Anyone who needs TAX / Accounting Advice

[eitai2001]

Hi Guys.

If any of you have a query you are unsure of relating to tax / accounting, ask it in here and I will try help you out. It will help me with my studying because I will go and search up (or maybe already know it well) ... and have it stuck into my head afterwords

For Tax, I don't mean administrative issues ... examples would be if you are unsure about a pension fund contribution, or medical bills, or dividends from a foreign company, or if you have shares in a foreign company and aren't sure if you should declare the companies taxable income here, etc, etc.

For accounting ... perhaps you don't know how you should classify a transaction or a payment or event, operating lease, etc ... something like that

Regards

Itai

[brown]

Hi Itai,

I need to find out since there's so much confusion around entertainment expenses and VAT. If I go out on a business trip and entertain potential clients, can I claim VAT on that?

If my technician travel out of town, can I claim VAT on their meals?

[JustinIT]

Hi

I hope you can help me i am really confused...

I just started a new job but they say i am contracted to them and therefore they don't have to deduct and pay my tax, but i've phoned SARS and they say if i spend more than 80% of my time at one employer, they must pay my tax. But my boss says his accountant says this isn't true.

They not the most helpful people at my work so i just want to know how i can go about paying my tax. Because I haven't been working for a while and received a fine from SARS recently i have to pay because i didn't submit my last 2 years tax returns as i wasn't working i didn't know i had to. and I don't want another problem in the future.

Any help will be much appreciated,

Thanks in advance
Justin

[eitai2001]

Hi Itai,

I need to find out since there's so much confusion around entertainment expenses and VAT. If I go out on a business trip and entertain potential clients, can I claim VAT on that?

You cannot claim input VAT on the expenses incurred to entertain clients. The act makes no mention about entertainment regarding clients or commission based income as to what you would have in the Income Tax Act, and as such fall under the general denial of Input VAT on Entertainment.

Specifically Input VAT is denied on entertainment as defined (see below for definition) as per Section 17(2)(a), and the situation above does does not fall under the Provisio.

If my technician travel out of town, can I claim VAT on their meals?

If your technician travels out of town, and stays at his destination for at least 1 night, then Input VAT may be claimed on his meals, accommodation and refreshments, provided that he travelled out of town for work purposes.

Specifically, although Input VAT on entertainment as defined in general is denied as per Section 17(2)(a), there is a provisio regarding the above situation under Section 17(2)(a)(ii) which allows you to deduct the Input VAT.

Regarding the above scenarios, these are the relevant parts out of the VAT act. I have highlighted the important parts in bold to make it easier to read, and if you read just the bold parts in order, it will make easier sense:

Entertainment means the provision of any food, beverages, accommodation, entertainment, amusement, recreation or hospitality of any kind by a vendor whether directly or indirectly to anyone in connection with an enterprise carried on by him

2) Notwithstanding anything in this Act to the contrary, a vendor, shall not be entitled to deduct from the sum of the amounts of output tax and refunds contemplated in section 16(3), any amount of input tax-

a) in respect of goods or services acquired by such vendor to the extent that such goods or services are acquired for the purposes of entertainment: Provided that this paragraph shall not apply where-

ii) such goods or services are acquired by the vendor for the consumption or enjoyment by that vendor (including, where the vendor is a partnership, a member of such partnership), an employee, office holder of such vendor, or a self-employed natural person in respect of a meal, refreshment or accommodation, in respect of any night that such vendor or member is [B]by reason of the vendor's enterprise or, in the case of such employee, office holder or self-employed natural person, he or she is by reason of the duties of his or her employment, office or contractual relationship, obliged to spend away from his or her usual place of residence and from his or her usual working-place. For the purposes of this section, the term ‘self-employed natural person’ shall mean a person to whom an amount is paid or is payable in the course of any trade carried on by him or her independently of the person by whom such amount is paid or payable and of the person to whom the services have been or are to be rendered, as contemplated in the proviso to paragraph (ii) of the exclusions to the definition of ‘remuneration’ in paragraph 1 of the Fourth Schedule to the Income Tax Act;

[eitai2001]

Hi

I hope you can help me i am really confused...

I just started a new job but they say i am contracted to them and therefore they don't have to deduct and pay my tax, but i've phoned SARS and they say if i spend more than 80% of my time at one employer, they must pay my tax. But my boss says his accountant says this isn't true.

They not the most helpful people at my work so i just want to know how i can go about paying my tax. Because I haven't been working for a while and received a fine from SARS recently i have to pay because i didn't submit my last 2 years tax returns as i wasn't working i didn't know i had to. and I don't want another problem in the future.

Any help will be much appreciated,

Thanks in advance
Justin

I do recall something about that 80% before, but when searching google I found this website: http://www.psiberworks.com/Default.a...D=70&tabid=118

Which had this to say:

8.1 Individuals

Is the individual an independent contractor? If yes, then no PAYE is deducted. If no, then deduct PAYE according to the tax table/directive. There are various tests of independence that can be applied with regard to independent contractors, and the questions to be asked are as follows:

8.1.1 Is the payment made to the person for services rendered? If no, PAYE is not deducted. If yes, then the test applies as follows:
8.1.1.1 Does the person work full time for the client?
8.1.1.2 Does the person do this work for other clients?
8.1.1.3 Is the person under control of the client, times of work, quality, leave, etc.
8.1.1.4 Does the person receive benefits like medical aid, pension fund, etc.
8.1.1.5 Does the client supply equipment for the work to be carried out?
8.1.1.6 Is the person paid at regular intervals?

