Credit notes under scrutiny, are you complying?

Credit notes under scrutiny, are you complying?

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What we have seen now is increased scrutiny of credit notes for compliance with the VAT Act. The main challenge is that in most instances accounting packages being used by businesses do not contain all the information required on a credit note by the VAT Act. It is therefore important that businesses and accountants ensure that credit notes comply with the Act before they are issued and before VAT claims are submitted. Otherwise, it will be difficult for businesses to get back their legitimate VAT claims.

Key elements that must be found on the credit note are the following:

  • Vendor details (names and addresses, VAT registration numbers for both the issuing and receiving party)
  • The words “credit note” must be clearly stated on the document being issued
  • A brief description of the circumstances that gave rise to the credit note. Now this one is critical and what you may find is that some accounting systems do not allow for this. We would encourage you to add this narration to the description part of the credit note.
  • Information sufficient to identify the original transaction to which the credit note relates, that is the original invoice that is being credited. In other words, if someone else who is not familiar with your records comes to check the credit notes, they should be able to trace its origins with ease.
  • It would also be very important to make sure that the correct VAT rate is applied. If the original invoice was issued before the VAT rate changes to 15%, then the credit note should also be at 14%. One cannot claim back more than what they declared.

In more detail and in terms of Section 21(3), of the VAT Act, a credit note must contain the following particulars:

(i) The words “credit note” in a prominent place;

(ii) the name, address and VAT registration number of the vendor;

(iii) the name, address of the recipient. And where the recipient is a registered vendor, the VAT registration number of the recipient;

(iv) the date on which the credit note was issued;

(v) either—
(aa) the amount by which the value of the said supply shown on the tax invoice has been reduced and the amount of the excess tax; or
(bb) where the tax charged in respect of the supply is calculated by applying the tax fraction to the consideration, the amount by which the consideration has been reduced and either the amount of the excess tax or a statement that the reduction includes an amount of tax and the rate of the tax included;

(vi) a brief explanation of the circumstances giving rise to the issuing of the credit note;

(vii) information sufficient to identify the transaction to which the credit note refers;

(b) the actual tax charged in respect of the supply concerned exceeds the tax shown on the tax invoice as charged, the supplier shall provide the recipient with a debit note, containing the following particulars:
(i) The words “debit note” in a prominent place;
(ii) the name, address and VAT registration number of the vendor;
(iii) the name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient, except where the debit note relates to a supply of goods in respect of which a tax invoice contemplated in section 20 (5) was issued;

(iv) the date on which the debit note was issued;

(v) either—
(aa) the amount by which the value of the said supply shown on the tax invoice has been increased and the amount of the additional tax; or
(bb) where the tax charged in respect of the supply is calculated by applying the tax fraction to the consideration, the amount by which the consideration has been increased and either the amount of the additional tax or a statement that the increase includes an amount of tax and the rate of the tax included;

(vi) a brief explanation of the circumstances giving rise to the issuing of the debit note;

(vii) information sufficient to identify the transaction to which the debit note refers:

Provided that—
(A) it shall not be lawful to issue more than one credit note or debit note for the amount of the excess;
(B) if any registered vendor claims to have lost the original credit note or debit note, the supplier or recipient, as the case may be, may provide a copy clearly marked “copy”;
(C) a supplier shall not be required to provide a recipient with a credit note contemplated in paragraph (a) of this subsection in any case where and to the extent that the amount of the excess referred to in that paragraph arises as a result of the recipient taking up a prompt payment discount offered by the supplier if the terms of the prompt payment discount offer are clearly stated on the face of the tax invoice.

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How to hold SARS accountable

How to hold SARS accountable

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The office of the Tax Ombud was established to act as a bridging gap between SARS and the taxpayer. But, taxpayers do not always have a direct line to connect with the Tax Ombud. A taxpayer may lodge a complaint with the Tax Ombud after they have exhausted all the SARS complaints mechanisms unless they are compelling circumstances for not doing so.  Otherwise, the process below will have to be followed:

There are three ways through which one can lodge a complaint with SARS:

  1. Via eFiling. See the step-by-step guide on how to lodge a complaint via eFiling. Please note that you have to be registered on eFiling to be able to do this. You may not download or print the form to send it by any other means.
  2. By visiting the branch. If you do, you may need to ensure that you have spoken to all relevant higher people before you leave the branch
  3. By calling the SARS Complaints Management office (CMO) on 0860 12 12 16.

