BUDGET 2005/06
Tax relief for small business
Richard Mantu
23 February 2005
The government has announced tax relief of R1.4-billion for small companies in a bid to stimulate the economy and create jobs by developing small business in the country.
Delivering his 2005/06 Budget Speech in Parliament in Cape Town on Wednesday, Finance Minister Trevor Manuel said the tax relief would help small companies make resources available for growth and investment.
The new tax regime, which takes effect from 1 April, will now cover small business corporations (SBCs), provided they maintain at least four full-time employees for core operations.
The government has also increased the turnover limit for companies to qualify as SBCs from R5-million to R6-million.
The tax relief means that, for example, with a taxable income of R400 000, an SBC will now pay R32 500 less income tax than before.
An SBC that provides information technology services, with a taxable income of R400 000, will now pay R55 000 less tax than
before.
The tax rate of small companies in other sectors, including close corporations, will be reduced from 30% to 29%.
Help from the taxman
The South African Revenue Service (SARS) will also help small businesses to be tax-compliant by deploying "tax helpers" to areas where small businesses are situated to help with tax registration, returns and business tax obligations.
SARS has also undertaken to dedicate a help desk solely to small businesses to enquire about tax compliance.
The Small Retailers Value Added Tax (VAT) scheme, announced in last year's Budget Review, also takes effect from 1 April. The scheme provides for a simplified method of accounting for VAT for small businesses with a turnover of less than R1-million.
These are mainly small businesses in the retail sector that do not have access to cash registers but can distinguish between zero-rated and standard-rated sales.
To help small businesses with
their cash flow, SARS has proposed that VAT return filing for compliance is done every four months for small firms with a turnover of less than R1-million.
This will inject R275-million into the coffers of small businesses, as the two-month filing process resulted in negative cash flows for businesses desperately needing cash to stay afloat.
However, registered vendors may elect to remain on the two-monthly return cycle if they wish.
Manuel also announced that, from 1 August, small businesses that spend R500 000 or less on paying their employees will no longer be required to pay the skills development levy.
This measure is expected to amount to R92-million in tax relief for small firms.
Source: BuaNews
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