If you are a business owner or self-employed, you are liable to pay South African corporate tax. Corporate tax in South Africa is payable by all registered businesses in the country to the South African Revenue Service (SARS). However, the amount of tax you pay and which deductions you can claim are determined by the size and type of your business. Here are a few ways in which you can legally decrease the amount of tax you pay for your business.
Donate to a registered charity
A Public Benefit Organisation (PBO) is a non-profit organisation that has special approval by SARS to not pay any tax on the donations it receives. PBO’S are usually involved in charitable work like healthcare, education, poverty alleviation, conservation, environmental, cultural and religious services. Your contributions to a registered PBO are tax-deductible up to a limit of 10% of your taxable income. If your donations exceed this, it will be carried forward to the following tax year. You can then claim it as a deduction. This is a great opportunity to donate to a good cause, while also reducing your tax bill.
Contribute towards your retirement fund
Contributions towards a retirement fund are tax-deductible up to a certain limit. This limit applies to the total contributions you make to any pension or retirement annuity (RA) fund during the year. You can, however, top-up your retirement savings yourself by contributing to a RA fund. Because you may not access your RA funds until you are 55 years old, this is a great way to save for your future, while also reducing your annual tax bill.
Keep a record of your mileage
If you are using a company-provided vehicle, this is a taxable fringe benefit. This means it is part of your taxable income. If however, you keep a logbook to record your business mileage, you can claim a travel deduction which could reduce your tax owed to SARS.
Claim expenses
If you are self-employed (e.g. an independent contractor or sole proprietor) SARS will allow you to deduct all your business related expenses against your business income. What have you spent your money on in order to keep your business running? Examples of such expenditure are telephone, stationery, employees’ costs, etc. Keep a record of these expenses and the related invoices. If you do, you may be able to take advantage of this deduction in order to pay less tax.
Professionals like your accountant and tax consultant will help you make the most of the tax incentives at your disposal. They ensure all your management accounts are in order long before tax season comes around. This is why a good accounting team is vital to help manage your finances for your small business. The Acumen Group is passionate about providing quality services that will help your small enterprise flourish. If you would like to get advice on tax deduction and would like to help your business save money, schedule an appointment with The Acumen Group now.
