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Thread: Income Tax on small business

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    Gold Member Martinco's Avatar
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    Income Tax on small business

    This is for the tax boffins..................

    If a CC has one member and falls below a certain turnover then the taxman will asses you R 0.00 tax on the first R57000.00 taxable income and 10% up to R 300,000.00 taxable income.
    If the same member is also a member of another CC then this falls away.

    Now my question is: If the same CC has 2 members that are not members of any other CC, do you still qualify for the above ?
    Martin Coetzee
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    We solve your fastening problems.
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    You may never know what results will come from your actions, but if you do nothing, there will be no results... Rudy Malan 05/03/2011

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    Quote Originally Posted by Martinco View Post
    This is for the tax boffins..................

    If a CC has one member and falls below a certain turnover then the taxman will asses you R 0.00 tax on the first R57000.00 taxable income and 10% up to R 300,000.00 taxable income.
    If the same member is also a member of another CC then this falls away.

    Now my question is: If the same CC has 2 members that are not members of any other CC, do you still qualify for the above ?
    In short, yes.

    But for a detailed answer, here are the exact requirements per Section 12E of the Income Tax Act:

    For the purposes of this section—

    a) ‘small business corporation’ means any close corporation, co-operative or company registered as a private company in terms of the Companies Act, 1973 (Act No. 61 of 1973), all the shareholders of which are at all times during the year of assessment natural persons, where—

    i) the gross income for the year of assessment does not exceed an amount equal to R14 million: Provided that where the close corporation or company during the relevant year of assessment carries on any trade, for purposes of which any asset contemplated in this section is used, for a period which is less than 12 months, that amount shall be reduced to an amount which bears to that amount, the same ratio as the number of months (in the determination of which a part of a month shall be reckoned as a full month). during which that company or close corporation carried on that trade bears to 12 months:

    ii) none of the shareholders or members at any time during the year of assessment of the company, close corporation or co-operative holds any shares or has any interest in the equity of any other company as defined in section 1 (other than-

    aa) a company contemplated in paragraph (a) of the definition of ‘listed company’; or

    bb) any portfolio in a collective investment scheme contemplated in paragraph (e) of the definition of ‘company’);

    cc) a company contemplated in section 10(1)(e)(i), (ii) or (iii);

    dd) less than 5 per cent of the interest in a social or consumer co-operative or a co-operative burial society as defined in section 1 of the Co-operatives Act, 2005 (Act No. 14 of 2005), or any other similar co-operative if all of the income derived from the trade of that co-operative during any year of assessment is solely derived from its members;

    ee) any friendly society as defined in section 1 of the Friendly Societies Act, 1956 (Act No. 25 of 1956);

    ff) less than 5 per cent of the interest in a primary savings co-operative bank or a primary savings and loans co-operative bank as defined in the Co-operative Banks Act, 2007, that may provide, participate in or undertake only the following—

    A) in the case of a primary savings co-operative bank, banking services contemplated in section 14(1)(a) to (d) of that Act;

    and

    B) in the case of a primary savings and loans co-operative bank, banking services contemplated in section 14(2)(a) or (b) of that Act; or

    gg) a venture capital company as defined in section 12J;

    hh) any company, close corporation or co-operative if the company, close corporation or co-operative—

    A) has not during any year of assessment carried on any trade; and

    B) has not during any year of assessment owned assets, the total market value of which exceeds R5 000;

    iii) not more than 20 percent of the total of all receipts and accruals (other than those of a capital nature) and all the capital gains of the company, close corporation or co-operative consists collectively of investment income and income from the rendering of a personal service; and

    iv) such company is not a personal service provider as defined in the Fourth Schedule;
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Gold Member Martinco's Avatar
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    Quote Originally Posted by eitai2001 View Post
    ii) none of the shareholders or members at any time during the year of assessment of the company, close corporation or co-operative holds any shares or has any interest in the equity of any other company as defined in section 1 (other than-:
    Thanks, The above seems to be the answer I need
    Martin Coetzee
    Supplier of Stainless Steel Band and Buckle and various fastening systems. Steel, Plastic, Galvanized, PET and Poly woven.
    We solve your fastening problems.
    www.straptite.com

    You may never know what results will come from your actions, but if you do nothing, there will be no results... Rudy Malan 05/03/2011

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    Gold Member Martinco's Avatar
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    Just to give the background first:

    My wife and myself are both members of CC # 1
    My wife is a member of CC # 4,
    Myself and my daughter are members of CC # 2
    My daughter and her husband are members of CC # 3
    My 2 nd daughter has no membership of any CC
    CC # 1 owned our house/property which I have transferred out onto our private names. ( Now dormant but with an accumulated loss of +- R 30,000 which is an "asset" i.t.o. SARS.)
    In order for me to qualify for this special tax in two businesses I am going to do the following:
    CC # 1; Both my wife and I resign and transfer to 2 nd daughter.
    CC # 3; My daughter resigns and leaves her husband as member.

    I should now have the 2 CC s ( 2 and 4) with membership that qualifies for "small business tax"

    Am I right or have I confused the issue ?
    Martin Coetzee
    Supplier of Stainless Steel Band and Buckle and various fastening systems. Steel, Plastic, Galvanized, PET and Poly woven.
    We solve your fastening problems.
    www.straptite.com

    You may never know what results will come from your actions, but if you do nothing, there will be no results... Rudy Malan 05/03/2011

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    Hi.

    Well I've put it all down onto paper, and provided that aside from the mentioned changes no one has any other interests in any other CC or Private Company (doesn't have to be somehow connected), then all cc's will qualify as Small Business Corporations because after the adjustments I see the following:
    1 = You
    2 = Your Wife
    3 = Your Daughter
    4 = Your Daughter's Husband
    5 = Your 2nd Daughter

    CC1 = 5
    CC2 = 1 + 3
    CC3 = 4
    CC4 = 2

    As you can see above no CC's share a common shareholder. But if one of the people above has interests in any other company except a listed company, then the CC where they are a member will not qualify.

    Also, the other requirements must also be met.

    Regards

    Itai
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

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    Gold Member Martinco's Avatar
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    Thank you Itai,

    Do you know if I can do the above via the CIPRO site ?
    I am registered as a user with CIPRO.
    Martin Coetzee
    Supplier of Stainless Steel Band and Buckle and various fastening systems. Steel, Plastic, Galvanized, PET and Poly woven.
    We solve your fastening problems.
    www.straptite.com

    You may never know what results will come from your actions, but if you do nothing, there will be no results... Rudy Malan 05/03/2011

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    Hi Martin.

    I don't think so ... I'm not 100% sure though, but when I had to deregister from my Co. the CIPRO website lets you fill out all the details, but the end result is it prints you a form which you need to take to CIPRO.

    But I can't really give you any advice on that, I used the company where I registered my CC to transfer.

    Regards

    Itai
    If you need any Accounting, Tax or even Financial Management advice, PM me and I'll try help and keep your information confidential.

    Visit my Android ZA website - a website dedicated to Google Android in South Africa - www.androidza.co.za

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    Martinco (05-Oct-10)

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    Site Caretaker Dave A's Avatar
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    I think you need to be a verified user to make those sorts of changes online. I looked at the schlep of becoming a verified user with CIPRO, tossed the job of filing those changes to my accountant and happily paid his bill (which I vaguely recall came to a little less than the cost of becoming a verified user).
    The trouble with opportunity is it normally comes dressed up as work.

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