time of year when much of the retail sector depends on consumers to spend big. We often are made to feel like we aren’t doing our bit for the economy if we aren’t giving our credit cards a bootcamp-grade workout. But you don’t need to do it.

Gifts need to be thoughtful – not expensive. Why not draw on any talents to make a homemade gift or a promise of services (like babysitting or lawnmowing), or perhaps give a personally designed IOU card for a gift you can purchase when the Christmas sales are on?

Or why not go green and buy quality second hand products?

Holiday at home

One way to avoid debt is to not undertake an expensive holiday during this higher-priced, peak tourism season.

Bali can wait for later. Instead, explore your own backyard with a renewed perspective. Remember, international tourists pay serious money to visit our beautiful beaches, national parks and recreational playgrounds.

If you can’t avoid a nagging feeling that your neighbour holidaying in Europe has outdone you, try thinking again.

Back to nature

Another upside to holidaying at home: these breaks are the rare chance we all have to have some serious downtime.

There are plenty of things you can enjoy with your family and friends much closer to home – nature, for example.

Taking walks for a meditative experience in nature.

Simple things

This holiday season, why not engage your playful creativity to invent ideas for simple fun and joy?

Let’s celebrate the fact we are in the sun in the southern hemisphere and forget the carols that dream “of a white Christmas”. Picnics packed with our extraordinary foods and wines in the hidden beauty spots known only to locals.

What about playtime? Kids remind us that fun can be had with things at hand – a frisbee, a puppy, or their peers.

Moderation in pleasures

This is the hard one at this time of year.

For many the festive season is about enjoying good food and drink in the company of loved ones. But don’t let your spirit of the season be undone by the “spirits” of the season.

Hangovers and food babies are not a good look – so why don’t we just avoid them this year?

Think of others and give back

The end of the year provides us with a chance to understand the blessings we have enjoyed in 2018.

One way to feel really good this holiday season is to take a little time to give back.

Find some reflective time

The end of the year also offers time to think about the year that was and set some intentions for the year to come. While the joy of being together is a feature of this time, also try to create some reflective time for yourself too.

Resolutions for new beginnings

This reflective time can give us an opportunity to take stock of our lives and use the traditions of the New Year to make 2019 better and more balanced.

We joke about resolutions, their making and their breaking, but these quaint traditions have some folk wisdom behind them.

Each new year offers new opportunities to transform some things we would like to change.

Travel with pets

When we do go on holidays, we have found in the past that our best friends have sometimes been less then welcome. I speak of our dogs and cats.

Let your pets enjoy the holiday season too.

Digital detox

The impact of technology, social media and instant communications results in some workers finding work creeping into their after hours’ lives. This holiday, what about trying a digital detox and get off the mobile, the email and Facebook for a specified period of time?

In fact, digital detox holidays are a “thing” now. That many of our iconic national parks don’t have reception is a bonus.

http://theconversation.com/ten-tips-to-make-your-holidays-less-fraught-and-more-festive-88866

– as amended

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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KORPORATIEWE BEHEER – FINANSIËLE JAAREINDE

A3Die finansiële jaar van ’n maatskappy staan bekend as die rekenkundige periode. Ingevolge artikel 27 van die Maatskappywet No. 71 van 2008 (“die Wet”), het elke maatskappy wat geregistreer is ingevolge die Wet ’n finansiële jaareinde. Hierdie datum word vervat op die Kennisgewing van Inkorporasie-dokument van ’n betrokke maatskappy.

Die eerste finansiële jaareinde van ’n maatskappy begin op die datum waarop die maatskappy geregistreer is. Hierdie laasgenoemde datum verskyn op die registrasie dokumentasie van die maatskappy. Die finansiële jaareinde van die maatskappy sal dan eindig op die datum soos wat dit verskyn op die Kennisgewing van Inkorporasie-dokument van die maatskappy.

Die opeenvolgende finansiële jaar van ’n maatskappy begin op die datum direk na die voorafgaande finansiële jaar geëindig het, en sal dan weer eindig op die datum soos vervat in die Kennisgewing van inkorporasie-dokument van die maatskappy, behalwe as die maatskappy se finansiële jaareinde verander word deur ’n besluit van die direksie gedurende die betrokke finansiële jaar.

