As a business owner, you want to ensure that you comply with all legal (statutory) requirements and returns. This not only includes tax submissions to the South African Revenue Service (SARS) but can also apply to other statutory bodies such as the Unemployment Insurance Fund (UIF), Compensation Commissioner (Compensation Fund) and Companies and Intellectual Property Commission (CIPC).
The responsibility lies with you as the business owner to confirm the relevant legal bodies you need to register with and submit returns to. Failure to do so can result in legal action and even, in some cases, imprisonment. For example, failing to declare income is considered tax evasion and can lead to imprisonment.
All business entities (including sole proprietors) need to register with SARS for income tax. To be tax compliant you must also make sure that you are registered for all the tax products that you are liable for – for example; PAYE, SDL, and VAT.
If you employ staff that earns over a certain threshold each year, then you are required to register for PAYE (Pay-As-You-Earn) or Employees’ Tax. Also, if your payroll exceeds a certain threshold per annum, then you are required to register for SDL (Skills Development Levy). If your income exceeds R1 million in a 12-month period, then you must register for VAT (Value-Added Tax). You can also choose to register for VAT if your income exceeded R50 000 in the past 12-month period or if you are registered as a micro business.
As the business owner (and even in your individual capacity), you also need to make sure that you keep tax records. Key tax information that you need to maintain and keep on file include the IT12 (a copy of your tax return), IT14 (a copy of the tax return of your business) and the ITA34 (the latest assessment for your personal tax or business). Generally, you need to keep records for at least the last five years to date. (More specific information about record keeping can be found on the SARS website.)
Tax compliance also means making sure all your registration particulars are up to date, that you do not have any outstanding returns, and that you do not owe any money to SARS (unless a payment arrangement or suspension of debt has been arranged).
Other statutory obligations
If you employ staff who work 24 or more hours per month, then you also need to register with the Unemployment Insurance Fund (UIF). Similarly, if you are registered with SARS for PAYE or SDL, then you are also required to register with SARS for the payment of UIF contributions.
All employers are also required to register with the Compensation Commissioner (Compensation Fund). The Compensation Fund is essentially a form of insurance that covers you and your employees from any workplace accident.
It is relevant for all businesses, not only construction- or trade-related businesses. The Compensation Fund, however, does not apply to domestic workers.
If you registered your business with the Companies and Intellectual Property Commission (CIPC), then you would also be liable for certain returns each year. Non-compliance with annual returns may lead to deregistration.
For more information, see Management of all statutory returns, page 20-22, The Nedbank Essential Guide for Small Business Owners