[Question] Tax Directive For Management Member of CC... Possible?

[Tinkit]

Hi everyone!

I am an affiliate marketer who was not making much for the first two years in this field but lately my income has skyrocketed and I was thinking that it is time to register a CC and formalize the business.

As an affiliate marketer I earn commission which means the income is variable and all the income I earn is from foreign companies (USA). As a self-employed individual I cannot request a tax directive because SARS requires an employer to apply for the directive on behalf of the employee. This is not possible for me as I am recognized as a indepedent contractor by the companies I am affiliated too, and tax issues is my responsibility.

I feel a tax directive will help me in many ways but of course I cannot apply for one.

I was wondering once I register the CC and all income (the commissions earned as an affiliate) is paid to the CC whether I can draw a fixed salary of say R1000/month plus a percentage share on the commissions earned by the CC (let say 70%) each month.

If this is possible will I be able to then apply for a tax directive on behalf of myself via the CC?

So, can I hold the capacity of employee with a contract and terms of employment, and also assume the role of management member who has 100% interest in the business?

I am still new to all this so any advice will be appreciated! Thanks!

[Tinkit]

I think this question may be in the wrong section... please move it for me if it is! Thanks!

[Dave A]

So, can I hold the capacity of employee with a contract and terms of employment, and also assume the role of management member who has 100% interest in the business?

Yes.

I'm struggling to see what you need a tax directive for though.

[Mike C]

Hi Tinkit. Once you have established a cc I also do not know why you would want a Tax Directive.

In terms of drawing a salary, I thought you might need to be aware of this aspect:

Directors of private companies and members of close corporations are
deemed to have received a monthly remuneration, subject to PAYE,
calculated in accordance with a formula.
The formula calculated remuneration does not apply to directors of private
companies and members of close corporations who earn at least 75% of
their remuneration in the form of fixed monthly payments.

[Tinkit]

Dave & Mike

Basically my income has gone to 70k/month and I expect it to be a constant 70-100K/month! If I have a CC I will be paying taxes on whatever taxable income I attain which will never be more than 15% of my income. Then if I draw a salary I will be paying personal income tax on that as well as income tax on whatever profits are distributed to me.

I thought will be favourable for me to draw a commission on my income generated (as high as possible but to also ensure the expenses of the CC are covered each month) and to leave all profts within the CC. In this way the CC's taxable income will be less due to the salary expense and by me having a tax directive I will pay less than the 40% tax rate (hopefully around 25%).

Perhaps this does not make sense and there are better ways of approaching this. It just seemed like a better approach but I am new to all this so I am open to any other input or advice.

Thanks guys!

[Tinkit]

I meant to say "will never be more than 15% of the CCs income" (not my income).

[Tinkit]

Okay I am having issue seperating the CC and me! Just to clear a few things in the other post (#5):

The businesses expenses (except salaries if I draw one) will always be less than 15% of income - the overhead and running expenses is extremely low.

If I draw a salary I will not look to take a profit distribution unless I really need too. All profits will be plugged back into the business.

I am looking at a commission based salary as being my main income source from the CC.

I think a tax directive with a flat tax rate will be favourable in the long run for me!

[Justloadit]

A company does not necessarily always have to make a profit, it can run at a cost. A company may not run at a loss, unless it is supported by a surety from the directors that it will meet the financial obligations.

The advantage of the company, is that there are expenses which may be allocated to the company, which is not so easy to do it in your personal capacity. What ever is left over, may be allocated firstly as wages , and the balance as directors income. For this approach, you need to register as a provisional tax payer. Following this method, the company never makes any profit, and you retain the maximum amount of income the company is able to pay, and then only pay PAYE.

This approach is only valid if you are the only share holder. The moment there is more share holders, and with 1st of April just around the corner, any new company's registered will be of the PTY arrangement with directors. The approach may still be maintained, however a very clear and written down in the director's meeting minutes in which the remuneration will be performed. The day that share holders start joining into the company, who are not directors, then this method of structure will not work, and the company will have to start showing profits, after payments to directors. If the company does not make profits, it will not attract investors and share holders.

[Tinkit]

Okay, after reading up more on the subject my question seems rather silly

SARS apparently will determine the fixed rate according to historical earnings which will place my rate at the highest if I draw the amount I intend. And the directive itself is more to help companies pay taxes on behalf of the employee without any uncertainties as to whether they going to pay too much or too little. At the end of the tax year the employee will still have to adjust everything accordingly and may or may not be entitled to a credit.

My understanding of the tax directive was skewed....lol

I was hoping to pay a lower rate...hehe

At least I learnt something new today! Thanks to all!

[CLIVE-TRIANGLE]

Deleted - I didn't read properly