Die direksie van ’n maatskappy mag die finansiële jaar van ’n maatskappy enige tyd wysig deur ’n aansoek van wysiging in te dien by die Companies and Intellectual Property Commission (“CIPC”) deur die indiening van ’n CoR 25-vorm wat geteken is deur een van die direkteure van die maatskappy asook ’n ondersteunde resolusie wat geteken is deur al die direkteure van die betrokke maatskappy.

Die vereistes vir die wysiging van ’n finansiële jaareinde soos uiteengesit is in die Wet is as volg:

  1. ’n finansiële jaareinde mag slegs een keer in ’n betrokke finansiële jaar gewysig word;
  2. die nuut-verkose finansiële jaareinde moet ’n datum wees wat later is as die datum waarop die wysiging ingedien word by die CIPC; en
  3. die nuwe finansiële jaareinde mag nie daartoe aanleiding gee dat die nuwe finansiële jaar langer as 15 maande sal wees ná die voorafgaande finansiële jaar geëindig het nie.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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SARS INTEREST ON PROVISIONAL TAX

A2As with various other business transactions, taxes in their various forms also attract interest, either payable by the taxpayer to SARS, or due to the taxpayer from SARS. Apart from knowing which of the various SARS interest rates are applicable (which is often a challenge in itself), knowing in which circumstances interest is applicable and the relevant income tax treatment of that interest, is increasingly important. This article explores one such a scenario: provisional tax.

Overpayment of provisional tax

If a taxpayer has any tax credit (amount by which taxes already paid exceeds the calculated tax liability) and that credit exceeds R10 000 or the taxpayer has a tax credit and the taxable income exceeds a certain amount (R50 000 for individuals and trusts and R20 000 for companies), the taxpayer earns interest at the prescribed rate, namely 6% (compared to the 10% when interest is payable to SARS – see in more detail below).

Subsequent income tax treatment

Interest earned from SARS will be included in the gross income of a taxpayer and accordingly, is fully taxable (subject to any annual interest exemptions for natural persons). Although income tax generally works on the principles of receipt and accrual, section 7E of the Act determines specifically that any interest due to a taxpayer from SARS will only be deemed to have accrued on the date on which it is paid to (received by) a taxpayer. Although less material for individuals, this could lead to some differences in treatment for companies and potentially give rise to deferred tax.

Underpayment of provisional tax

If a taxpayer’s normal tax obligation exceeds any tax credit and the taxable income exceeds a certain amount (R50 000 for individuals and trusts and R20 000 for companies), interest will be levied by SARS at the prescribed rate – currently 10%. Interest is also payable at the 10% prescribed rate on late payments in respect of first, second and third provisional tax periods.

Subsequent income tax treatment

Section 23(d) prohibits the deduction from taxable income of any interest paid under any act that is administered by SARS. Therefore, any interest paid to SARS will not be deductible for income tax. Presumably, this is since this interest will not be considered to be in the production of income or expended for the purposes of a trade.

Given the widely publicised delays on refunds for various types of taxes, taxpayers should carefully scrutinise their statements of account from SARS to ensure that interest they are entitled to in terms of the various tax acts has been paid to them. Taxpayers should also carefully take note of due dates for provisional tax payments, to ensure that interest is not incurred on late payments or any underpayments.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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VALIDITY OF VOETSTOOTS CLAUSES UNDER THE CONSUMER PROTECTION ACT

A1Consumers often opt to purchase second-hand goods in order to save money or because of the mere fact that they stumbled upon a bargain. Second-hand goods, although a possible bargain, can be risky to buy as it may contain defects, and the consumer’s recourse in such an event can be severely limited. This concern relating to defects is considerably increased when buying high-value second-hand goods such as motor vehicles, where latent defects can cost a lot of money to repair – often leaving the consumer in a position where he or she is spending significant amounts of money repairing the defects whilst still paying off the initial purchase price.

The biggest limitation of the consumer’s right to recourse when buying faulty goods is the inclusion of the so-called “voetstoots” clause which is often included in verbal or written sale agreements. These clauses are often referred to as “as is” clauses since it literally means that the consumer is buying the product as it stands, with all latent and patent defects included. The seller can then not be held liable for damages under the common law once such defects are discovered, thus leaving the consumer without a remedy.