Here are a few tips on winning the battle against SARS poor service/administrative issues and making sure you have a winnable case when you approach them or the Tax Ombud:

 

Be specific: 

If you have a complaint, it is better to call the Complaints Management Office (CMO.) If you call SARS contact centre to get a reference number, specify that it is a complaint with a complaint, specify that it is a complaint and not a follow-up. If you keep calling the call centre and saying you are following up, it may remain just that, a follow-up. You need to specify that you have a complaint so that it is treated as one. Some complaints will need case numbers, make sure you call the contact centre to get one.

Try again: 

Sometimes, a complaint lodged on eFiling may be rejected for one reason or the other. If you feel you have a  compelling case, pick up the phone and call the CMO so that they may record and lodge the complaints on your behalf. You may also call them if you are not sure how the process works on eFiling or if you are too far from a SARS office. For example, I once lodged a complaint about a delayed refund (because refunds should be paid 7 workings days after verification or audit is finalised) but the system kicked me out and rejected my complaint. The complaint was successfully lodged after calling the CMO.

Build a compelling case:

The most important thing to do when dealing with SARS is to build a good case, this is whether you are raising a complaint, an appeal or an objection. You will need a system to record your interactions with SARS (at each touchpoint with them). You also need to store documents and supporting documents relevant to the taxpayer’s case. The system of recording your interactions with SARS should allow you to build a timeline of how the case is developed and to ensure that you have all the documents you need for this case.

One such system is to make sure each client file/folder contains relevant subfolders that will help you gather the important and necessary information. The other is to build a dashboard that records the timeline and communications with SARS. This can take any form, for example, Word or Google docs, a task management tool like Asana, Trello or Monday.com.

NB: You do not do this because something has gone wrong, but because things may go wrong and often they do go wrong. Below is an example of client folders that tax practitioners or individuals can use:

The advantage of doing things this way is that you will save yourself a lot of time when doing the actual complaint, even an appeal or objection. The Tax Ombud form will ask you to summary your case in chronological order. So, if you had been building a case over time, this process will be a breeze. You have all the facts and timeline at your fingertips.

 

Are you frustrated with the way SARS has handled your affairs? How can we help you? Click here to contact us

How to best qualify for a bond

How to best qualify for a bond

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Are you planning to buy a home, whether as a primary residency or as an investment? Buying a house can be an expensive investment. Often than not, one will need financial assistance to make the dream of buying a house a reality. This is because buying a house out of your own money is nearly impossible or requires you to save money over a significant amount of time, several years to be specific.

In this article, I hope to help you prepare yourself to get your first housing finance. How then do you qualify for a bond? Banks work like robots. They follow a strict set of rules when assessing your application for a bond. This may mean that you may even be disqualified even when you can afford to repay the amount applied.

If your bank does not approve your application, stay calm banks are not the only bonds providing institutions. To increase your chances of getting approved for a bond, you can go through bond originators like Ooba or SA Home Loans.

What are the advantages of using a bond originator? 

  • Most bond originators provide a free service and will send your application through to all major banks. As a result, you will incur little to no costs at all whatsoever.
  • Your chances of getting approved increase because:
    • They will not send your application unless they are convinced that you will get approved
    • They will send your application to more than one bank. As a result, you may in fact get the most affordable bond terms. It is the bond originators job to ensure that the applicant get the most affordable rate
  • You save a significant amount of time as you will not have to go around shopping for a good rate among all banks
  • Bond originators know what banks require to successfully process a bond application. So, they will prepare your application for success

Tips to secure a better bond: 

