South Africa: Accounting and Company Tax

What South African companies can now do in AbbPay for bookkeeping, VAT and company tax, and how each return gets to SARS or CIPC.

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In short

A South African company can keep its books in AbbPay with a chart of accounts built for South Africa. From those books, AbbPay prepares:

• the VAT return (VAT201)
• the company income tax return (ITR14)
• provisional tax payments (IRP6)
• the annual financial statements
• turnover tax
• dividends tax and other withholding taxes

AbbPay also reminds the company when its CIPC annual return is due.

AbbPay prepares and checks the figures. It does not send them to SARS or CIPC. SARS does not let outside software file on a company's behalf, and CIPC doesn't either. The company (or its accountant) logs in to SARS eFiling or the CIPC website, enters the figures AbbPay has prepared, and pays. Then they mark the return as submitted in AbbPay, so the dashboard shows what is done and what is still due.

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Where to find it

Everything sits in the Tax app, under South Africa Tax:

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1. Bookkeeping set-up

When a South African company is created, it gets:

• A South African chart of accounts. This is the list of accounts the books use. It includes South African accounts such as:

  • VAT
  • PAYE, UIF and SDL (payroll taxes)
  • workers' compensation (COIDA)
  • medical aid and retirement fund deductions
  • provisional tax paid and dividends tax payable

• The South African VAT rates, ready to use on invoices and expenses:

  • standard rate (15%)
  • zero-rated sales and exports
  • exempt supplies
  • goods bought for the business's own use (capital goods)
  • imports

  Each rate already knows which box it belongs to on the VAT return.

• Salaries posted to the books automatically. When a payroll run is completed, AbbPay records the salary cost and the amounts owed to SARS, the pension fund and the medical aid. If a payroll run is reversed, that entry is reversed too.

A fix that helps every country: the profit and loss report previously left out interest and dividends the company received. It now includes them, and so does the profit figure that company tax is worked out from.

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2. VAT return (VAT201)

What AbbPay does

• Works out the company's VAT periods from its VAT category (A to E). For example, Category C files monthly and Categories A and B every two months. It also works out each due date: the last business day of the month after the period ends, moved earlier for weekends and public holidays.
• Fills in every box (1 to 20) of the VAT201 from the invoices, point-of-sale sales, expenses, credit notes and debit notes for the period. Foreign-currency documents are converted to Rand.
• Compares the result with the VAT accounts in the books and points out any difference.
• Lets the user lock ("finalise") the figures, reopen them if something changes, and download them as a spreadsheet.
• Warns if documents are added or changed after the return was finalised.

How it is submitted

1. The user opens the finalised return in AbbPay.
2. They log in to SARS eFiling, open the VAT201 for the same period, and type in the figures box by box.
3. They submit the return and pay SARS (or claim the refund).
4. Back in AbbPay, they click Mark submitted, then Mark paid.

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3. Company income tax (ITR14)

What AbbPay does

• Starts from the year's profit in the books and adjusts it to taxable income. Examples:
  • adding back expenses SARS does not allow;
  • replacing accounting depreciation with SARS's wear-and-tear allowances;
  • applying losses brought forward from earlier years, within SARS's limits;
  • including only the taxable part (80%) of capital gains, after taking off capital losses from earlier years. A capital loss that can't be used yet is carried forward to the next year.
• Deducts donations to approved charities (those that issue section 18A receipts), up to 10% of taxable income. Any amount above the limit is carried forward and claimed the following year.
• Calculates the tax at the company rate (27%), or at the lower rates for a small business corporation if the company qualifies.
• Takes off the provisional tax already paid during the year.
• Lets the user add their own adjustments with a note explaining each one.
• Keeps an asset list with the write-off period SARS allows for each type of asset. Small items under R7,000 are written off at once. It also handles SARS's faster write-offs:
  • factory machinery: new machinery 40% in the first year, then 20% a year; second-hand machinery 20% a year;
  • small business corporations: factory machinery written off in full in the first year, other equipment 50%, 30% and 20%;
  • factory buildings and new commercial buildings: 5% a year.
• Checks the return for problems before it is finalised. One check warns when provisional tax was underestimated.
• After submission, records the assessment SARS sends back.

How it is submitted

1. The user finalises the calculation in AbbPay.
2. On SARS eFiling, they complete the ITR14 form with those figures.
3. They pay any balance due, or wait for the refund.
4. They click Mark submitted in AbbPay and later enter the SARS assessment.

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4. Provisional tax (IRP6)

Companies pay their income tax in advance, in instalments during the year.

What AbbPay does

• Shows the due dates:

  • the first payment, six months into the year;
  • the second, at year end;
  • an optional third, after year end.

• Calculates the basic amount, the minimum estimate SARS expects, based on the last assessment.

