Turnover tax for micro businesses
The tax is based on turnover and its supposed to make compliance duties for the entity far less. VAT may not be charged by a micro business which may not register for VAT. This might not be ideal for exporters as an exporter would qualify for zero-VAT ratings upon export and be eligible for refunds of input VAT.
To date ending 28 February 2010
Taxable turnover (R) Rate of tax (R)
0 – 100 000 0%
100 001 – 300 000 1% of the amount above 100 000.
300 001 – 500 000 2 000 + 3% of the amount above 300 000.
500 001 – 750 000 8 000 + 5% of the amount above 500 000.
750 001 and above 20 500 + 7% of the amount above 750 000.
Transfer duty
Where VAT is payable, transfer duty isn’t and there are many instances of exemptions from transfer duty like the receipt of property from an estate or trust under certain conditions and the transfer of property when a partnership or a sole proprietor incorporates his or her business into a close corporation or company. A new companies act will shortly put paid to certain forms of business enterprises, however, this isn’t a bad thing and existing firms will simply be converted, making more work for company secretaries, accounting firms and attorneys. For acquisition of property by persons other than natural persons, the rate is 8% of the value.
Acquisition by natural persons
Value of property (R) Rate
0 – 500 000 0%
500 001 – 1 000 000 5% of the value above R500 000
1 000 001 and above R25 000 + 8%
if over R1 000 000
As is the practice in every budget, new tax rates are proposed. We now have a few different sets. The rate might apply to a particular undertaking dependent on turnover or if enterprises can be classified as a Small Business Corporations (SBC) or a Micro Business Enterprise (MBE).
Farming operations can, of course, be classified as either an SBC or MBE, if the farming turnover is below the threshold of R14 million for SBC and R1 million for an MBE if the enterprise owner has no other shares in other entities.
Corporate tax
The rate of tax on corporate entities such as close corporations and private and public companies remains fixed at 28%.
Bear in mind, Small Business Corporations are taxed at a lower rate – from R0 to R54 200 at 0%, and R54 201 to R300 000 at 10%.
The amount of taxable income earned over and above R300 001 is taxed at R24 580 + 28%.
Small business corporations include close corporations, private companies and cooperatives owned by natural persons and producing a turnover under R14 million per annum. The natural person may not own more than one close corporation or company or else the regime doesn’t apply. Certain professions are excluded, but agricultural firms or enterprises are certainly eligible for SBC tax relief.
We now also have MICRO businesses, which are even smaller than SBCs. Here, the owner may also not own more than one entity. The threshold for such enterprises is R1 million or less. While certain professions are excluded, farming fits the bill.
Value Added Tax
The good news is the rate remains unchanged and the threshold for VAT registration is elevated to R1 million. Severe penalties await those who place any untrue information on any VAT form, not only returns, but registration forms as well. Sars is to make absolutely sure vendors are who they say they are. Apparently this is done in an effort to curb VAT fraud.
Secondary tax on companies
STC is still 10%. Withholding tax is replacing STC, but the mechanism for taxing dividends remains broadly the same. The beneficial owner will be responsible for ensuring the tax is paid.
Interest and foreign dividends
The amount of interest and foreign dividends one may receive free of tax is now R21 000 for under-65-year-olds and R30 000 for those above the age of 65.
Certain foreign dividends are exempt from tax. Foreign dividends of R3 500 are tax-exempt included in the interest exemption.
Fuel and diesel levies
Government wishes to send a strong price signal to limit fuel consumption, road congestion and environmental impact and so an increase in the general fuel levy is proposed. Government hasn’t been increasing the use of diesel in passenger vehicles and it intends to equalise the general fuel levy on diesel and petrol over time.
Proposals are therefore to increase the general fuel levy on petrol and diesel by 23c/â„“ and 24c/ â„“ respectively from
1 April 2009. The diesel fuel levy refund relief for the primary sector remains unchanged in percentage terms.
Estate taxes
The rates of estate duty and capital gains taxes remain unchanged with the estate duty abatement remaining at R3 500 000.
Legislation will be enacted to put a stop to avoidance of estate duty through the use of limited rights such as usufructs. The abatement of the surviving spouse will now also automatically qualify as a deduction in terms of estate duty. The rate of estate duty remains unchanged at 20% of the nett dutiable estate of a person. Capital Gains Tax (CGT) is also triggered by death, but assets in trust are not affected by the death of the planner.
CGT taxes the annual exclusion now at about R17 500. The abatement for CGT purposes in the year of death of a taxpayer is now R120000, while a home sold at R2 million or less as a primary residence is free of CGT. When a primary residence is sold at a figure above R2 million the exclusion of R1 500 000 of the gain is still in force.
The primary residence of a farmer is recognised for this relief. For smallholders who hold less than 2ha, including the home, the entire sale proceeds are eligible for relief.
Donations tax
The amount of money or asset value which can be donated in aggregate, free of donations tax, still remains at R100 000/annum. Remember any amount donated between spouses is free of donations tax. Assets distributed from a trust are also distributed free of donations tax. Non-natural persons may make casual gifts of R10 000 or less per annum.
Skills development levy
A skills development levy is payable by employers at a rate of 1% of the payroll amount. If the annual payroll amounts to less than R500 000, the employer is exempt from the payment of skills development levies.
Incentives for energy efficiency
Various environmental statutes and regulations require private sector elimination of inefficient use of energy, water and raw materials. To complement these measures, market-based instruments such as carbon credits are playing a greater role. Incentives for energy-efficient investments are being explored. Current legislation provides for a three-year 50:30:20 percent accelerated depreciation allowance for investments in renewable energy and biofuel production.
It’s proposed investments by companies in energy-efficient equipment should qualify for an additional allowance of up to 15% on condition there’s documentary proof of energy efficiency after a two- or three-year period, certified by the Energy Efficiency Agency. In an effort to be in line with the developed world’s carbon reduction programmes, the budget has a number of features aimed at combating the increase in carbon emissions:
Incentives for investment in energy-efficient technology
Implementation of the electricity levy announced in the 2008 budget.
Making certified emission reduction credits tax exempt or subject to capital gains tax, instead of normal income tax at an effective 75% tax reduction.
Taxation of energy-intensive light bulbs is R3/bulb.
Reform in the motor vehicle ad valorem excise duties.
Increases in the Road Accident Fund and general fuel levies.
Lower excise duties on imported carbon-efficient motor vehicles.
There’s a great opportunity for carbon credits to be favourably taxed. In fact, the credits will be subject to CGT only, even though a farmer might actively market and sell credits on the open market. The efforts of government to create awareness of the Kyoto Protocol and the clean emissions trade is very welcome and a potential source of revenue for business and agriculture.
