Complex tax or tax complications? Done.

Posted by Nico Viljoen on 16 July 2018.

Nico Viljoen

MBA, Hons BCompt, HDip Tax (Jefferson School of Law USA), HED, AGA(SA) DBA Graduate Student, Business School Netherlands

The Tax Shop Head Office

More about Nico Viljoen

Nico obtained qualifications from various academic institutions and currently studies towards the DBA at the Business School Netherlands. He is an associate member of the South African Institute of Chartered Accountants. After completion of his articles with PWC, he lectured in the fields of taxation, accounting and auditing at the Vaal University of Technology. Thereafter, he occupied financial executive positions in the heavy engineering, chemical, transport and automotive industry. Nico has owned and managed various successful businesses over the 20 years. Nico has been a business mentor for various organisation and serves as an external moderator for taxation and internal auditing.

Tax by its very nature is complicated. Yet if you thought the South African tax system is difficult to navigate, think again. According to the Financial Complexity Index for 2017, the top three most complex jurisdictions when it comes to accounting and tax compliance are Turkey, Brazil and Italy. Despite the fact that South African tax also requires a considerable level of understanding and knowledge in order to maintain compliance, the South African Revenue Service (SARS) has come a long way in making it easier for taxpayers to honour their obligation.

Back in 2006 SARS discovered that the best way to get South Africans to effectively use its services was…well…making things easier for them to do so. Enter eFiling, a convenient online tax return system that, at first, put fear into the hearts of ordinary tax payers, but which in the past 12 years have become second nature to many.

Of course, there are always exceptions to the rule and for High Net Worth Individuals, the self-employed, or people with more than one income stream eFiling can be a minefield for mistakes, resulting in inaccurate declarations, tax debt and potential audits. Luckily there are companies like The Tax Shop who have many years’ experience in taxation.

Tailoring tax to individual taxpayers’ characteristics

Let’s admit it. With success arrives a much higher tax bill. SARS’s job is to trace income from businesses to individuals. To do this, individuals need to report their income and expenditures. While taxpayers have the right to reduce their taxes by any legal means, SARS has the right to investigate whether an individual’s declared tax returns match their specific characteristics.

The following are just four examples of individual taxpayer characteristics that may influence your need to get professional tax assistance from a company like The Tax Shop:

  1. Self-employed. Whether you own a business from which you draw a salary or are working from home as a freelancer claiming legitimate expenses such as rent (if renting), interest on your bond (if you own the property), electricity, levies, water, other municipal charges or your domestic worker’s wages, chances are you’re going to need tax advice.
  2. Multiple income streams. Keep in mind that employees’ tax (PAYE) deducted by the respective employers or pension funds of taxpayers who receive income from more than one source of employment or pension may not be enough to cover their final tax liability on assessment. Contact us for advice in this regard.
  3. Rental income. SARS regards the earning of rental income as a trade. This means that owners of rental property must declare all rental income received or accrued during the tax year. In turn, the owners can deduct expenses such as cleaning, security, rates and taxes, electricity, repairs and maintenance, and bond interest incurred in the earning of this income with the result that only the net profit will be taxable. Contact us if you need to discuss your rental income deductions.
  4. Selling a business. Are the proceeds of the sale of a business taxable? Unfortunately, the answer is yes. However, it is essential that you or your tax advisor fully understand the implications of Capital Gains Tax (CGT), as it is not the full sale proceeds which are subject to CGT, but the capital gain element only (sale price less the acquisition price or original cost).

There are many more individual characteristics which can play a role in determining your personal tax status; for simple, convenient and affordable help with your submission don’t hesitate to call The Tax Shop – our door is always open (especially in tax season!)