If the answers to these questions suggest that the person cannot be classed as an employee of the client, and is therefore independent, PAYE need not be deducted.

It appears as these Laws have been amended and it is no longer the responsibility of the employer, my guess is it was done for practicality reasons.

I am not clear on the laws regarding "independant contractors" but what I believe is the way to approach it, is to keep records of all payments received from the company, and to include them in your personal income tax return which is submitted somewhere around October or so.

I am unclear as to why SARS has fined you, because if you earn less than 120k a year you do not need to register to submit a return ... however, saying they fined you makes me believe you went to them and registered to submit and received your Tax number.

I believe this is an issue best suited for a professional tax practitioner, and not just a student as myself.

I can help with calculations and such, but not so much the administrative side as it is not what we learn in honours.

Based on what I can find though, what I said above should be fine ... but I still reckon clarify with a professional Tax Practitioner, or go to a SARS office, and sit down and discuss with the general enquiries guys ... over the phone people are of very limited use.

[JustinIT]

eitei...

Thanks for your response and i think i will go to a tax practitioner.

Ya just for your info, The reason they fined me was because i had registered and submitted returns before but for those two years i didn't so i suppose they thought i just didn't submit even though i did dispute it.

Anyway, thanks again

[geraldenek]

JustinIT

You should google interpretation note 17 on the sars website - there is a lot of questions to be asked to see if you are indeed an independent contractor. but if more than 80% of your total income is derived from this one company they should deduct paye.

if they don't want to pay over your paye, the best would be to register for provisional tax if not registered already and declare those amounts on the returns (it's normally twice a year in Aug 2010 and Feb 2011 for the 2011 tax year (1 March 2010 - 28 Feb 2011)

The penalties you received from sars is R250 for each year which was because you did not submit your income tax returns - i did disputes for a few clients and got half off so maybe you are lucky

[JustinIT]

Geraldenek,

Thanks for the info.

I am quite interested in what you said about registering as a provisional tax payer, but actually i have no clue what that means or requires. But i will do some research and see what i find. :-)

[Dave A]

Justin, just go to SARS, say you are self-employed and need to register as a provisional taxpayer.

There are a couple of extra returns a year to complete when you're a provisional taxpayer, but with SARS eFiling it's all dead easy nowadays.

[PILATUS]

Hi i am a Government employee and would like to find out if there are any i can claim back on my tax.I am building at my house and paying vat on every thing.What can the normal guy on the street claim for SARS?

[JustinIT]

Justin, just go to SARS, say you are self-employed and need to register as a provisional taxpayer.

Ok thanks, it sounds like a plan.

Do you know if you have to pay more this way or anything

[brown]

Hi i am a Government employee and would like to find out if there are any i can claim back on my tax.I am building at my house and paying vat on every thing.What can the normal guy on the street claim for SARS?

Hi Pilatus, unfortunately for you, as an employee you cannot claim anything on VAT.

You must be in a trade and registered for VAT to claim input VAT.

Even if you were in trade, you still wouldn't be able to claim any VAT on your house as it is for personal use and even if you were to use it for business purposes, you still wouldn't be able to claim any VAT unless if it was an industrial building...

Tax is crazy huh?

[brown]

Do you know if you have to pay more this way or anything

Provisional Tax and PAYE alike are not really taxes in themselves, but prepayments towards your Income Tax, but they help to relieve you of the burden come end of assessment year. At the end of the day, you still pay the same amount calculated per the tax tables.

BTW- in terms of your penalties, you should have filed a Notice of Objection, but that you can only do within 30 days of receiving the assessment. You must remember just because SARS say you owe them doesn't mean they're always right. They work on assumptions in cases like those and if you don't know the facts, you will end up paying more than you should.

[Dave U]

Hi Justin

I'm reposting my reply from the other thread where you asked this question, to be sure anyone with a similar question sees it:

It seems you've been misinformed by SARS. There are laws regarding 80% of revenue, but they apply to labour brokers and companies, not individuals such as yourself. So on that count, at least, the accountant was correct.

The actual law that is relevant here is exclusionary subparagraph (ii) of the definition of "remuneration" in the Fourth Schedule of the Income Tax Act. What this law basically says is that, even though employers don't normally have to deduct income tax from independent contractors, they are legally required to do so in the following cases:

• the worker is subject to the control of any other person as to the manner in which the worker’s duties are or will be performed, or as to the hours of work; or
• the worker is subject to the supervision of any other person as to the manner in which the worker’s duties are or will be performed, or as to the hours of work; or
• the amounts paid or payable for the worker’s services consist of or include earnings of any description which are payable at regular daily, weekly, monthly or other intervals

Note that, if any of the above 3 points are true for you, they are legally required to deduct tax. I'm assuming, at the very least, that the third point holds (you're paid regularly), if not all of them. I hope that having a reference to the actual law helps to convince your boss and his accountant. Are they deducting tax for the other workers at the company? If not, it's almost certain that your employer is just too lazy to do it correctly. Remind him that the law also says that he will be liable for the taxes to SARS, not you.

The bottom line is that simply calling someone a contractor does not make it so.

[Silvia41]

Hope your offer is still valid

I am an independent contractor, but my employer(s) deduct PAYE on a monthly basis.

I would like to know what am I entitle to claim back, as an IT professional, I incur expenses related to my work, such as computer hardware and software, cell and 3G for communication purposes, books, studies, stationery, etc. What am I entitled to claim back?

Thanks for your help
Silvia