Home Practice Management An income tax primer for accountants

An income tax primer for accountants

674
0

One of the fundamental services provided by accountants is income tax filings and compliance. While this is a bread and butter issue for many Saiba members, it’s worth revisiting the basics of income tax for those new to the subject, or for those who need a brief refresher.

What is income tax?

Income tax also referred to as taxable income is the compulsory contribution to the government from an employee’s income. Tax types may differ according to each individual. Income tax is imposed on individuals, companies, and trusts. The income tax Act No.58 of 1962 thoroughly explains income tax. Capital gains tax and donation tax are two of the less known types of tax that are administered in South Africa.

Why you get taxed?

For a countries economy to grow and develop, there should be funds available. The sustainability of a country is also dependant on the money that the government receives as a form of tax from the citizens or dwellers. Public and free services such as health, security and transportation are funded by these taxes that the government collects.

2021-22 tax rates for individuals

Below is Sars’ current tax rates for individuals.

SA Revenue Services (Sars)

The South African Revenue Services (Sars) is responsible for tax collection which happens annually. For individuals and trusts, the start of the year of assessment starts on 1 March and ends on the 28/29 February each year. For companies and close corporations, the year of assessment is the applicable financial year.

Income tax returns are available annually after the end of each year of assessment to registered taxpayers and must be completed and submitted to Sars each year.

The following documents are needed when you register for income tax at a Sars branch:

  • Proof of identity
  • Proof of address
  • Proof of bank details.

Alternatively, you can register online using the following steps:

1. Go to www.sars.gov.za
2. Select ‘Register Now’
3. Follow the prompts
4. Request a Notice of Registration – it will reflect your income tax registration number

Non-taxpayer’s offence

According to Wikipedia, the following applies for those who do not comply with the Income Tax Act:

  • submit a tax return or document to Sars; or
  • fail to issue a document to a person as needed; or
  • fail to register or amend a registration in the instance where registered details have changed; or
  • keep records as needed by Sars; or
  • knowingly submit a false tax certificate or statement; or
  • refuse or neglect to take an oath or make a solemn declaration.

A person convicted of these offences may be liable to a fine or imprisonment not exceeding two years. You must register within 60 days of first receiving an income. For more information on other types of tax, you can visit Sars here