Tax terms defined
Provided by Business Partners Ltd, South Africa's leading investor in SMEs
Before you try to get your taxes in order, it's important be familiar with the technical jargon you're about to be bombarded with. This glossary of tax terms can help you get to grips with that complicated language called Tax.
When dealing with your company's taxes, you may feel you need a dictionary for the tax-speak, and explanations for the explanations. Below you will find an alphabetical list of terms you might come across when filing your taxes.
Amount Due - Money that taxpayers must pay to the government when the total tax is greater than their total tax payments (throughout the year).
Association not for gain - A religious institution or other society or organisation that is not carried on for profit and has to use any property or income solely to fulfil it's objectives. An association not for gain could also qualify as a "welfare organisation" if it conducts certain activities.
Audit - A process whereby auditors come in to examine a business's accounts.
Capital Gains Tax - A tax incurred when a business disposes of an asset or property.
Consideration - The total amount of money (including VAT) received for a sale.
Deductible expenditure - Any expenditure of a capital nature that is incurred during the tax year in order to produce income for your business, such as operational expenses, assets bought for the business and so on.
Direct taxes - Taxes that are imposed on persons. The term 'person' relates to individuals and to legal entities (companies, CCs, trusts, deceased estates).
Dividend - A share of profits paid to shareholders of a company at the end of a financial year.
Dividend Tax - Has replaced Secondary Tax on Companies (STC). This new tax is a withholding tax of 10%, payable by the company on behalf of a shareholder. This means that the shareholder will not pay tax on the dividends at his effective tax rate; 10% will be the final tax payable on the dividend.
Dwelling - Any building, premises, structure or any other place or part thereof used predominantly as a place of residence.
eFiling - SARS eFiling allows taxpayers to submit tax returns and payments electronically (via the internet). Currently, only VAT 201 returns, PAYE / SDL / UIF (EMP 201) and provisional tax returns (IRP 6) are accommodated. For more information visit the SARS eFiling website at http://www.sarsefiling.gov.za/.
Employee - Any person (other than a company) who receives remuneration or to whom any remuneration accrues. This includes services rendered by a person to or on behalf of a labour broker.
Employer - Any person who pays or is liable to pay an amount by way of recompense to another person.
Exempt supply - A supply on which no VAT may be charged (or claimed) even if the supplier is registered for VAT. Exempt supplies include financial services (interest, life insurance, medical aids and others), renting a dwelling to use as a private home and educational services (primary and secondary schools, etc).
Fiscal year - Fiscal year is a period of 12 consecutive months without regard to the calendar year. The fiscal year is designated by the calendar year in which it ends. The SA government's fiscal year begins 1 March and ends 28 February. The fiscal year carries the date of the calendar year in which it ends and is referred to as FY.
Gross income - Total income before taking any exemptions, deductions or allowances into account. This includes income other than cash, such as an asset given or service rendered in exchange for the sale of goods.
Income Tax - A tax imposed on all taxpayers; calculated on the taxable income of both natural and legal persons.
Indirect taxes - Taxes that are levied on transactions, e.g. the tax levied on the selling price of goods, which in
Input Tax - VAT paid by a vendor on goods or services supplied by the vendor. Conversely, Output Tax is VAT charged by a vendor for goods or services supplied.
Net income - This is the amount of income a business is left with after subtracting costs and expenses from the total revenue. 'Expenses' include allowable deductions such as pension fund, retirement annuity, medical aid, PAYE, UIF, etc).
PAYE - Pay As You Earn; a rate of tax deducted from the salary/wages of any person who earns more than R60 000 per annum.
Person - For the purposed of tax, a "person" includes any natural person, public or local authority, company, trust, body of persons (i.e. partnerships) and the estate of any deceased or insolvent person.
Pre-trade costs - Costs such as advertising and marketing promotion, insurance, accounting and legal fees, rent, telephone, licenses and permits, market research and feasibility studies. This excludes capital costs, such as the purchase of buildings and motor vehicles.
Provisional Tax - A person must register as a provisional taxpayer if he derives income which is not a salary or wages (such as profits from a business), is director of a private company or is a member of a close corporation. Provisional tax is usually paid twice per financial year.
Remuneration - Money paid to an employee, including a salary or wages, leave pay, travel allowances, overtime pay, bonuses, gratuities, commissions, pensions, annuities, any amounts paid for services rendered or variation of office, retirement lump sums and any fringe benefits.
SITE - Standard Income Tax on Employees is deducted by the employer from an employee's salary (usually at the end of every month). All employees are liable for this tax. Where an employee's net remuneration is R60 000 or less, PAYE does not have to be deducted.
STC - Secondary Tax on Companies (phased out in 2008 and replaced with Dividends Tax - see definition of Dividends Tax).
Taxable income - The amount you will be taxed on once exempt income and allowable deductions have been deducted from your gross income.
Turnover Tax - Voluntary tax system that allows small businesses with a turnover up to R1 million a year to only submit two interim returns and a final return for assessment.
Trust - Defined in section 1 of the Income Tax Act as "any trust fund consisting of cash or other assets, which is administered and controlled by a person appointed under a deed of trust, by agreement or under a deceased's will".
Unemployment Insurance Fund - UIF provides benefits for people who are out of work or unable to work because a chronic illness or pregnancy. Contributions to UIF are compulsory and are made by employers, employees and the government.
VAT - Value-Added Tax; an indirect system of taxation that is currently levied at 14% on the value of all goods and services supplied by vendors.
Vendor - Any person who is required to register in terms of the VAT Act.
Very small business - A business with a turn-over of up to R1 million per year.
Have this glossary handy when you're doing your taxes or speaking to a tax consultant and feel like a fundi. Some of this information may change at any time, so for updates and more detailed tax information, rules and regulations, visit the SARS website.
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