  • Start by restructuring your budget. Consider what you ready need vs. what you do not need. Get rid of all unnecessary items on your budget. This will ensure that you have more disposable income that will otherwise go towards your bond
  • Get rid of all your bad debts. Bad debt is debt incurred to purchase things that quickly lose their value and do not generate long-term income. It carries a high interest rate, for example, credit card debt. Having a lot of debt is one of many sources for a bond application being declined. Creditors believe that a customer with a lot of debt has a higher chance of missing their repayments.
  • Save up a large deposit. Not all banks will give you a 100% bond. Besides, a huge deposit will save a bit on interest. Also, you may need money to pay for transfer costs banks may not cover. Most lenders also require the borrower to have at least 10% of the capital outlay
  • Have a payslip. Most bond providers need proof of income. A good start is a payslip. Even if you own your own business, have a payslip. Ensure that you have money going into your personal account every month.
    • NB – A payslip is good, but remember at the end of the day what the banks are looking for is your affordability. That is, do you have the ability to service the debt. If you pay yourself or if you get a big salary but what is left in your bank account, after all, expenses are paid for, is too little then you may end up not qualifying for the amount you are looking for.
  • Have financial statements and management accounts. If you own your own business, have your business’s financial statements and management accounts (latest) ready. Banks will use these to measure your affordability and to see how much income (drawings) you are getting from the business.
  • Check affordability – before you even start applying check if the property is affordable. Ensure that the property price is affordable in relation to its location. Further, you need to determine if you can personally afford the price and are able to pay for this house. Affordability is generally calculated at 25% to 30% of joint gross income. But, remember there are other factors, including existing debt commitments that may affect the size of the loan that the credit providers may grant you.

What should accompany your application? 

Based on my experience with bond originators like SA Home Loans and Banks like Nedbank and FNB, at a minimum you should have the following before you send your application:

  • The application form from the bank or bond originator
  • Your statement of assets and liabilities. If you keep a personal data room (also see: https://wordpress.com/read/blogs/143769079/posts/13), you should have the latest updated statement at your disposal. If you maintain a set of your personal accounts, then it should be easy to print out your balance sheet from your accounting system.
  • Your latest payslip or/and IRP5. You can easily get these from your employer.
  • Certified copy of your ID/passport
  • Proof of residence
  • Latest six months bank statements. If you are applying through your bank, this may not be needed as your bank has access to your bank statements.
  • Your most recent ITA34 – income tax assessment, which may also be used as proof of income
  • Income letter from your accountant or auditors
  • If you own and run your own business:
    • Latest signed financial statements
    • Letter confirming shareholding in the company or close cooperation
    • Latest management account, which should cover the latest complete month up to the last signed financial statements month

What if I am a foreign national or non-resident: 

There are certain restrictions for non-resident property buyers:

  • You may be required to raise 50% for the property price. For example,

A non-resident who wishes to purchase a property in South Africa for R900,000.00 provided R450 000.00 is introduced into South Africa to effect the purchase he/she would be able to apply to the South African Reserve bank for permission to avail himself of a bond of R450 000.00. In other words, banks will lend up to 50% of the purchase price.

  • The requirement for a temporary resident or permit holder is almost similar. The only exception is that such a mortgage bond is not restricted and depending on the standing of the client can be 50% of the purchase price of the property. The approval of the foreigner application is dependant on the approving manager in the bank where the application is made or where he/she holds his bank account.
  • You may want to read this: https://www.ooba.co.za/resources/financial-assistance-foreign-buyers

Requirements for permit holders (Source Property24): 

  1. Temporary Residence Permits

The applicant:

  • must have a valid Work permit which has at least three years remaining before its renewal date
  • at the time of the bond, the application must be working for the same employer reflected on the Work Permit.

IMPORTANT THING TO KEEP IN MIND:

Most banks restrict home loans for Temporary Residents to 50% of the purchase price of a property but Nedbank currently offers up to 90% if the applicant has banked with them for a minimum of a year. These terms are fluid, however, and the banks can change their policies at any time. If you are a foreigner (or have a foreign partner) and you are looking to purchase a property and apply for a home loan it is CRITICAL that you approach a reputable and experienced mortgage originator who will provide you with the very latest information.

  1. Permanent Residence Permits.

 

The Permanent Residence Permit confers on holders the same rights to mortgage loans as apply to bonafide South Africans (i.e. they are not restricted to 50% loans.)

However, some banks will not exceed the 50% loan-to-value until the applicant has been issued with the South African green bar-coded identity document.  This often places the applicant in an invidious position because Home Affairs has been known to take more than two years to issue such identity documents!

Other tips: 

If you can’t afford to buy on your own, you may want to buy together with a friend as a co-applicant. As time goes on, and you finish paying for the first house, you can repeat the process to buy a second house. Without a doubt, this must be a person you trust and you must find out if your bank is open to this set-up. If you are buying private, try and negotiate for alternative settlement plans for any amount in excess of what the bank is offering you provided your affordability and ability to repay the bank is not negatively affected.

I hope you are ready to buy your first home!

 

Contact us should you need any help qualifying or accessing mortgage

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Are you ready to exit from your business?