However, this traditional position as set out above has been dramatically altered in respect of second-hand goods sold by a supplier who is rendering goods or services in the ordinary course of his or her business (this will include most sellers who are not private persons merely selling his or her goods on a once-off basis). This protection is afforded to consumers purchasing both new and second-hand goods by the CPA.

Section 55 of the CPA sets certain standards with which goods sold by suppliers must comply with. This section requires firstly that goods must be reasonably suitable for the purpose for which they are generally intended. The goods must secondly be of a good quality, in a good working order and free of any defects. The goods must lastly also be useable and durable for a reasonable period of time, having regard to the use to which they would normally be put to and with regard to any relevant circumstances.

Section 56 of the CPA creates the implied warranty according to which consumers have certain remedies if the above standards are not met. Consumers may, according to this implied warranty, return such defective goods for repair, refund, or replacement. This warranty is valid for a period of 6 months from the date of purchase.

It is thus clear from the above discussion that the traditional voetstoots clause which was valid under the common law no longer protects sellers against liability for faulty goods. However, a voetstoots clause which specifically states what the condition of the item being sold is and which lists all the defects which are present will be valid in terms of the CPA if the consumer then expressly accepts it. This is the position since the consumer would not be prejudiced as he or she will be aware of the defects and thus make an informed decision.

It is furthermore important to note that neither the standards as set out in section 55 nor the warranty contained in section 56 can be excluded from a sale agreement. The consumer is thus always protected. Consumers considering to buy a second-hand motor vehicle or some other high-value second-hand item would thus be wise to rather buy such an item from a dealership as opposed to a private person who is entering into a once-off sale, since voetstoots clauses between private persons entering into a sale agreement will still be valid (except if such private person wilfully concealed the defects).

Reference List:

  • Consumer Protection Act 68 of 2008
  • Advisory Note 1: Consumer Goods and Service Ombud
  • Consumer Protection Guide for Lawyers: Law Society of South Africa
  • Right to Return Goods in Terms of Section 56 of the CPA: SEESA

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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NON-COMPLIANT COMPANIES WILL FEEL THE PAIN FROM SARS FROM DECEMBER

The South African Revenue Service (SARS) will be using information supplied by the Companies and Intellectual Property Commission (CIPC) to determine which companies are not tax compliant and impose penalties accordingly, from 7 December 2018.

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The national revenue collector issued an official notice to registered accountants and tax practitioners’ during October to confirm Fabian Murray, acting SARS chief officer’s announcement of the implementation of the new line of attack earlier this year.

The notice, which is signed by Acting SARS Commissioner, Mark Kingon, states that administrative penalties for late corporate income tax (CIT) returns will be imposed on over 300,000 companies. Such penalties can range from R250 to R16,000 per month of lateness.

It is a well-known public fact that SARS is short on collection, and as the Tax Administration Act determines a penalty per month of lateness, this will boost their collection. The law also looks at when a company should have been registered for tax. For instance, if you opened a company five years ago and never registered it, the minimum penalty is R250 x 12 months x 5 years = R15,000.

However, this minimum penalty is only applicable in instances where a company was dormant, as the law still demands CIPC and SARS compliance. Where a company is active, depending on various factors, the Tax Administration Act will determine the level of penalties applicable.

Directors could feel the pain

The directors of companies that are found to be not tax compliant, should rightly feel uneasy, as SARS will undoubtedly come after them personally, especially where the company does not have means to pay penalties, or plainly ignores it.

There are very clear company law provisions creating a personal liability against being reckless and delinquent on statutory duties.

Therefore:

  • A head in sand approach will not be wise here, as everyone dealing with SARS will agree – fx the problem before SARS targets and/or the system penalises you.
  • Where you have ever setup a company or been a director, and you are unsure whether the company is tax compliant, immediately get the status checked up with a CIPC registered tax practitioner, who can access both CIPC and SARS systems and give you a complete and accurate picture. This only takes a day or two to complete. This process is generally known as a tax diagnostic which gives you a complete update and visibility of your situation.
  • If there are any sensitivities about your situation, deal with tax attorneys, which ensures you have legal privilege. This is not obtainable from accountants or normal tax practitioners.
  • Where you are on the wrong side, fix anything outstanding, before the penalty is imposed. Your ideal skill set is someone who can provide full accounting sign-off, tax attorneys and those who know how to fix tax issues proactively, without causing you to be placed automatically on the SARS audit list.
  • The issue comes in in cases where the penalty has already been imposed, as they are not easily waived. SARS makes penalty waiver decisions by committee and you therefore need an experienced accountant, or ideally a tax attorney on more complex matters.

