How to Find and Secure Tenders for Your Small Business – 5 Expert Tips

There is a new lane for tendering and an urgent need for assistance from government that has been created by Covid-19 PPE tenders, and other tenders used to fight the pandemic that have increased the scope of tender targets for SMMEs. The government is seemingly incapacitated by the pandemic and the PPE tenders that have been advertised since the outbreak, by themselves, present new opportunities for SMMEs.

Finding the relevant public, or even corporate, tender for a small business depends on a number of factors including the actual task, trading licenses, certification like BEE, the competitiveness of the pricing and most importantly, according to experts, experience. 

Here are some tips on how small businesses can go about finding relevant tenders.

“There are no secrets to success. It is the result of preparation, hard work and learning from failure” (Colin Powell)

The obvious starting points to securing tenders would be the likes of B-BBEE certification and company registration, but from an operational perspective – there are things suppliers can do to find relevant tenders, and to put themselves in a better position to benefit from them.

SMEs with appropriate capability, capacity, experience, and will may benefit by considering tendering for business opportunities, either on their own or in partnership with other SMEs or larger entities. Where an SME has particular skills, competency, experience and so on, they may be in a position to offer a larger organisation a competitive edge in a tender. Winning and completing a tender, either alone or in partnership, benefits the entity putting it on the map and growing its confidence, experience, ability and, hopefully, profitability.

The Covid-19 pandemic has forced organisations and institutions to be more proactive and creative. As a result, even the likes of the Centre for Entrepreneurship at the University of Pretoria has launched the National SMME Support Portal to help small businesses tender during this difficult period.

For qualifying small businesses to stand a better chance of securing suitable tenders, they should consider these expert tips:

  1. Start by registering on the right database

SMMEs should start by registering as suppliers on the Central Supplier Database (CSD). This is a database where all the information, pertaining to all the suppliers that either do business or intend on doing business with the government is kept. Government entities consult this database when looking for suppliers.

Once registered, small businesses may then be invited to participate both in tenders and also receive Requests for Quotations (RFQs). Of course, it is imperative that an SME has carefully thought through what its qualifications are before tendering.

  1. Check the E-Tender portal

The government places all the tenders on this electronic portal as the starting point for alerting potential suppliers. This is the first place registered suppliers should peruse for relevant tenders as all municipalities, constitutional institutions and government departments upload their tenders here.

Another option is to look up tenders in newspapers and government departments’ websites, which is more time consuming.

  1. Consider using tender notification services

Small businesses can subscribe to tender notification services. These service providers ease the process of searching for the right tenders. These automated services try to match qualifications listed by subscribers with the specifications of the published tenders. These agencies then send the subscribed suppliers notifications of close matches, making it easier for busy SMMEs to compete for suitable tenders.

  1. Verify tenders to avoid scams

The government has repeatedly advised suppliers to verify tenders before engaging them.

“Companies are therefore advised to verify all the RFQs and orders by calling the respective departments using the departmental contact details listed on their respective websites to verify authenticity prior to responding to any RFQs or orders to avoid falling prey to these fraudsters”, reads the warning on various governmental websites.

  1. Avoid experiments, avoid implosion

When looking for relevant tenders, suppliers are advised to look for operations for which they have appropriate experience, ability and capacity to avoid causing their “own demise”.

SAICA’s Senior Executive: Public Sector, Julius Mojapelo warned “any uncalculated expansion, whether it’s tendering or getting into a new market, will always have risks. The key is, SMMEs should avoid tendering on things they have never done on their own.”

He further explained that this was simply because government projects are usually on a larger scale.

Ask your accountant to guide you through the lucrative tendering process – don’t be left behind.

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Independent Non-Executive Directors: A Value-Add for Your SME?

Most, if not all, entrepreneurs are passionate about their ideas or concepts for a new product or service offering. Frankly, they need to be.

Once the business is up and running it is easy, and quite natural, to be so focused on your idea and business and the busyness of the operations and activities, that emerging risks or opportunities may not be seen or anticipated – ‘not seeing the wood for the trees’. Having an advisor or advisors may, of course, help. However, an independent non-executive director has, by virtue of their responsibilities on the board, a stake in the survival and growth of the business. Furthermore, as they are not involved in the day-to-day operations, they can bring valuable perspectives to the table.

Many small and medium-sized enterprises (SMEs) are owned and managed by the founder(s), sometimes with the involvement of family members, and in the early stages of the life of a small or medium-sized company there would seem to be little reason or motivation to appoint independent non-executive directors to the board. However, as an entity grows in size, complexity and, hopefully, market share, there may well be a need for, and advantage in, having diversity and independence of thought in the direction of the company.

All members of the board, whether executive, non-executive or independent non-executive have a legal duty to act with independence of mind in the best interests of the organisation.

Firstly, what exactly is an “independent non-executive director”?

The Companies Act and King IV define a director as “a member of the board of a company, as contemplated in section 66”. There is no definition in the Act of ‘Independent’ or ‘non-executive’. Accordingly, all directors have the same responsibilities.

King IV, however, explains independence as follows: “When used as the measure by which to judge the appearance of independence, or to categorise a non-executive member of the governing body or its committees as independent, it means the absence of an interest, position, association or relationship which, when judged from the perspective of a reasonable and informed third party, is likely to influence unduly or cause bias in decision-making”.

Why appoint independent non-executives?

  • Appointing independent non-executive directors does not, in itself, ensure the entity’s governance is enhanced.
  • However, establishing a well-balanced governing body is a meaningful step towards good governance. The King IV code states: “The governing body should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively”.

  • Bringing in additional skills, experience and thought to the leadership of the entity has the potential of enhancing the ability of the board, recognising and dealing with risks and opportunities, and even lifting quality and effectiveness of the deliberations in the board.

  • Non-executive or independent non-executive directors are charged with maintaining an arms-length relationship with management, exhibiting professional scepticism and bringing independent judgment to bear on issues of strategy, risk management, performance and resources including key appointments and standards of conduct. Non-executive directors may not have any operational capacity within the entity; no employment relationship; not be a major supplier or major customer and should not be rewarded on the basis of the entity’s performance.
  • An entity recognised for its strong ethical and effective governance will likely attract more business as a trusted partner. After all, while a company requires a licence from CIPC (Companies Intellectual Property Commission) to commence business, it also needs a Social License to Operate!

What should the independent non-executive director bring to an SME?