Are you ready to exit from your business?

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Some people go into business with the aim of building a good business then sell it. Others spend years building their businesses so that they may leave something for their children. Whatever the intention, it is clear that at some point one will exit their business.

Even though the idea of you exiting your business sounds inconceivable, you must remember that you will not run your business forever. As an example, the people that started Coca Cola are not the same people running it today. Therefore, you and your business must be exit and investor-ready at every stage of your business. You must have an exit plan. The exit will happen in a different form, whether you are prepared for it or not.

Your exit from your business may happen in any of the following ways:

  • Retirement
  • The passing of your business to your children
  • Selling
  • Health issues limiting the ability to run the business
  • Death
  • Lack of interest in the business and a desire to start a new venture
  • Exit an unprofitable business

Every business must have an exit plan:

  1. Unplanned exits may be disastrous. Imagine trying to sell a business whose tax affairs or books are not in order. Also, investors are looking for a well-run company. They want to know that their money will not go down the drain.
  2. A good plan will ensure that you exit at the right time. Remember, just because you are ready to exit does not mean your business is ready. Life has its own dictates on when or how you will exit our businesses. When life circumstances dictate an unprepared exit, it rarely goes smoothly.

Do you know how much your business is worth? 

Any exit plan should start with a professional valuation. A professional valuation is critical to ascertain the accurate value of your business. If you are to approach a buyer and you do not know how much your business is worth, where are you going to start the negotiations for a price?

Proper due diligence will also be needed. This will help you to review your business from the perspective of a potential buyer. It will help you identify any gaps in the key drivers of your business and identifying ways of closing these gaps in order to have a proper exit and investor-ready business.

Good due diligence will also enable business owners to determine the key value drivers of the business and identify the areas that will impact its sale value. Once you have a proper plan, a value for your business and well-executed due diligence for your business, it will be easier to identify and approach potential buyers.

business-exit.jpg

Some of the actions that are important in developing an exit strategy: 

  • Do not allow the business to heavily rely on you and your skills set. When you get sick or die, the business takes sick leave or dies with you.
  • Therefore, develop key employees who can run the business on a day-to-day basis without your involvement.
  • Develop an operating manual of how you do what you do. Define each key process and quality control checks. This is important because business goes on even when you or your key employees are not around.
  • In addition to the operating manual, have a library or knowledge base. This will ensure that important information/knowledge is shared among everyone in your business. Also, you will most likely find yourself in a unique situation from time to time. Adding your experiences of the case and how you dealt with it will ensure that you do not waste time dealing with a similar issue in the future.
  • Have a dashboard that shows you the key performance indicators and what the trends of those indicators are.
  • Have a compensation system in place that rewards managers who help improve key performance indicators of your company and who come up with innovative ideas to improve your business and customer experience.
  • Have a data room for your business. A data room is a place where you store all important documents and information about your business. Your data room may include but not limited to:
    • Latest financial signed financial statements
    • Share certificates and share register
    • Memorandum of incorporation (MOI)
    • Company registration documents
    • Your latest up to date Tax clearance (what is now known as Tax Compliance certificate)
    • Operating Manual and knowledge base
    • Shareholder Agreements
    • Board members and advisors
    • Licences and permits and other Intellectual properties
    • Strategy and KPI targets
    • Pressroom
    • Internal controls
    • Risk profiles and risk management
    • Organisational structure
    • CVs of key management
    • Summaries of key employment agreements and benefit plans
    • Copy of IDs for senior management
    • Material contracts

Be aware of the tax consequences

If you will be selling beware of the tax consequences. Whether you sell the operating assets in the business or the business as a whole, the transaction will attract Capital Gains Tax (CGT). Therefore, a well-thought tax plan is an important part of the overall exit plan. If you do not have a dedicated tax team within your business, get the services of a professional Tax Advisor/Practitioner.

sucession .jpg

Succession after death or retirement: 

Strategic planning for a business needs to include a proper succession plan. Succession planning may not be high on your agenda but retirement and death are certain. In a small/family business succession planning is even more important to effectively conclude the transfer of ownership or management from one party to another:

  • The first step is to draw up a shareholders agreement. The agreement should specify the rights and privileges of a shareholder if they wish to sell/exit. It should be agreed if the existing shareholders have the first preference to buy. The agreement should specify the terms and conditions of the sale and purchase by existing shareholders if existing shareholders are to takeover.
  • The second step is to take a policy to cover for the key shareholders. This should step in when the key shareholders die or get disabled/or are permanently incapacitated. To avoid complication in these situations a business may consider key-man insurance against these shareholders. This provides a pay-out to the business in the event of death or permanent incapacity of the insured individual which can be used to headhunt a new manager or to provide funding to the shareholders if they decide to dissolve the business. The reason this coverage is important is that the death of a key person in a small company often causes the immediate death of that company too.