Author: Melani du Toit

http://www.bizcommunity.com/Article/196/512/184127/ct-1.html

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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VAT TRAP COULD IMPACT ON YOUR EARNINGS

It’s been nine years since the annual threshold required to register as a VAT vendor was increased from R300,000 to R1m. If you consider the effects of inflation over that period it seems clear that a growing number of businesses, and in particular professionals, will be required to register as vendors and to charge VAT on their fees.

Sc2

Jeremy Burman of PCH

“This obligation to register is measured on the value of taxable supplies rather than actual amounts received, and will apply regardless of the entity through which the business is carried, i.e. sole proprietorship, company or trust. The impact that this compulsory VAT registration will have on a person will depend largely on the kind of business or service being offered,” says Jeremy Burman of Private Client Financial Services, a division of Private Client Holdings.

Businesses and professionals such as IT support companies and accountants who render services to clients who are themselves VAT vendors, a compulsory registration should not have any significant adverse affect on their profitability, apart from the additional administration costs involved in meeting the VAT reporting requirements. “The business will be obligated to charge an additional 15% on all invoiced fees and pay this over to the South African Revenue Service (SARS), leaving their underlying revenue unchanged. The VAT registered client can then claim this 15% back as input VAT, leaving their effective cost unchanged.”

Income going backwards

However, Burman cautions that for persons like doctors and dentists who largely service individuals in their private capacity, the effect on their business may be significant.

“VAT is an indirect tax meaning that it is a tax charged by the vendor but ultimately borne by the client who pays the higher VAT inclusive price. With VAT registration, the vendor will face the tough decision of either increasing fees in line with the legislated VAT rate of 15%, which many clients may not be willing or able to afford or accepting a decrease in net revenue through implementing a lower percentage increase.”

“For example, a professional who charges an hourly rate of R 2,000 will be required to increase their fees to R 2,300 (R 2,000 x 1.15) if they want their earnings to remain unchanged. The VAT portion of R300 will be payable to SARS and they will retain R2,000. However, where a professional is aware that their clients will not accept such a large increase and any such increase would result in losing business, they may choose to share the burden of the VAT charge – increasing fees by only 8% (for example)and charging a VAT inclusive fee of R 2,160 (R 2,000 x 1.08) of which they would be obligated to pay R281 (R 2,160 x 15/115) to SARS, leaving their net hourly rate at a reduced amount of R 1,871.

“Coupled with this, certain professionals, such as doctors in private practice, may be limited to prescribed rates for services and are therefore unable to pass on any increase to their clients, resulting in a significant decrease in earnings from date of registration,” says Burman.

Claiming input VAT

On the upside, for those persons who are required to register as VAT vendors, input VAT may be claimed on taxable supplies or services purchased from a VAT vendor for business purposes. Examples of purchases on which input VAT may be claimed include rent, communication costs, professional subscriptions, bank charges, stationery, equipment purchases etc. However, input Vat claims are prohibited on certain business purchases, most notably entertainment expenses, staff welfare, petrol, car hire costs, and acquiring passenger motor vehicles.

“VAT returns are generally submitted every second month with VAT due for a two month period, being payable on the last business day of the following month. Most vendors will be registered on the invoice basis which requires them to pay VAT on the amounts invoiced in the VAT period (regardless of whether these invoices have yet been settled).

“This may cause cash-flow issues for vendors whose customers are slow with payments,” warns Burman. “There is some small relief granted in that the vendor may also claim input VAT on supplier invoices received in the VAT period and not yet settled. A person who practices as a sole proprietor and who has annual taxable supplies of less than R 2.5m may apply to be registered on the cash basis for VAT purposes. This will allow them to pay output VAT only on amounts settled in the VAT period (and conversely only claim input VAT on supplier invoices actually paid in the VAT period).”