  • Someone, as mentioned above, who will bring specific skills and a range of business experience of relevance to the entity. While it may be helpful to have experience in the entity’s particular industry, diversity of experience in other sectors such as, for example, the financial sector, could add value.
  • Clearly, an understanding of the business and the industry is essential in order to make a positive contribution. A non-executive director is expected to make a creative contribution to the board by providing objective and constructive challenge and advice.

  • Owners and management of an SME should not seek to appoint independent non-executives who will simply reflect management’s views, but accept that honest, respectful and robust challenge should be expected and encouraged.

What qualities should you seek in an independent non-executive director?

Clearly, an independent non-executive director should exhibit appropriate behaviour, have a strong ethical stance with absolute integrity; a disciplined and dedicated approach to the role together with a good understanding of the requirements of good governance, controls and risk and opportunity management.

A knowledge and understanding of the regulatory environment of the entity together with the key players and risks in the supply chain and customer base (the entity’s market) is an added advantage.

What should you offer a new appointee to your board?

Any new independent non-executive should insist on an induction programme together with appropriate Directors’ and Officers’ indemnity cover.

Realistically, most SMEs may not be able to offer competitive fees, compared to large or listed companies. Both the Institute of Directors in South Africa and PricewaterhouseCoopers issue useful annual guides to directors’ fees. SMEs should consider making use of this resource in determining the level of fees they are able to afford.

Furthermore they need to consider how the fees are determined i.e. per meeting attended; a retainer regardless of meeting attendance or a combination of both – retainer plus per meeting attended. The SME should also undertake annual director’s performance evaluation.

A non-executive and independent non-executive director needs to balance the contribution they can make in considering an appointment where the fees are, perhaps, not quite at the level they expect. Serving on NPO (Non-Profit Organisation) and SME boards is an opportunity to ‘put back’ their experience and skills. They should consider the responsibility and risks they undertake against the potential contribution they can make to these essential sectors of the economy.

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Sales Reps Are the Lifeblood of Your Business – 10 Interview Questions To Ask

In any business there are few more important people than the sales reps. In this pandemic climate, they have become even more important for keeping small businesses and start-ups afloat and pushing bottom lines into the black. They are the people at the coal face of meeting with clients and selling your products, and are not only the ones who will make or break your bottom line, but also the eyes, ears and face of your company. Placing the perfect candidate in this role is therefore an essential element for building a successful company. We look at ten important questions you should be asking every sales rep candidate you interview.

 “Sales are contingent upon the attitude of the salesman – not the attitude of the prospect” (W. Clement Stone)

With the world experiencing its toughest business environment in decades, your sales reps are the people who more than anyone else need to not only embody the company and its values, but also be capable of delivering on their job specifications every time they step in front of a client. They are the employees that people will first judge your company on, and often it’s the impression they make that will build or break your business.

As well as being able to convert sales, these critical employees also need to gather feedback, accurately communicate your client messages and analyse the market to ensure your products are best placed. This is a critical series of skills that require a very particular person. Unfortunately the world is full of extremely charismatic people, who on the surface may appear to be exactly what you need and who, in the long run, will only end up damaging your brand and costing you sales.

So how do you find the person with the right temperament, the right abilities and the right mindset? These are the ten questions you should be asking every sales rep candidate you interview.

  1. Walk me through a successful sales process. What is your role?

On the surface this is a simple question. Everyone can guess that a sales employee’s role is to sell things, but do they know they are also supposed to gather information, build relationships and represent the company values and ideals? If not, they either do not have experience or simply do not understand what they have applied for.

  1. Why are you interested in this role as a salesperson?

The right sales candidate will speak about the challenge of sales, the people-centric aspects of the job, the relative independence or the competitive aspect. A poor candidate will either start speaking about the high salary, or quickly give away the fact that they don’t know much about what they have applied for.

  1. Tell me in detail about a sale you made where you think your sales pitch was perfect.

With a sales rep you are looking for five qualities and this question will test them all. Confidence, diligence, honesty, thoughtfulness, and a positive attitude are all an important part of being a sales rep and how they handle their “perfect sale” will quickly illustrate all of these things. Did they connive to get the sale? Did they go above and beyond for a client? And do they tell this story in a way that you buy it as a perfect sale?

  1. Tell me about a time you had to deal with a complaint from a customer. What happened, and how did you resolve it?

Both the first and second parts of this question are equally important. How the candidate describes what happened can indicate the kind of person they are. Do they blame others for the problem? If they take no ownership of the problem and instead point to accounts, another rep, the client or even their boss making a mistake without adding in their own culpability then they may not have the emotional maturity to truly handle conflicts.

How they resolved it will show you the kind of person they are under pressure. Did they still make the sale? Did they build the relationship with the client? Did they manage to come to a solution that still helped the company they work for or did they simply cave and give the client everything they wanted?

  1. Tell me about a time you missed a sale or a big opportunity. What was it and what happened?

Similar to the previous question this one speaks to emotional maturity and the ability to learn from mistakes. A candidate who cannot explain why they lost the opportunity and what they could have done differently hasn’t spent time thinking about that problem and will likely not do so when faced with the problem again. These candidates will never be among your top sellers as the ability to learn and evolve is of utmost importance in sales.

  1. How do you stay motivated?

Sales can be a frustrating and sometimes thankless job and self-motivation is therefore an important skill. What you are looking for here is any believable method that does not involve the mention of salary or bonuses. Being interested in a bonus is not a problem by itself, but being able to pick yourself up and do the kind of job that makes a top sales rep cannot be linked only to salary.

  1. Why would you choose our brand over others?

Coming into an interview is just like entering a client’s office as a sales rep. You are selling yourself and need to be prepared. This question will quickly reveal the level of effort a candidate is prepared to go to, to get the job. It will also give you an idea of just how hard working they are, and how much effort they will put in when learning about your company, your products and your goals.

  1. How long are you willing to fail at this job before you succeed?

This is a tough question that forces the candidate to think out of the box and improvise an answer they couldn’t have prepared for. Beyond determining how they would handle setbacks, this question will give you an insight into their expectations, and ability to plan for and handle failure. Do they hope to engage in training, will they seek out answers or are they prepared to sit back and learn on the job as problems arise? There is no right answer but it will definitely help the interviewer determine culture fit and potential.

  1. What’s the most interesting thing about you that’s not on your CV?

A sales rep needs to be a people person. Small talk and the ability to connect on unexpected questions is an important skill. How they improvise here is how they will improvise when asked a tough question by a potential client. What’s important here is how the person answers and not just what they say. Are they able to speak personally? Tell a good story? And be convincing? Perhaps their hobby or story wouldn’t normally be interesting to you, but did they sell it as an interesting thing? Did they intrigue you? If the answer is yes, then you have found an important clue to how they will be out on the streets representing your brand.

