CH Consulting Logo
  • 021 888 9175
  • This email address is being protected from spambots. You need JavaScript enabled to view it.

We believe there is a better way. We are an accounting, tax and business consulting firm based in Stellenbosch.

We believe there is a better way. We are an accounting, tax and business consulting firm based in Stellenbosch.

Blog

The 2018 Budget Speech and its tax implications

portrait-of-man-in-bedroom-running-business-from-P29BXMR

The 2018 budget speech was delivered on 21 February 2018, this article will summarise the most important tax amendments.

This was a difficult budget and it was indeed tough on the taxpayer. You could argue that the VAT rate increase is extremely harsh, however in my opinion the only other option was to further burden the higher income earners with income tax or increase the corporate tax rate. Neither of which were really an option since in my opinion both the individual taxpayer and corporates are over burdened as it is.

Make no mistake, the higher earning individuals have not escaped the recoupment of the shortfall. The top 3 brackets on the individual tax table brackets were not adjusted for inflation. Meaning that if your salary increases with inflation you will possibly fall in a higher tax bracket due to your salary being adjusted for inflation but not the tax table brackets (the so called bracket creep).

Continue reading
  1416 Hits
  0 Comments
1416 Hits
0 Comments

A simple explanation of a Section 12J investment

A simple explanation of a Section 12J investment

Please note this article was sponsored by Fairtree Capital

The main points:A taxpayer can make an investment in a Section 12J company and this investment is 100% tax deductible if held for a period of 5 years or longer.If the taxpayer is an individual with a marginal tax rate of 45% or a trust, the taxpayer can invest R1 million and will effectively be paying R550 000 (R1 million - R450 000) for the investment since the full investment amount is tax deductible in the year of investment (provided the taxpayer has taxable income of R450 000 or more).A company (excluding a SBC which will be taxed at different rates) can invest R1 million and effectively be paying R720 000 (R1 million - R280 000) for the investment since the full investment amount is tax deductible in the year of investment (provided the company has taxable income of R280 000 or more).When the section 12J investment is realised in the future, the base for the capital gain will be 0 due to the initial benefit of 100% tax deductibility.What is a Section 12J company?

The government has identified small and medium-sized entities (SMEs) as a major contributor to future economic growth. One factor that hampers the growth of SMEs is a lack of access to equity funding.

In order to alleviate this problem the government has added Section 12J to the South African Income Tax Act as a catalyst for equity funding for SMEs. Section 12J provides a marketing vehicle to venture capital companies (VCCs) due to the tax incentive.

Continue reading
  6568 Hits
  1 Comment
Recent comment in this post
Hi Do you have to be in the highest tax bracket to benefit from the S12J deduction? Does your taxable income have to be higher th... Read More
Monday, 26 November 2018 11:01
6568 Hits
1 Comment

How is crypto currency such as Bitcoin taxed in South Africa?

How is crypto currency such as Bitcoin taxed in South Africa?

Please note that the information below is an opinion and cannot be used to rely on as formal tax advice. In order to  obtain formal tax advice regarding your tax situation, please contact us directly for a consultation.

For the lazy reader I start with a summary:

It is my opinion that Bitcoin will be classified as an asset for tax purposes in the current ambit of the income tax act.It is my opinion that the gains made on the sale of Bitcoin will be taxed as trading income (except in the unlikely case where it was held as a long term investment where it will be taxed as capital gains).See the example at the end of the article.The View of SARS

SARS has not given their interpretation for the specific tax treatment of cryptocurrency yet. There is a common misconception that this means that no tax has to be paid on cryptocurrency gains. This is not the case, as the income tax act does make provision for gains on cryptocurrency albeit not directly. According to an article published by IOL, in Personal Finance, SARS has made their current position clear “Transactions or speculation in Bitcoin is subject to the general principles of South African tax law and taxed accordingly” (https://www.iol.co.za/personal-finance/youre-liable-for-tax-on-bitcoin-gains-11508366).

Continue reading
  5103 Hits
  39 Comments
Recent Comments
If you buy in USD and sell in ZAR via the use of different platforms, can this be subject to import tax? Or is it still based as i... Read More
Thursday, 21 December 2017 11:57
5103 Hits
39 Comments

Provisional Tax Estimate - The Risk of using the Basic Amount

Provisional Tax Estimate - The Risk of using the Basic Amount

Many tax practitioners have reverted to the easy option of using the basic amount as an estimate for provisional tax. Many tax professionals are also under the incorrect impression that this is within the ambit of the income tax act to use the basic amount as an estimate.

The actual purpose of the basic amount is twofold:1. It serves as the minimum estimate.2. It is used as a limit to calculate underestimation penalties if the taxpayer's assessed income it below R1 million.

A brief examination of the income tax law will substantiate statements one and two above:

Continue reading
  3414 Hits
  2 Comments
Recent Comments
Hello,Isn't this technically wrong? While SARS definitely does not want you to just be basing your first provisional estimate on t... Read More
Sunday, 26 August 2018 19:17
3414 Hits
2 Comments

Tax and small business owner remuneration

Tax and small business owner remuneration
Introduction

A question that we often receive from directors is how to compensate yourself if the company is owner managed. In other words a business where the owners are the directors and have discretion in how they are going to structure their own remuneration, or how they are going to extract the profit from the company.  Let us explore three possible scenarios.

1. Building up a loan account

We often find that the owners draw money at will and build up a loan account with the company. Some directors are under the impression that this method attracts no tax. They are wrong. 

The first factor to consider here is the interest rate that the company is charging the director. In most cases this is 0%. In normal circumstances a company would charge an interest rate to someone it lends money to. Thus in this case the 0% or lower than market related interest rate is directly attributed to the fact that the director is a connected person to the company. In other words the director is receiving a benefit due to his / her employment or connection with the company. This  equates to remuneration and as you know remuneration is taxable. 

Continue reading
  6905 Hits
  9 Comments
Recent Comments
Hi Chris You are basing this salary on the amount at which the effective tax rate breaks through the 42% rate. But over R1,5 milli... Read More
Friday, 09 March 2018 10:46
6905 Hits
9 Comments
CH Consulting Logo White
  • 021 888 9175
  • This email address is being protected from spambots. You need JavaScript enabled to view it.