It is also worth noting that VAT registration attaches to a person. Therefore, if a person carries on two separate businesses and he is registered as a vendor for one, he will be required to charge VAT on invoices raised in the other. For example, a VAT registered architect who adds interior decorating to their services offered will be required to charge VAT on fees for this service as well. “Section 50A of the VAT Act also allows SARS to treat two separate businesses as one for VAT purposes when a person has split his business between two or more entities for the main purpose of remaining below the threshold that triggers compulsory VAT registration,” says Burman. “And if a person fails to register as a VAT vendor timeously, submits returns late, or keeps inadequate VAT records, this will result in penalties and interest being payable to SARS.”

If you are a person carrying on a business whose income over the last 12 months has exceeded R1m or is reasonably expected to do so in the coming months, it is recommended that you speak to a registered tax practitioner who can provide the necessary guidance on meeting your VAT registration obligations and minimising the impact on your business. This will help to ensure that costly mistakes are avoided.

[08 Nov 2018 08:34]

http://www.bizcommunity.com/Article/196/512/184049.html

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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TAX ON RETIREMENT LUMP SUMS

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Determining the tax consequences in respect of any lump sum benefits from retirement funds can be complex and various legislative changes have been incorporated over the last few years, to regulate and align the tax treatment of these benefits.

Lump sum benefits are included in “gross income” in terms of paragraph (e) of the definition in section 1 of the Income Tax Act[1], read with the provisions of the Second Schedule to the Income Tax Act.

The portion of your retirement interest that can be taken as a lump sum depends on the type of retirement fund and whether you withdraw (prior to retirement)[2] or retire (normally after reaching normal retirement age and on leaving your employer) from the fund.

When retiring as a member of a pension fund, pension preservation fund or retirement annuity fund, members are only allowed to take (or commute) a lump sum equal to a maximum of one-third of the retirement interest in that fund. The balance must be used to buy an annuity. This rule does not apply if the entire value of the fund does not exceed R247,500. In these cases, the member may take the full retirement interest as a lump sum. There is no such annuitisation requirement for provident or provident preservation funds, and the member’s full retirement interest in such funds will be paid as a lump sum upon retirement.[3]

The abovementioned lump sum benefits are taxed according to a retirement lump sum tax table.[4] Please note that all lump sums from retirement funds are taxed on a cumulative basis and therefore all lump sums received by the member after 1 October 2007 (i.e. including benefits taken prior to retirement) will be considered in determining the current benefit. Furthermore, contributions to these retirement funds may be deductible, and subject to certain limitations.

Following retirement, it is important to note that two-thirds of the retirement interest in respect of pension, pension preservation or retirement annuity that is received in the form of an annuity, will be taxed in the retiree’s hands to the extent that his or her total income exceeds the tax threshold. Even though the person is retired and no longer earning a salary, he or she may still be liable for income tax on their annuity income.

The take away is that careful consideration should be given to the tax consequences which may arise when retiring from a retirement fund.

[1] No. 58 of 1962

[2] Please note that different rules may apply in respect of such withdrawals and should be considered separately from the circumstances discussed above.

[3] Specific fund rules may however provide for the payment of an annuity.

[4] See SARS’ website for the tax table.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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MANAGEMENT’S RESPONSIBILITY

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Throughout the audit of a set of financial statements, the phrase “management/director’s responsibility” appears. It is included in the engagement letter, the financial statements and the auditor’s report. But what does it mean?

Management is responsible for the management of the business, for implementing and monitoring of internal controls in the business, and in terms of the Companies Act (“the Act”), for maintaining adequate accounting records and the content and integrity of the financial statements. These financial statements must be issued annually to reflect the results thereof.

These financial statements are used by various users (shareholders, directors, banks, SARS, etc.) to make certain decisions (buying and selling of shares, valuations, credit terms, etc.), and therefore need to be a true representation of the business.  It is therefore critical that all transactions are valid, are recorded accurately and completely in the correct financial year, are classified correctly, and that all assets and liabilities that exist are recorded at the true cost/value thereof.