  1. Can you remember a time when a problem arose and you weren’t able to contact your manager? How did you handle this situation and who did you turn to for help?

This question speaks to the candidate’s initiative and potential for leadership. Are they capable of thinking on their feet? Did they make a sound judgement that day? Being able to act alone without asking questions of seniors and doing the right thing would show they have both of these valuable traits.

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Provisional Income Tax Due 26 February: Do’s and Don’ts for Companies

By the end of this month, the second provisional income tax payments for companies are due for a financial year that certainly ranks among the most difficult in recent memory – a year in which many business owners realised, as Thomas Dewar once put it, that paying income tax is in fact better than being unable to generate sufficient income to be liable for tax. As companies face intensified scrutiny and more punitive measures from SARS in 2021, we take a look at the issues around the provisional tax payments for companies, due on 26 February to find out what companies should – and should not – be doing to minimise their tax liability and to avoid the hefty penalties and interest that can apply.

“The only thing that hurts more than paying an income tax is not having [an income on which] to pay an income tax” (Thomas Dewar)

Provisional tax is not a separate tax but rather a method of payment used to collect in advance some of a taxpayer’s income tax payable for the year. SARS calls it “an advance payment of a taxpayer’s normal tax liability” and notes in its External Guide for Provisional Tax that provisional tax liability “will prevent a large amount of tax due by you on assessment, as your tax liability will have been spread over a period of time prior to the issue of such assessment”.

Two provisional tax payments are compulsory each year, one six months into the year of assessment (first period) and one on or before the end of the year of assessment (second period). There is also an option to make an additional third or top-up payment, seven months after the end of the year of assessment – unless your year end is anything other than end of February in which event you have only six months for the top-up payment (third period).

Provisional Tax PeriodsExamples

The provisional return for the first period is forward-looking, requiring companies to estimate their taxable income for the year ahead and then paying tax on this estimate in advance.

The provisional return for the second period is retrospective, since by the year end there is more certainty regarding what exactly the income for the year was, and the tax payable thereon.

While provisional tax payments spread a corporate taxpayer’s income tax liability over two or even three payments, it also increases a company’s tax risk. It creates additional tax filing obligations such as completing and submitting a provisional tax return (IRP 6) twice per year, as well as increasing the risk of attracting penalties, notably underestimation penalties. Furthermore, researchers have found that provisional tax is the most burdensome tax for small businesses, and that penalties and interest incorrectly raised by SARS are the most onerous aspect thereof.

Given that taxpayers will find themselves under greater scrutiny and subject to more punitive measures from SARS in 2021, here are some important insights regarding what companies should – and should not – be doing to minimise their provisional tax liability and to avoid the hefty penalties and interest that can apply.

 Provisional Tax – Do’s and Don’ts

  • Don’t file late

A provisional return must be submitted by all provisional taxpayers. Even if your company owes no tax, a ‘nil’ return (i.e. taxable income is equal to zero)must be filed on time. 

For companies with a financial year ending on 28 February 2021, the next due date for provisional tax returns and payments is 26 February 2021, as the last day for submission (28 February) falls on a weekend.

Also remember that if an IRP6 is filed more than four months after the deadline, SARS considers a ‘nil’ return to have been submitted. Unless the company’s actual taxable income is really zero, it will result in the underestimation penalty being imposed, in addition to a late payment penalty and interest. 

  • Don’t pay late

The failure to make payment on time will result in an immediate late payment penalty, calculated at 10% of the provisional tax amount, whether it is not paid or simply paid late. For example, if the amount payable is R150,000 and is not received by SARS on the due date, a R15,000 penalty will become due immediately.

Furthermore, interest will be levied on the outstanding amount and will continue to accrue until it has been paid in full. The interest is calculated at the prescribed rate, which is the rate of interest fixed by the Minister of Finance by notice in the Government Gazette and is currently 7% – the lowest in 40 years.

  • Don’t under-estimate your annual income 

Estimating the annual taxable income just six months into the year is rarely an easy task. Fortunately, under-estimating income for the first period does not attract a penalty, but the second estimate must be quite accurate (within 80 – 90% of the actual taxable income) to avoid the underestimation penalty.

The underestimation penalty is calculated depending on the taxable income, and the percentage of under-estimation as detailed in the table below.

Underestimation penalties

Interest will also be levied on the underpayment of provisional tax as a result of under estimation.

  • Do be proactive

To avoid an underestimation penalty and interest, it is crucial to take proactively all the necessary steps to correctly calculate the estimated taxable income for the year of assessment.

Make certain that all sources of income are included. The estimated taxable income means gross income less exempt income plus all amounts included or deemed to be included in taxable income under the Act, for example, the amount of taxable capital gains.

Ensure that all rebates and amounts allowed to be deducted or set off are also factored in, including provisional payments already made for the year.

Also make sure, if you claimed for COVID-19 provisional tax relief, that the company qualifies before factoring in this cash flow relief and ensure such relief is calculated correctly.

Government’s temporary provisional tax relief measures came into effect in April 2020 and allowed qualifying taxpayers to defer a portion of the payment of their first and second provisional tax liability to SARS, without SARS imposing administrative penalties and interest on the deferred amounts.

Example – COVID-19 Provisional Tax Relief

Claiming this provisional tax relief while not meeting the qualifying requirements would result in normal penalties and interest being applied to the provisional account.

  • Do maintain common sense and accurate records

A relatively accurate estimate of taxable income for the year of assessment is expected for the second period. As SARS says: ‘the calculation must be one which has been carefully considered and is thoughtful, earnest and sincere…” and the amount of the estimate must be determined “sensibly and by careful reasoning and judgment, in a mathematical manner, and using experience, common sense and all available information”. 

Keep accurate records of all the calculations and source documents used.
SARS may ask you to justify your estimate and can increase it if they are dissatisfied with the amount. The increase of the estimate is not subject to an objection or appeal.

  • Do call in professional assistance

The provisions of the sub-sections of Section 89 and of the 4th Schedule to the Income Tax Act are daunting and can be confusing. Nevertheless, provisional taxpayers are ultimately responsible for their tax affairs and may therefore need expert tax advice to comply with the regulations and to avoid substantial penalties and interest.

