Thank you for this valued information Jacques, but really, the background music must be removed or the volume turned down if you want to keep the music. I feel that your information is so important that we can do without the interference of the music. Keep up the good work. Good teacher!
What is the difference between a Company and Sole Proprietor? If you do not make a profit of R500k+ a year, it does not make sense to register as a company. Whereas with a Sole Proprietor you trade as with your business name... Any advice?
Hi Charlene Good question. For a lot of people the added administrative requirements are not worth it. However, there is significant risk linked to a Sole Proprietor, and it further complicates an already complex income tax situation. Also, too many Sole Proprietors don't keep accurate records of their expenses and often mixes personal and business expenses. By formalising the company structure, it is much simpler to separate business and personal expenditure. And then, once the business has grown, it is significantly simpler and easier to bring on board a partner in the business by issuing a share certificate and shareholders agreement, than it is to partner in your personal capacity. Long term, Sole Props are risky business. Lose the business and you could lose everything. In a company, lose the business, is just the business lost, unless someone can prove you were grossly negligent.
Hello. I am a business consultant and have a Pty Ltd. Is it better to pay myself reimbursive travel per kilometer travelled or to pay myself a travel allowance from a tax perspective please?
Hi Karen. My apologies, I noticed I haven't responded to your query yet. It would really depend on your vehicle and travel, but it seems to us that the most tax efficient way to treat travel activities is with a travel allowance and a logbook, and not reimburse expenses.
Hey Winnie It depends on the property being rented, and the purpose for the rental. If it's a business premises, it's easier to get the deduction from SARS. But if it's residential, say for one of the directors, it makes more admin (meaning more costs) for only a slight deduction in the taxes payable, if at all. My advice is to put business expenses through the business, and keep private expenses separate.
Nice video, if you're still active please can you advise how to draw money out of the company? If I pay a salary to myself I have to be taxed individually or can I declar everything as dividend to me and not pay tax
Hi there OK, firstly, sorry for not responding sooner. Secondly, there are 3 main ways in which a shareholder/director can withdraw money from a company. 1. Draw a salary. This is subject to PAYE and SDL (and if the company is registered for UIF, then UIF as well). Usually the main method of withdrawals. 2. Dividend. This is admin intensive, requires 20% dividends tax to be paid to SARS on every dividend paid out, as well as a declaration to SARS with every payment. 3. Interest on a shareholder's loan. This will be subject to Income Tax in the director's personal income. If you want to chat more about this, feel free to get in touch.
Because LLC does not exist in South Africa. Most people know of LLC's because of Rich Dad Poor Dad from Robert Kiyosaki. He's an American. His advice is predominantly for Americans, though a lot can be carried over to other countries. In South Africa we have: Public Companies (Ltd) Private Companies (PTY Ltd) Close Corporations (CC) (cannot create new ones, only those who are in existence continue) Personal Liability Companies (Inc) Non-Profit Companies (NPC) Special Purpose entities - which are usually a PTY with limited scope in the MOI. Partnerships Sole Proprietors Joint Ventures Trusts This video's intention was to inform the public of the most common and widely applicable option for most businesses. Unless I forget one, that's about it.
This is an excellent question. The answer is: No, you don't pay double tax on salaries. How it works is that the "salary" paid to the director is not taxed at the corporate tax rate which is now 27% (it changed from 1 April 2022). This is considered an allowable deduction from the company. Therefore it is either the 27% corporate tax rate, or the applicable tax rate on the sliding scales. However, if you are declaring a DIVIDEND, then yes there will be double tax. Dividends are paid out of profit after tax (so you already paid the 27% tax), and then there is the dividends tax applicable on the amount. This means you effectively pay 47% on the amount received. If you're unsure, please look into my video "How to calculate income tax - South Africa 2018" to see how an individual's tax is calculated through the use of the sliding scales. The actual sliding scale figures has changed, but the principle remains the same. -Jacques
@@JJTAcc that makes a lot of sense, thank you very much for the clear explanation. So in essence, if you're earning above R2m a year as a salary, there is now way to escape paying 45/47% to tax, because both the salary and the dividend amount to that percentage. That is so crazy to me because America's highest tax percentage is 37%
This is where things like Retirement Annuities, endowments and the like comes in. Also, the effective tax rate on a R2million income is closer to 35% than the tax bracket 46%.
Hey Shack01. Sorry, I took a bit of leave some time ago. Please hit us up through jjtacc.co.za/quote-request/ or jjtacc.co.za/contact/ Yes, JJT. As per my latest video, Pretera has merged with JJT. Please refer to this channel message when making contact so we know it's you?
Very informative
Thank you for this valued information Jacques, but really, the background music must be removed or the volume turned down if you want to keep the music. I feel that your information is so important that we can do without the interference of the music.
Keep up the good work. Good teacher!
Cool Man 💪 but the background MUSIC 🚩
"Executive Coffee Drinker" 🤣🤣🤣🤣, I love your videos they are very informative 👍🏾
Glad you like them! And thanks for watching!
I love this, very informative.
