[Question] Taxes on a Sole Proprietorship

[Tinkit]

Hey everyone!

Just trying to figure out what sort of business to register and I have a question with regard to taxation of the business and the individual who runs the business....

If I have a sole proprietorship do I pay taxes on the businesses taxable income as well as taxes on any drawings or is there only one tax payment?

If it is a stupid question then my apologies... this is all new territory for me!

One more question: if the sole proprietorship is allowed to pay Turnover Tax, do I have to pay one amount for turnover tax as well as tax on drawings?

I guess I just need to know whether drawings is a seperate tax when one runs a sole proprietorship.

Thanks!

[CLIVE-TRIANGLE]

Hi Tinkit

A sole proprietor does not have drawings. His entire profit is his to use as he sees fit, and his entire profit is subject to tax on the scale for individuals.

[Tinkit]

Hi Tinkit

A sole proprietor does not have drawings. His entire profit is his to use as he sees fit, and his entire profit is subject to tax on the scale for individuals.

Thank you Clive-Triangle!

Assuming I qualify for turnover tax, will I pay one flat rate according to the turnover tax tables and that's it? If that is the case then that will be great for me.

[CLIVE-TRIANGLE]

Tinkit I don't know. At the moment, although I can't find fault with your thinking, I have to say it does not make sense from SARS' angle.

[Dave A]

Assuming I qualify for turnover tax, will I pay one flat rate according to the turnover tax tables and that's it?

Yes.

[Cpt Chaos]

Hi Tinkit,

Hope the below mentioned information will help you understand how it works.

A sole proprietorship also known as a sole trader is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the owner. However, the South African Revenue Services (SARS) recommend that you register as a tax payer. Businesses with a turnover of under R100 000 usually do not pay tax, but they must register with SARS.

Submitting returns...

From 1st March 2009 many small businesses with a turnover of less than R1 000 000 per annum can opt to be taxed purely on turnover. If a business does a turnover of less than R100 000 they do not pay tax, but must submit a return.

Taxable turnover (R)	2010/11 Rates of tax	Taxable turnover (R)	2011/12 Rates of tax
R0 – R100 000	0% of each R1	R0 – R150 000	0% of each R1
R100 001 – R300 000	1% of the amount above R100 000	R150 001 - R300 000	1% of the amount above R150 000
R300 001 – R500 000	R2 000 + 3% of the amount above R300 000	R300 001 – R500 000	R1 500 + 2% of the amount above R300 000
R500 001 – R750 000	R8 000 + 5% of the amount above R500 000	R500 001 – R750 000	R5 500 + 4% of the amount above R500 000
R750 001 and above	R20 500 + 7% of the amount above R750 000	R750 001 and above	R15 500 + 6% of the amount above R750 000

If the business is not yet generating an income, the business must register as a tax payer and submit a zero return.

As you will see the business does not pay any tax on a turnover below R 100 000 but thereafter it is calculated on the scale above.