In terms of the Act, financial statements are to be prepared using either International Financial Reporting Standards (“IFRS”) or IFRS for Small to Medium-sized Entities (“IFRS for SME’s”). Luckily management is not responsible to be experts in the above-mentioned standards, as the Act does allow for management to delegate the task of preparing the financial statements to someone with the knowledge and skill set to be able to perform this task. The Act does, however, not allow management to delegate the responsibilities that go along with it too, so they need to ensure that when they do delegate the task, that it is to a responsible person and that they review the financial statements before approving it.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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ADMINISTRATIVE PENALTIES FOR CORPORATE INCOME TAX (CIT) TO BE IMPOSED

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Dear Taxpayer

SARS will be imposing administrative penalties from December 2018 for outstanding Corporate Income Tax (CIT) returns.

Administrative penalties will be imposed on companies that receive a final demand to submit a return. In terms of Section 210 of the Tax Administration Act of 2011, non-compliance with regards to non-submission of required CIT returns may be subjected to a penalty, as follows:

(1) If SARS is satisfied that noncompliance by a person referred to in subsection (2) exists, excluding the non-compliance referred to in section 213, SARS must impose the appropriate ‘penalty’ in accordance with the Table in section 211.
(2) Non-compliance is failure to comply with an obligation that is imposed by or under a tax Act and is listed in a public notice issued by the Commissioner, other than:
(a) the failure to pay tax subject to a percentage based penalty under Part C; or
(b) non-compliance subject to an understatement penalty under Chapter 16.

The penalties range from R250 to R16 000 per month that non-compliance continues, depending on a company’s assessed loss or taxable income.

Please note that it is compulsory for registered companies to submit their income tax returns. If a company is dormant, it is still required to submit any outstanding returns prior to 2018 to prevent a penalty being imposed. The criteria for the exception in 2018 are set out in Notice 600 of 15 June 2018, which is available on the SARS website.

More information
Visit the SARS website on www.sars.gov.za for more information.

Sincerely

SOUTH AFRICAN REVENUE SERVICE
September 2018

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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WHEN SHOULD FINANCIAL STATEMENTS BE AUDITED, REVIEWED OR COMPILED?

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The Companies Act of South Africa (the Act) requires all companies to prepare financial statements within 6 months after the end of its financial year. A very popular question among business owners with regards to financial statements is whether the statements should be independently audited, reviewed or compiled. In determining the engagement type, the Act prescribes the following criteria to be applied:

Audited financial statements

  1. Any profit or non-profit company that, in the ordinary course of its primary activities, holds assets in a fiduciary capacity for persons who are not related to the company, and the aggregate value of such assets held at any time during the financial year exceeds R5 million;
  2. Any non-profit company, if it was incorporated:
    • directly or indirectly by the state, a state-owned company, an international entity or a company; or
    • primarily to perform a statutory or regulatory function in terms of any legislation, a state-owned company, an international entity, or a foreign state entity, or for a purpose ancillary to any such function;
  3. Any other company whose public interest score in that financial year is:
    • 350 or more; or
    • at least 100, but less than 350, if its annual financial statements for that year were internally compiled.

How to calculate your public interest score, to determine if you exceed 350 points or not:

  1. a number of points equal to the average number of employees of the company during the financial year;
  2. one point for every R1 million (or portion thereof) in third-party liabilities of the company, at the financial year end;
  3. one point for every R1 million (or portion thereof) in turnover during the financial year; and
  4. one point for every individual who, at the end of the financial year, is a member of the company, or a member of an association that is a member of the company.

Independent review of financial statements

The Act prescribes that an independent review of a company’s annual financial statements must be performed if the following apply and the company does not select to be voluntarily audited:

If, with respect to a company, every person who is a holder of, or has a beneficial interest in, any securities issued by that company is not a director of the company, that financial statements should be independently reviewed.

A company and its directors may choose to be voluntarily audited or reviewed if they wish to engage in an assurance engagement, although it has not been prescribed by the Act.

Compiled financial statements:

If none of the above-mentioned requirements has been met, the financial statements may be compiled.

With compilations, or compiled financial statements, the outside accountant converts the data provided by the client into financial statements without providing any assurances or auditing services.

If you need any assistance with your engagement in financial statements, do not hesitate to contact our friendly staff.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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