Companies with complicated returns, including various sources of income or expenses, should consider engaging a CA(SA) tax specialist to assist them in preparing and/or reviewing their income tax return prior to submission to avoid issues which may be raised by SARS at a later date. Similarly, where penalties and interest have already been imposed and levied, taxpayers may need expert assistance to successfully make a request for the remission of penalties and interest to SARS.

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Companies: How to Manage Your Greater Tax Risk in 2021

South African companies are exposed to a significant tax risk. Companies are liable for a range of direct taxes, indirect taxes and employees’ taxes that are continuously subject to legislative changes and administrative improvements by SARS and National Treasury. This means not only great complexity and high cost in terms of compliance, but also high tax liabilities that could total 40% of turnover and more. In addition, tax compliance is increasingly becoming a corporate governance and a reputational issue. In this article, we look at recent developments that indicate that tax risk management will become even more critical in 2021; ways in which companies can manage their tax risk more professionally; and the benefits of tax risk management that can help companies re-build after a difficult past year.

If you think compliance is expensive – try non-compliance.” (Paul McNulty, former US Deputy Attorney General)

The extent of corporate taxes – from income tax, employment taxes and value added tax (VAT) to dividend taxes, capital gains taxes, transaction taxes and other indirect taxes – along with the operational aspects such as data and reporting systems and related technicalities, guarantee complexity and time-consuming processes for companies, which in turn increases compliance costs.  

This also compounds other tax risks such as under-estimation; underpayments; overpayments; not applying the correct tax savings and incentives; tax penalties – such as the 10% late payment penalty; the inability to meet tax obligations; and assessments and audits. 

Compliance costs are another growing tax risk. Studies suggest that companies spend hundreds of hours and tens of thousands of Rands each year on internal tax compliance costs such as labour or time devoted to tax activities and incidental compliance expenses, and on external tax compliance costs like tax practitioners’ fees.

In addition, tax issues can place a company’s reputation and brand at risk. An example would be a company losing a tender on a large contract because it was unable to provide a tax clearance certificate, perhaps due to a technical or minor non-compliance issue. Companies also face the risk that a tax issue could attract negative attention from the media, civil society or competitors, as growing numbers of stakeholders ranging from customers to potential investors increasingly support only companies perceived to be contributing their fair share to the country and community in which it operates.

Why tax risk management will be even more critical in 2021 

All these tax risks will be amplified in 2021 for a number of reasons, including increased tax liabilities; intensified taxpayer scrutiny; and the further entrenchment of SARS’ powers.

In the 2020 Medium-Term Budget Policy Statement, Finance Minister Tito Mboweni announced government-projected tax increases of R5 billion in 2021/22; R10 billion in 2022/23; R10 billion in 2023/24; and R15 billion in 2024/25. Companies need to factor these tax increases into their future planning and budgeting.

Taxpayers will also find themselves under greater scrutiny and likely to be subject to more punitive measures in 2021. Human errors and simple mistakes, which are not uncommon given the complex processes and strict deadlines involved, stand now to be harshly punished even if unintentional. The Tax Administration Laws Amendment Bill, 2020 (awaiting Presidential signature to become law) provides that for certain tax crimes you can be convicted if you acted either “wilfully or negligently”, where previously proof of wilfulness (intention) was required. This means that a court could find a taxpayer guilty of an offence without proof of wilfulness, so that even inadvertent errors could be penalised with a maximum penalty of up to two years’ imprisonment. 

Along the same lines, companies can also expect an increase in the number of tax audits, as well as more detailed, expensive, and time-consuming investigations and audits. These are likely to focus on SMMEs, business owners, trusts and high net worth individuals.

Furthermore, SARS’ already extensive powers – including asset forfeiture powers – continue to be entrenched. Just two examples from recent court rulings illustrate: the Gauteng High Court confirmed a taxpayer’s obligation to be vigilant when filing a tax return and liability for appropriate penalties when falling short of this duty, while a North High Court judgement set an important precedent by re-affirming SARS’ right to liquidate a taxpayer to recover debt where an assessment is under appeal.

How to manage your tax risk

  • Plan for tax compliance

A well-defined tax strategy, aligned with your overall business strategy and the specific tax challenges facing your business, is important. As the business grows, a re-assessment of the corporate vehicle or tax structure may be required. 

Detailed planning is also required for the tax year ahead, providing ample time for processes required for proper record-keeping to ensure tax returns are complete and accurate, and that the numerous tax deadlines can be met.

Planning should also incorporate identifying and implementing relevant tax relief and incentives and assistance. Just one example is turnover tax that provides administrative relief for micro businesses by replacing Income Tax, VAT, Provisional Tax, Capital Gains Tax and Dividends Tax for businesses with a qualifying annual turnover of R1 million or less.

  1. Budget for tax compliance

Proper budgeting is required to ensure all the various tax liabilities can be met before or on the stipulated deadlines, while also factoring in the effect of the annual tax increases announced in the latest Medium-Term Budget Policy.

Companies also need to budget for compliance costs including the internal cost of labour or time devoted to tax activities, incidental expenses, and the resources, systems and continuous upskilling required to meet ever-changing tax obligations. The budget should also provide for external costs such as tax practitioners’ fees; external reviews of the tax function; and even tax risk insurance to cover the cost of immediate expert assistance and support from a team of tax professionals in the case of a SARS’ tax audit.  
 

  • Call on expert professional services 

Given the increase in compliance complexity and costs, the expertise of accounting officers and auditors is vital in determining the taxable income and the amount of tax to be paid.

Advice from a tax professional can ensure an appropriate tax strategy is formulated to proactively manage your tax risk in the long-term, saving time and money and avoiding expensive tax mistakes, while keeping in line with the ever-changing tax obligations. 

Be sure to choose a specialist who is appropriately qualified and experienced, as well as a member of a professional controlling body that enforces strict standards, such as SAICA (South African Institute of Chartered Accountants).

Benefits of professional tax risk management

Failure to manage tax risk effectively will negatively impact on an organisation’s profitability. However, beyond managing tax liability, there are further benefits to managing a business’ tax risks. One of these is more accurate records resulting from tax compliance obligations. This improves the availability of up-to-date information and insight into the financial position of the business and its profitability – enabling accurate, timeous financial management which is crucial to business success. In addition, tax compliance has become both a corporate governance and a reputational issue and can create both shareholder value and stakeholder trust. These benefits, along with tightly managed tax liabilities, will certainly assist companies as they build back after the economic upheaval of 2020.

