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Thread: Shelved CC alternative?

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    Shelved CC alternative?

    Hi There

    We are in the process of getting our business up and running and wanted to register a shelved CC because of the 29% tax cap that comes with it (according to my accountant), but now I heard that the government doesn't allow the registration of CC's any longer.

    What would be the best alternative to a shelved CC and what are the costs involved?

    P.S. Sorry if it's a dumb question, I'm very new to this

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    Silver Member geraldenek's Avatar
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    I have not hear about the 29% tax cap? please do explain more

    You can't register new cc's anymore. the company act has changed and you can only register a pty but not all pty's need to be audited anymore

    you still do get shelf cc's i got one last week for one of my clients for R1700 - they are really expensive due to the fact that there is so little left.

    on the other hand getting a shelf company is also hard to find lately because of cipc's backlog of documents

    The best would be is get a pty
    Geraldene Kapp
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    The way I understood teh tax cap was that you will never pay more than 29% of your earning towards tax, unlike provisional tax that can go up to something in the 40% range.

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    Quote Originally Posted by thatgerhard View Post
    The way I understood teh tax cap was that you will never pay more than 29% of your earning towards tax, unlike provisional tax that can go up to something in the 40% range.
    Yes the company pays a flat rate of 29% tax on its profits, but when it pays you your salary, you will be taxed on the sliding scale back up to 40% ish for that.

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    Silver Member geraldenek's Avatar
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    Quote Originally Posted by thatgerhard View Post
    The way I understood teh tax cap was that you will never pay more than 29% of your earning towards tax, unlike provisional tax that can go up to something in the 40% range.
    a company/cc is taxed at 28%

    40% is the highest tax bracket for individuals if they are trading in their personal capacity / receive a salary

    depending on the business you planning you can also qualify as a small business corporation and pay less tax
    Geraldene Kapp
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    Gold Member Singhms's Avatar
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    geraldenek is correct, it is 28% and not 29%

    I also think your accountant maybe means dont run the business in your personal capacity as then the tax rate could be higher. Rather have a legal structure?
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    Hi there everybody

    It makes no difference whether its a CC or a Company (as registered under the new Companies Act) from a tax perspective.

    CC or Company - tax rate is 28%. Individuals can be taxed up to 40%

    If you are not earning a lot it doesn't make sense to register as a company. The reason being is that individuals tax starts off at 18% and then goes higher as you earn more - until it reaches the 40% level.

    SO which is better - depends on how much you earn.

    However, there can be a reason for you to register as a company anyway.

    You can be taxed at at even lower rate than the 28% if you meet the requirements of a Small Business Corporation.

    Between R0 and R57 000 income the companies tax percentage is 0%. For earnings between R57 001 and R300 000, the tax rate is 10% once you earn more than R300 000 the tax rate is 28%.

    This works out to about R59 700 in additional tax savings compared to a normal CC/Company and obviously an even bigger saving compared to being taxed as an individual.

    What are the requirements to be regarded as a SBC (small business corporation)

    I don't have the detail in front of me but briefly it relates to the business having less than a certain amount of turnover and assets.

    Secondly, all the shareholders should be natural persons (a legal term meaning actual people and not other companies)

    And the shareholders should not be holding shares in other companies (other than investments into things like listed shares).

    Your accountant will have the exact detail.

    Remember though that as a company you will also have to pay STC/Dividends tax which also needs to be taken into account.

  8. Thank given for this post:

    Dave A (16-Sep-11), Singhms (15-Sep-11)

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    Diamond Member Justloadit's Avatar
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    This is my take.

    I have noted on many occasions people getting all knotted with the company tax and personal tax. It seems we are all trying to make this gigantic enterprise with one owner and all the nonsense involved in a huge enterprise unnecessarily. Any small company, theoretically does not make a profit! As the company has more loot in the bank, the owner takes the money out as wages/salaries/drawings, what ever you wish to call it. This means that the company makes no profit, so therefor there is not tax to pay.

    If the company does make a profit - as you wish to do in the books, it then pays the 28% tax on the profit, now you need to move it out of the company into your account, that is why you are in business to make bucks, this is then seen as a dividend, and a personal income, so you have to declare it, and you get taxed on the amount received, albeit at a lower rate. When you add the numbers up, you still pay the personal tax amount you would have paid had you taken the money out in the first instance, so why go through the extra paper work, because you think you are going to be paying less tax?
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    Gold Member Singhms's Avatar
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    What is the current dividend tax?
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    Silver Member geraldenek's Avatar
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    Quote Originally Posted by Singhms View Post
    What is the current dividend tax?
    It is 10%.
    Geraldene Kapp
    Professional Tax Help
    www.mytaxhelp.co.za

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