What are STC Credits ?

[daveob]

Looking into the new changes to affect small businesses with the new budget.

The biggest impact I see ( for me ) is the change from STC to DWT.

More so with the surprise announcement of the change in rate from 10% to 15%.

Logic tells me to pull out all retained earnings immediately and pay the 10% now ( cash holding sufficient to do this ) - your advice ?

Also, I keep seeing the term "STC Credits" - can anyone tell me, in laymans terms, what these 'credits' are ?

Regards

[Nickolai Naydenov]

http://www.taxtalkblog.com/?p=4795

http://www.sars.gov.za/home.asp?pid=3414

[daveob]

Many Thanks.

So STC Credits are, for example, related to dividends that my company receives from a subsidary company.
In the books of the sub-co, they pay the STC to SARS and the divs to my co.
In my books, I can deduct the STC paid on the divs received ( because it was paid to SARS by the sub-co ), from the STC payable to SARS for divs paid to my shareholders.

Sounds pretty much just like the Input / Output VAT system.

[Dave A]

Logic tells me to pull out all retained earnings immediately and pay the 10% now ( cash holding sufficient to do this ) - your advice ?

Pretty hard to argue with your logic in a single tier structure. In this situation it looks like tax has effectively gone up 5%.

[jasonpat]

The term of STC Credits is really nicely explained by you with the examples.