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Five Mistakes to Avoid When Investing Offshore

With Fitch and Moody’s downgrading South Africa’s credit rating even further and the political and economic climate becoming increasingly erratic it’s perhaps unsurprising that more and more people are electing to move their money offshore.

While this may seem to be a simple solution for those looking for stability it is also easy to make mistakes that could ultimately cost a lot of money and undermine the benefit of investing overseas. We take a look at five of these potential pitfalls and share some tips on how to avoid them.

“An investment in knowledge pays the best interest” (Benjamin Franklin)

It can be tempting to look at South Africa and the bad news that seems to hit us like freight trains one after another, and immediately consider moving all your money offshore. There is however far more to consider than simply your gut feel, and predictions of woe as investing offshore comes with a lot of difficulties and more than a few unique problems.

Here we look at some of the most common errors people make, to steer you clear of losing your investments.

  1. A bank account is not an investment

Perhaps the largest mistake that new offshore investors make is panicking. In their emotional state they open an offshore bank account and start moving money overseas, but this is a mistake.

Bank accounts, particularly in Europe, often pay less than 1% interest and any money that is sitting in one is certainly not even keeping up with South African inflation. As with local investments offshore investors should be looking to craft a diverse portfolio that includes quality global equities to ensure they aren’t just throwing money away.

  1. Understand the market

Before leaping into an offshore investment, it’s important to have a clear picture of the currencies, returns, fees and taxes associated with the different options, and the respective risks that might need to be managed from the outset.

In many jurisdictions fees can end up being a significant player in the profitability of the investment, to the point where they may result in an ongoing shrinkage of offshore assets. This is particularly true if an investment is held in the name of a company, trust or pension, where director or trustee fees will usually be charged on top of the advisory fees.

On top of this, investors in many European countries often pay significantly more in fees for absolutely no added benefits, compared to local investors.

  1. Rental properties aren’t simple

Many people consider buying a rental property in a foreign country the ideal investment, especially if they are considering emigrating there at some stage. A number of countries also offer passports to investors provided they purchase property in those countries, which can also lead to this kind of investment.

There are, however, a number of ways that a rental property can end up becoming a money sinkhole instead of offering the expected stable returns.

International property investors should not simply buy into whichever development the internet or sales agents are suggesting. Do your homework and fully understand the laws, taxes and unique conditions around the country, city and suburb you hope to invest in. Even if the property you are about to buy seems like a good deal, if it is in an area where there is too much rental housing and you struggle to find a tenant, it will end up costing you a small fortune instead.

Investors need to also make sure they do their research on the companies they are working with to ensure they are not uncertified or unscrupulous. Fortunately for investors there is the Association of International Property Professionals (AIPP), an international body that is committed to regulating the industry. If you partner with an AIPP member, you are assured that they have been vetted and approved.

Arranging finance in a foreign country is possible, but again comes with a need for caution. What is the track record of the company offering the finance and just what are the terms they are offering in their contracts? Laws in other countries may not be the same when it comes to finance, and there may not be the same protections that are on offer in SA relating to allowable interest rates and what happens in the event of a default.

Applicable laws need to be checked regarding tenancy too. Are there protections in place if your tenant does not pay the rent? What happens if someone refuses to move out or damages the property? The best solution is to team up with a reputable letting agent who knows the laws, and who has your best interests at heart to ensure you don’t fall foul of some trick of local law. Of course, using an agent results in additional costs, but in the scheme of things this is likely to be money well spent.

In short, research and research again. This is not something to rush into because you saw a flashy Power-point presentation.

  1. Double Taxation

With the laws around taxation of foreign income recently changing there is a lot of uncertainty, and numerous rumours have arisen as to just when tax is applicable, whether disclosure is necessary and just how much is due. The basic rule is that South African tax residents are subject to tax on their worldwide income regardless of where that income derives or whether it has already been subject to tax in the country where it was earned.

It gets more complicated though, because the South African government has numerous Double Tax Agreements (DTA) with various countries, which seek to prevent double taxation. These are not always helpful however as they don’t always protect the investor from paying two sets of taxes.

The DTA signed with the UK for example clearly outlines in Article 6(1) and 6(3) that where a South African receives rental income from letting immovable property in the UK, such income may be taxed by the UK. It does not however say that South Africa is then not allowed to also tax the income. Article 21 tries to provide protection from double taxation, but there are numerous limitations.

This is then further complicated by the fact that there are some domestic laws which seek to help prevent double taxation in some circumstances, but these laws don’t always apply and come with onerous documentary requirements. Basically, consult an accountant to go through the particulars of your case to determine if any tax is owed and what to do about previously undisclosed income to avoid falling foul of the law.

  1. Waiting for the right time to invest

Perhaps the simplest error to correct is the one where, having already decided to invest offshore, the investor decides to hold onto their money, waiting for the right time to jump into the foreign market.

It may seem wise to wait for the Rand to strengthen or the global equity markets to offer up some value, but this is advised against. Commonly, when people are waiting to move funds, they place large sums of money in money market funds, sometimes for years, looking for the right time to jump in, all the while accruing local income taxes at the marginal rate. This more than undoes all the good that a small strengthening of the Rand could present.

If you are going to do it, there is no better time than the present.

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What Should You Do If a Creditor Tries to Liquidate Your Business?

One of the most stressful events that a small business owner can face is having creditors breathing down their neck demanding payment for overdue debts, threatening to liquidate their company and even applying to a court to have their company liquidated.

In this article, we provide expert advice about how to fend off the liquidation of a company and ensure a firm comes out better prepared to survive the brutal economic times that South Africa finds itself in today. We also provide the options available for a small company that is struggling to survive and having to fight off aggressive creditors.

Due to the recession, there are a rising number of local companies in financial distress and facing threats or applications from creditors to liquidate their businesses.

The latest Statistics South Africa (StatsSA) figures released in November show that the total number of liquidations increased by 33.2% in the three months ended October 2020 compared with the three months ended October 2019.

Werksmans Attorneys head of insolvency, business rescue and restructuring Dr Eric Levenstein said during an interview that a company in distress faced with the possibility of liquidation needed to get advice as soon as possible.

Get professional advice as soon as possible

“My advice is do not wait if your company is struggling, or your creditors are applying pressure, go get professional advice. If you leave it too late, then your company faces one option – liquidation,” Levenstein added.

He said it was vital for small business owners to confront the situation and take drastic action to fix their battling company and ensure it survived.

Shepstone & Wylie Attorneys head of litigation Andrew Donnelly has specialist knowledge about insolvency, business restructuring and business rescue.