Very informative 👍
Dankie Jacques
Thank you
Nice one
Thanks 🔥
Thnx for in. The background music is a bit too high. Friendly!!!
Noted
What is the difference between a Company and Sole Proprietor? If you do not make a profit of R500k+ a year, it does not make sense to register as a company. Whereas with a Sole Proprietor you trade as with your business name... Any advice?
Hi Charlene
Good question. For a lot of people the added administrative requirements are not worth it. However, there is significant risk linked to a Sole Proprietor, and it further complicates an already complex income tax situation. Also, too many Sole Proprietors don't keep accurate records of their expenses and often mixes personal and business expenses. By formalising the company structure, it is much simpler to separate business and personal expenditure.
And then, once the business has grown, it is significantly simpler and easier to bring on board a partner in the business by issuing a share certificate and shareholders agreement, than it is to partner in your personal capacity.
Long term, Sole Props are risky business. Lose the business and you could lose everything. In a company, lose the business, is just the business lost, unless someone can prove you were grossly negligent.
Hello. I am a business consultant and have a Pty Ltd. Is it better to pay myself reimbursive travel per kilometer travelled or to pay myself a travel allowance from a tax perspective please?
Hi Karen. My apologies, I noticed I haven't responded to your query yet.
It would really depend on your vehicle and travel, but it seems to us that the most tax efficient way to treat travel activities is with a travel allowance and a logbook, and not reimburse expenses.
Thank you my brother for the info.
You are most welcome. Thank you for watching!
Hey Jacques , nice video, does renting property through your business also help with taxes ?
Hey Winnie
It depends on the property being rented, and the purpose for the rental. If it's a business premises, it's easier to get the deduction from SARS. But if it's residential, say for one of the directors, it makes more admin (meaning more costs) for only a slight deduction in the taxes payable, if at all.
My advice is to put business expenses through the business, and keep private expenses separate.
That was really informative..... :)
Nice video, if you're still active please can you advise how to draw money out of the company? If I pay a salary to myself I have to be taxed individually or can I declar everything as dividend to me and not pay tax
Hi there
OK, firstly, sorry for not responding sooner.
Secondly, there are 3 main ways in which a shareholder/director can withdraw money from a company.
1. Draw a salary. This is subject to PAYE and SDL (and if the company is registered for UIF, then UIF as well). Usually the main method of withdrawals.
2. Dividend. This is admin intensive, requires 20% dividends tax to be paid to SARS on every dividend paid out, as well as a declaration to SARS with every payment.
3. Interest on a shareholder's loan. This will be subject to Income Tax in the director's personal income.
If you want to chat more about this, feel free to get in touch.
Why not LLC?
Because LLC does not exist in South Africa. Most people know of LLC's because of Rich Dad Poor Dad from Robert Kiyosaki. He's an American. His advice is predominantly for Americans, though a lot can be carried over to other countries.
In South Africa we have:
Public Companies (Ltd)
Private Companies (PTY Ltd)
Close Corporations (CC) (cannot create new ones, only those who are in existence continue)
Personal Liability Companies (Inc)
Non-Profit Companies (NPC)
Special Purpose entities - which are usually a PTY with limited scope in the MOI.
Partnerships
Sole Proprietors
Joint Ventures
Trusts
This video's intention was to inform the public of the most common and widely applicable option for most businesses.
Unless I forget one, that's about it.
dont you end up paying more, because your paying 28% business tax + 45% personal income tax?
This is an excellent question. The answer is: No, you don't pay double tax on salaries. How it works is that the "salary" paid to the director is not taxed at the corporate tax rate which is now 27% (it changed from 1 April 2022). This is considered an allowable deduction from the company. Therefore it is either the 27% corporate tax rate, or the applicable tax rate on the sliding scales.
However, if you are declaring a DIVIDEND, then yes there will be double tax. Dividends are paid out of profit after tax (so you already paid the 27% tax), and then there is the dividends tax applicable on the amount. This means you effectively pay 47% on the amount received.
If you're unsure, please look into my video "How to calculate income tax - South Africa 2018" to see how an individual's tax is calculated through the use of the sliding scales. The actual sliding scale figures has changed, but the principle remains the same.
-Jacques
@@JJTAcc that makes a lot of sense, thank you very much for the clear explanation. So in essence, if you're earning above R2m a year as a salary, there is now way to escape paying 45/47% to tax, because both the salary and the dividend amount to that percentage. That is so crazy to me because America's highest tax percentage is 37%
This is where things like Retirement Annuities, endowments and the like comes in. Also, the effective tax rate on a R2million income is closer to 35% than the tax bracket 46%.
@Pretera Accounting Services thanks for the advice, just registered mine couple weeks ago and need some advice how can I reach you?
Hey Shack01. Sorry, I took a bit of leave some time ago. Please hit us up through jjtacc.co.za/quote-request/ or jjtacc.co.za/contact/
Yes, JJT. As per my latest video, Pretera has merged with JJT. Please refer to this channel message when making contact so we know it's you?
@@JJTAcc will do that thank you, hoping you had a good time off ☺️!
Dankie Jacques
Groot plesier.