• Estimates each payment from the current year's results.

• Warns if the estimate is low enough to attract SARS's underestimation penalty.

• Records the payments made. These flow automatically into the ITR14.

• Works out what SARS charges when payments are late or short:

  • a 10% penalty on a first or second payment not made in full by its due date, plus interest at SARS's current rate until it is paid;
  • interest on the year's shortfall when the provisional tax paid falls short of the final tax, counted from six months after year end (seven for a February year end) until SARS's assessment. If the company paid too much, it shows the interest SARS pays instead.

  SARS's interest rate changes several times a year. AbbPay holds the published rates and refuses to calculate for a date it has no rate for, rather than guess.

How it is submitted

1. On SARS eFiling, the user completes the IRP6 for the period and pays.
2. In AbbPay, they mark the IRP6 as submitted and record the payment.

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5. Annual financial statements

What AbbPay does

• Builds the year's financial statements from the books, in the South African small-company format (IFRS for SMEs):
  • statement of financial position (balance sheet)
  • statement of profit or loss
  • cash flow statement
  • notes on fixed assets and tax
  • a deferred tax note
  • a related parties note
• Shows the previous year's figures alongside.
• Collects the details the books cannot supply:
  • registration number
  • directors
  • nature of the business
  • who compiled the statements
  • dividends declared
  • events after year end
  • related parties: directors, shareholders and their families or companies, what the company paid them or received from them, and what is owed at year end
• Calculates the company's public interest score. This decides whether the statements must be audited, independently reviewed, or neither.
• Points out problems, such as:
  • the balance sheet not balancing;
  • fixed assets in the books not matching the asset list;
  • the tax charge not matching the tax calculation;
  • deferred tax in the books not matching the calculation.
• Works out deferred tax: the tax effect of fixed assets being written off faster for tax than in the books. The directors can add other differences, such as provisions, and can include the tax benefit of an assessed loss when they expect future profits to use it. One click posts the result to the books.

Segment reporting (results by business line) is not included because the small-company standard (IFRS for SMEs) does not require it.

• Lets the directors approve the statements. Approval freezes the figures and removes the "Draft" mark from the PDF.
• Produces a PDF to print, sign or send.

How they are used

Financial statements are not submitted to SARS on their own. They support the ITR14, and SARS can ask for them. The company keeps them, gives them to its bank or auditors as needed, and uses them for the CIPC annual return.

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6. CIPC annual return reminder

Every company must file an annual return with CIPC (the Companies and Intellectual Property Commission). The deadline is 30 business days after each anniversary of its incorporation. CIPC can deregister a company that misses two years in a row.

What AbbPay does

• Uses the date of incorporation, entered once in SARS settings.
• Shows on the dashboard:
  • which year's return is due and the date to file by;
  • any earlier years still not filed;
  • a red "Overdue" mark when a deadline has passed.
• Lets the user mark each year as filed, and undo it if marked by mistake.

How it is submitted

The company files the annual return on the CIPC website. With it goes either a short Financial Accountability Supplement or, for audited companies, the financial statements. Then the user clicks Mark filed in AbbPay.

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7. Turnover tax

A simplified tax that very small businesses can choose instead of income tax and VAT. It is charged as a small percentage of turnover, for businesses with turnover up to R2.3 million.

What AbbPay does

• Calculates the tax on the year's turnover using SARS's turnover tax table.
• Works out the two interim payments (TT02) and the annual return (TT03).

How it is submitted

1. The user files the interim payments and the annual return on SARS eFiling and pays there.
2. They record each one in AbbPay.

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8. Dividends tax and other withholding taxes

When a company pays certain amounts, it must keep back a portion as tax and pay it to SARS:

• Dividends tax: 20% of dividends paid to shareholders. Dividends paid to another South African company are usually exempt.
• Interest and royalties paid to people or companies outside South Africa: 15%, or a lower rate where a tax treaty applies.

What AbbPay does

• Records each payment with the payee, the rate used and the reason for any exemption or reduced rate.
• Groups the payments into one return per tax per month and shows the due date: the last business day of the following month.
• Posts each payment to the books if the user ticks "Post to the books":
  • a dividend is recorded against retained income, split between what the shareholder is owed and the tax owed to SARS;
  • for interest and royalties, the tax withheld is moved from what is owed to the foreign payee to what is owed to SARS.
• When a month's tax is paid to SARS, it records the payment from the chosen bank account.

How it is submitted

1. The user declares the tax and pays it on SARS eFiling.
2. They mark the return as submitted and paid in AbbPay.

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Submission at a glance

In every case, the user marks the return as submitted (and paid) in AbbPay afterwards, so the dashboard stays accurate.

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Not included yet

• Sending returns to SARS or CIPC directly. There is no public way for software to do this.