He said during an interview that when the owners of a small company faced a court application from a creditor to liquidate their business for alleged unpaid debts, they must first check its legality and determine if the creditor’s claims for outstanding debt were valid.

If there was a dispute about the validity of the application, then the company owners should oppose the liquidation, he added.

Stephan Venter is a Cliffe Dekker Hofmeyr lawyer who focuses on insolvency, corporate recovery, and business rescue.

He said during an interview that when reviewing a liquidation application, it was important for small business owners to determine whether their companies were commercially insolvent, since this was what a court would focus on when deciding whether or not the court should order the company liquidated.

To answer this question, the owners must consider if the company could pay its debts as and when they became due and payable, he added.

“It is expensive to go to court, so a creditor will normally only apply to the court for a company’s liquidation once they have exhausted all other informal options, and if there is a reasonable prospect to recover amounts owing to them once the company is liquidated,” Venter said.

Levenstein said that what often happened was that the board of directors anticipated the possibility of a liquidation application because of their creditors getting aggressive about unpaid bills.

“The directors then file for business rescue by a board resolution, and that puts a stop to the liquidation application for the time being. It is a defensive strategy. It doesn’t mean that the business rescue will be successful, but at least there is an opportunity to talk to your creditors. To set aside the business rescue, a creditor would have to apply to the court,” he added.

Donnelly said that only companies and close corporations could apply for business rescue. If there was already a pending application for liquidation, then the company must apply to the court for an order allowing for business rescue, he added. Donnelly said that when the owners of a distressed company applied to the court to have their company placed into business rescue, they must have a plan to save the business. The business rescue plan would require the approval from creditors holding 75 per cent of the value of the claims, Donnelly said.

“If there is no plan, then liquidation may be the only option,” he added.

Many well-known companies have gone into business rescue

Well-known local companies that have recently gone into business rescue include Comair, Edcon, Phumelela Gaming and Leisure, SAA and SA Express.

If a creditor brought a justified liquidation application and the company was insolvent with no hope of rescue, then the courts would approve the winding up, Donnelly said.

Small owner-managed or family businesses often look at their companies emotionally, and they try to save their businesses at all costs regardless of the facts.

“The best course of action often would be to make the hard decision and close the business,” he added.

Donnelly cautioned that while creditors might use the threat of liquidation to aid the payment of their debts, they had to have rational grounds for a liquidation application.

Levenstein said that tactically a creditor wanting payment could threaten the company that owed money with liquidation.

“Creditors that are owed money would apply pressure and to ensure the repayment of outstanding debt,” he added.

Creditors see liquidation as a quick way to get their money

Creditors seeking payment for their debts were increasingly applying for liquidation rather than business rescue as they saw liquidation as a quicker way to get their debts settled, Donnelly said.

“The problem with business rescue is that it can drag on. Creditors find that very frustrating because the company continues trading, but legislation prevents them from enforcing their claims,” Donnelly said.

Larger companies have a better chance of surviving than small to medium companies because business rescue was expensive, Levenstein said. It was important for company directors to consider whether they were incurring needless debt that they could not afford to pay back, he said.

In such a situation, the company directors could face accusations of reckless trading and be sued in their personal capacities, he added. Donnelly said that before a company went into business rescue, the first person the company’s directors should talk to was their banker.

If the banker heard about a business rescue of a small company through the grapevine, he or she would get a nasty surprise and go into a defensive mode where they would focus on debt recovery rather than trying to help the distressed company, he added.

Communication with a company’s bankers was even more important if the company was likely to need post-commencement finance from their bank to stay afloat, Donnelly said.

Other options for distressed businesses

A company facing the possibility of liquidation has several options other than a business rescue or a court-sanctioned liquidation.

The first was to negotiate an informal repayment plan with the creditor bringing the liquidation application, Donnelly said.

The second option was for a distressed business to pursue an informal restructuring, Levenstein said.

An informal restructuring takes place when a company changes the structure of the company, exits from non-performing entities, sells off assets, reduces staff, and cuts costs to make the company more efficient, Venter said.

“The most important thing is to have a good relationship with your creditors when proceeding with informal restructuring options,” he added.

Levenstein said that the dangers of an informal restructuring were that all of the company’s creditors needed to agree to it.

“You cannot have one creditor disagree, and then the company pays the other creditors because then you prefer certain creditors ahead of other creditors, which the law does not allow,” he said.

“The other problem is that one of those creditors could apply to the court for the company’s winding up with liquidation. This situation would come amid the company’s admission that it cannot pay its creditors and so this could invite a liquidation. So informal restructuring can work, but the problem is that there is no moratorium on creditor claims like in business rescue,” Levenstein added.

The third option for a company in distress was to pursue a voluntary liquidation, which Donnelly pointed out could offer big cost savings when compared with a court-sanctioned liquidation.

Voluntary liquidations are much more prevalent than compulsory applications as StatsSA figures show that during the ten months ending October this year, there were 162 compulsory liquidations compared to 1,448 voluntary liquidations.

Venter said that a voluntary liquidation could involve the sale of the assets and wind-down of a distressed company by an appointed liquidator.

If a company filed a special resolution with the Companies and Intellectual Property Commission in line with the relevant sections of the Companies Act, then the company would be placed under voluntary liquidation, he added.

The owners of a company could place it under voluntary liquidation even though its creditors do not agree or support the initiative, Venter said.

A fourth option is for the company directors to enter into a compromise with all of its creditors or a class of its creditors in terms of Section 155 of the Companies Act.

Venter said that a compromise was where a company comes to an arrangement with its creditors, for instance, to reduce the debt it owed them or to pay the amount owed to the creditors over an extended period. A compromise aimed to allow a company to improve its financial position, he added.

“If seventy-five per cent of the creditors in value approve the compromise, the court sanctions it and then it becomes binding on all existing shareholders. Properly used a compromise can be a very effective way of saving and restructuring a struggling company,” Donnelly said.

But Levenstein said that the problem with Section 155 was that there was no moratorium against creditor claims.

Once the court approved the liquidation application, then the Master of the High Court would select a liquidator, Levenstein said.

Liquidation was the end of the company because the liquidator would shut it down, sell all the assets and the creditors would get a final liquidation dividend, he added.

Donnelly said that liquidation would tarnish the reputations of the owners of a business and could impair their ability to win the support of clients, investors, and financial institutions for other business ventures in the future. However, a factor of liquidation was that the liquidator could probe any allegations of mismanagement by the company’s directors, he added.

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The Way Forward: More Virtual Meetings?

If there was ever a protocol-challenging year in recent memory, it has to be 2020. Due to its challenges imposed as a result of Covid-19, improvisation and ingenuity were required. Some of the results of these will remain with businesses long after the pandemic is over as they have proved to be as convenient and effective as, if not more than, the methods used before.

As result of the recent lockdowns around the worlds, business has generally engaged in more virtual meetings and less time-consuming conventional face-to-face meetings. The time and resources used driving to and from meetings, as well as hosting them, could be put to better use going forward. The order of the day is cost cutting, effectiveness, and safety.

“Any sufficiently advanced technology is indistinguishable from magic” (Arthur C. Clarke, English science writer and inventor)

Virtual meeting platforms have their pros and cons, but the standout advantages seem to be their cost effectiveness, time saving capabilities and their ability to host large numbers of attendees at very small cost.

The options available to companies looking to use these platforms are vast. The South African Institute of Chartered Accountants (SAICA)’s recommended list of virtual meeting software and platforms for accounting professions and their clients include:

  • CrowdCast
  • Google Hangouts
  • GoToMeeting
  • Hopin
  • Microsoft Teams
  • Skype
  • Zoom.

Auditable voting tools

Furthermore, one of the useful tools of a platform like Zoom and Microsoft Teams, for example, is their polling system, which could be used in a meeting that requests voting or Q&As.

Virtual meetings pass the legal test and are admissible in court

Earlier this year, the Johannesburg Labour Court ruled that it is fully legal for employers to negotiate retrenchments with employees through Zoom. 

The watershed ruling handed down by judge Graham Moshoana, in an urgent application brought by the Food and Allied Workers Union (FAWU) against South African Breweries (SAB), effectively gave credence to virtual meetings as legally recognised replacements for, or equivalent to, conventional face-to-face meetings in appropriate cases.

The resources used in face-to-face meetings can be put to better use

The average meeting requires money – from catering, human resources and fuel to even flights and accommodation. You can host a virtual meeting with literally thousands of attendees almost for free, with the only cost considerations being software, data and the availability of a laptop or computer.

This is ideal for businesses with a lot of employees. For example, if you are using Zoom for Webinars, it can allow up to 10,000 virtual attendees to sign up.

Virtual meetings afford a chance to save the conversation online

The meetings’ recordings are capable of remaining available for the attendees to refer back to and replay the content for clarity at their own discretion without extra charges. This can improve the quality of output.

The downsides

On the downside, the quality of the conversation depends on external factors, typically beyond the administrator’s control. These could include data processing speed, audio visual quality, and the quality of network reception.

Consider virtual meetings more in your business and put your resources to better use – ask your accountant how to achieve this to maximum effect.

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A Remote Working Danger: Independent Contractor or Employee?

The move to a much greater level of remote working this year has reinforced the need for small businesses to ensure that they classify the people that work for them correctly. One of the biggest challenges for small businesses is to ensure that independent contractors, especially sole proprietors, do not drift into a position where the South African Revenue Service or the Department of Labour would classify such a person as an employee. The failure by a small company to manage the relationships with their independent contractors can lead to great costs for the company if the authorities find that the relationship with any of them is an employment relationship and the firm then needs to rectify the situation. 

The prevalence of remote working since the start of the national lockdown in March has brought to the fore the need to distinguish between an employee and an independent contractor.

This topic has both labour and tax law implications.

Anli Bezuidenhout, a Cliffe Dekker Hofmeyr employment lawyer, said during an interview that a situation could arise where an independent contractor started working for a company, but ended up operating as an employee.

“It is important that both parties manage the relationship because the lines get blurred. Companies need to classify people correctly and manage the relationship properly,” she said.

Tertius Troost, a Mazars tax manager, said during an interview that small businesses could avoid an administrative burden if they dealt with an employee as an independent contractor.

“Small businesses battle with Pay-As-You-Earn (PAYE) tax, especially with complicated employee fringe benefits,” Troost added.

Having an employee defined as an independent contractor means that the employer would not need to pay the person either annual or sick leave or overtime pay, nor would the employer be required to make pension or medical aid scheme contributions.

In addition, an independent contractor cannot enforce a claim against the company for unfair dismissal, nor hold the employer to any of the many other employee rights provided by our labour laws.

The company would also not need to contribute on behalf of the contractor to the Skills Development Levy, Compensation Fund, and the Unemployment Insurance Fund.

Bezuidenhout said some companies like to have employees classified as independent contractors, because they then do not have to comply with the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA).

Often employees agree (or pro-actively request) to be independent contractors in order to avoid PAYE and to make expense deductions against their business income.

Bezuidenhout said that individuals were often happy when companies classified them as independent contractors because that gave them flexibility.

However, the South African Revenue Service (SARS) and the Department of Labour look at the actual relationship between a company and those that work for it – it is a factual enquiry and an employer that incorrectly classified an employee as an independent contractor would be liable for the employee’s tax that the company should have deducted plus penalties and interest.

However, the employer could (at least in theory) recover the tax paid to SARS from the employee.

How tax law defines an employee versus an independent contractor

SARS requires a company to withhold employees’ tax when three elements are present, namely an employer, the payment of remuneration and an employee.

SARS also provides two tests to determine whether a person is to be regarded as an independent contractor for employees’ tax purposes.

If an employee meets both parts of the first test, then the person is an employee and any earnings paid to that employee will be subject to employees’ tax.

The first part of this test is that the employee performs over 50% of the services or duties at the client’s premises.

The second part of the test is whether any person controls the employee or his or her work hours.

The second test determines whether a contractor is trading independently.

Where an independent contractor rendered services to more than one client, then the contractor needed to apply these tests in respect of each client to assess whether the contractor was an employee at each engagement.

Another test is the common law “dominant impression test” that SARS applies to determine whether an employee is an independent contractor or an employee.

How to apply the common law “dominant impression” test

The “common law dominant impression grid” sets out 20 of the more common indicators.

These indicators take a detailed look at the relationship to determine if it is an employer and employee relationship or a client and independent contractor relationship.

There are three categories of these indicators, namely:

  1. Near-conclusive, which relate most directly to the acquisition of productive capacity;
  2. Persuasive, which relate to the control of the work environment;
  3. And resonant of either an employer-employee relationship or an independent contractor or client relationship, whichever is relevant.

SARS said in an Interpretation Note that it would use the dominant impression to classify the relationship as either an employee or an independent contractor relationship.

Personal service providers, labour brokers, and expatriate employees

SARS introduced anti-avoidance measures about personal service providers or labour brokers to clamp down on those trying to avoid employees’ tax.

SARS uses common law tests to determine whether a personal service provider or labour broker is carrying on an independent business.

Mazars’ Troost said that tax law required that when a company engaged a personal service provider or a labour broker, without a SARS certificate of exemption, that company had to withhold PAYE as SARS deemed such a person an employee.

SARS would only issue an exemption certificate if the labour broker or personal service provider conducted an independent business, according to a SARS Interpretation Note.

A personal services company has to have at least three employees who were not family members in order to be considered an independent contractor, Troost added.

Expatriate employees working in South Africa may need to pay employees’ tax on local income, subject to any double tax agreements which may be in place between South Africa and the expatriate employee’s home country.

In terms of the definition of remuneration in the Fourth Schedule of the Income Tax Act, a person who is not a resident cannot qualify as an independent contractor.

A quick comparison of employee versus independent contractor

Indicative factors in determining where a person is an employee or an independent contractor, according to the South African Guild of Editors.

EmployeeIndependent Contractor
Works for only one employer at a time.           Provides services to more than one person or company at a time.
Works the hours set by the employer.Sets his or her own hours.
Usually works at the employer’s place of business and uses their equipment.Works out of his or her own office or home and uses his or her equipment.
Entitled to annual and sick leave.Not entitled to any leave.
Often receives employment benefits, such as medical aid or bonuses.Does not receive employment benefits from the employer.
Works under the control and direction of the employer.Works relatively independently.  
Receives a nett salary after the employer has deducted income tax and UIF.A provisional taxpayer and responsible for paying his or her own taxes.
(Adapted from: S A Guild of Editors)

How labour law handles the distinction between employees and independent contractors

The major pieces of employment legislation, the LRA, the BCEA and the Employment Equity Act (EEA), apply to employees and not independent contractors.

The law defines an employee to mean any person, excluding an independent contractor, who works for another person or the government, receives remuneration, and conducts the business of the employer.

There is no statutory definition of the term “independent contractor”.

As a result, several tests have evolved through case law, the presumption of employment provision in the LRA and BCEA, and the Code of Good Practice on “Who is an Employee”.

To ensure that employees do not lose their labour law protections, section 200A of the LRA and section 83A of the BCEA introduced a rebuttable presumption that everyone earning under the earnings threshold of R205,433.30 a year is an employee until proven otherwise and regardless of the contract concluded, according to an article on the EE Publishers website.

An employer who disputes that an independent contractor is an employee must provide evidence about the working relationship.

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Accounting Tips for SMMEs in a Rocketing Tax Future

During his 2020 Medium-Term Budget Policy Speech not so long ago, Finance Minister Tito Mboweni announced that government has projected tax increases of R5 billion in 2021/22, which will be followed by increases of R10 billion in 2022/23R10 billion in 2023/24 and R15 billion in 2024/25.

These impositions will require SMMEs to utilise the best available accounting skillset to minimise the impact of the imminent bite on their bottom-line.

The future is uncertain and there is much speculation about a whole range of predicted trends (such as the possible disappearance of cash by 2030), but there is a sizable obstacle that SMMEs will definitely have to deal with in the short term – the projected increases in tax.

 “The avoidance of taxes is the only intellectual pursuit that carries any reward”: John Maynard Keynes

While there are diverse reasons why SMMEs ultimately fail, financial mismanagement and poor performance are two of the most often-cited explanations.

A financial forecast as a tool, allows businesses to plan their finances for the future – with the consideration of their present and past performances. This implement should be mindful of the looming tax increments within the South African context, if it is to be effective in steering the company to a state of readiness and efficiency, particularly during the ongoing COVID-19 pandemic.

Being that the increases are projected to be an ongoing imposition over the next five years at least, here are some expert accounting tips for SMMEs on how to best manage future projections and targets in our volatile local tax environment.

1.   Appropriate and timeous management of the tax predicament

SMMEs are advised to manage their expectations within our rocketing tax context, in order to prepare themselves in dealing with their future successes and failures. Understanding the context, timing, various tax implications and what is projected at company level is vital in preparing for the inevitable pinch on the pocket.

The COVID-19 trial hasn’t come at the best of times for our government as it can’t afford to be as giving as others around the globe. There are governments that have given deferrals on payroll taxes, VAT and corporate income tax as a collective package. In South Africa, tax compliant businesses have been allowed to defer 20% of their employees’ tax liabilities and a portion of their provisional corporate tax payments – ask your accountant for details.

2.    Pick the right forecasting model for your business.

Picking between the right qualitative and quantitative forecasting approach should be determined by the core data of the company being dealt with. The projected tax increments should be factored in, as the overall objective is to forecast profitability and not just actual sales. For example, in the Qualitative Model, there is Trend Projection, where the accountant looks at the trajectory of what is happening at that point in time, while following the trend in the publicised increases. 

3.  Adaptability and reducing costs where applicable.

According to Johnny Yong, who is technical manager with the International Federation of Accountants’ (IFAC) Global Accountancy Professional Support (GAPS), and Robyn Erskine, who is partner at Brooke Bird in Australia, SMEs should evolve with the times.

Death and taxes are the two constants in life. It is therefore not surprising for SMEs to be asking this question. In other instances, the corporate vehicle or tax structure may need to evolve as the business grows. [Accountants] can discuss this with their clients – at a certain point of the SME’s evolution. Preparation (for the entrepreneur) is important to ensure long term success of the business,” they penned for the IFAC website.

4.  Charitable contributions as a means of getting tax breaks

This is a tool that can be achieved through manoeuvring and strategy. The South African treasury has announced tax breaks which might help soften the tax pinch.

The tax-deductible limit for donations (currently 10% of taxable income) will be increased by an additional 10% for donations to the Solidarity Fund during the 2020/21 tax year.

The bona fide donations have to be made to an approved organisation, agency, institution, or department of government listed in section 18A (1) of the Income Tax Act and there must be a receipt to prove the donation. Make sure of course that you can afford the cash outflows involved.

5.  Planning accordingly and compliance.

The benefits of forecasting can never be overstated. The thoroughness of forecasting gives the organization insight into the possible future performance of the business and how to prepare.

A specific benefit is that forecasting can lead to better accuracy in budgeting. This includes accounting for future tax spend. The complete forecast can serve as a framework for developing new strategies.

Don’t be left scrambling for cover at the last hour, ask your accountant for help with this – don’t let high taxes kill your business!

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