How key-man insurance works:

  • A company buys a life insurance policy on the key personnel, pays the premiums and is the beneficiary of the policy.
  • If that person unexpectedly dies or is permanently incapacitated, the company receives the insurance payoff.
  • The company can then use the insurance pay-out for expenses until it can find a replacement person, or, if necessary, pay off debts etc.

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How to avoid or reduce the risk of a SARS audit

How to avoid or reduce the risk of a SARS audit

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By now we all know that SARS is looking to raise more tax revenue to make up for revenue collection shortfalls. This means SARS may and will do all they can to increase revenue collections.

It will not be surprising to find that SARS audit teams will target taxpayers in order to raise additional income. Besides, their systems are designed to pick up “discrepancies” on a taxpayers’ return and these can easily trigger an audit. So do not be surprised if, a few days after submitting, you get a notification from SARS saying you’ve been selected to submit your supporting documentation for inspection or even that you have been selected for a full audit.

At Eva Financial Solutions, we have a team of dedicated and diligent tax practitioners working around the clock to ensure that you do not pay a single cent more that what you should legally pay over to SARS. We have designed our internal processes, checks and balances to ensure that, even if the audit comes, our clients can avoid an audit or the process goes smoothly without causing them unnecessary emotional stress.

Here are a few tips:
  • Always ensure that your tax affairs are up to date and that you have filed all tax returns as they fall due.
  • SARS has now made it easy to check your tax compliance status online. You should always check that your tax status is green (compliant). Once you have picked up that you are not compliant seek to address the issues sooner rather than later or consult your tax practitioner for help.
  • You should always come clean with the taxman before being audited. Once the audit has started, you are prevented from claiming the relief under section 227 of the TAA for coming clean.
  • Before you submit your return, ensure that you have all supporting documents for every income and deductions on your return. If you kept a personal data room, by the time your return is due you would have gathered all the necessary supporting documents for your tax return (Medical aid, Travel logbooks, Interest and Dividends certificates etc.).  Be warned, do not convince yourself that if you ignore SARS’ requests for documents long enough, it will just go away. Always have your house in order.
  • If you own and run a business as a sole proprietor or have a rental property, ensure that you do not include and deduct your personal expenses.
  • Chances are that an ordinary taxpayer will struggle to interpret various tax laws or will misinterpret certain SARS requests or requirements. Therefore, always use the services of a reputable tax practitioner or accounting firm. Eva Financial Solutions can assist you in this regard, contact them if you cannot get your own personal tax practitioner.
  • After submitting your return log into (or at least ask your tax practitioner to do so) SARS at least a few more time to check if SARS hasn’t issued any sneaky notifications that require your attention. If your email address and not that of your tax practitioner is linked to your profile, alert your tax practitioner if and when you receive any kind of notification from SARS.

When it comes to VAT, these tips might be helpful:

  • When you get VAT registered ensure that you have sent your VAT number to all your suppliers so that they may update their databases and add your VAT numbers onto your invoices.
  • Insist on getting a valid tax invoice from all your suppliers. When you receive a tax invoice, check that it meets all the requirements of a valid tax invoice
  • Check that the new VAT rate of 15%, and that the total price (including VAT) is correctly calculated before accepting the invoice/quote.
  • Before you submit your VAT return:
    • Check that you have claimed only where you are supposed to claim VAT (for example, you may not claim on motor car (passenger vehicle) rental or entertainment expenses as defined and other zero-rated or tax-exempt supplies.
    • Check that you have applied the correct tax types/rates to each transaction, for example, Zero-rated sales cannot be classified as tax-exempt. Ensure that each tax type is correctly populated on the VAT201 return.
    • Check that you have declared all standard rated sales (Sales VAT at 15%) that you should have declared and have done so using the correct VAT tax rate.
    • Perform turnover VAT reconciliation at each VAT return submission. This will always ensure that your income statement turnover matches your VAT return submission. This will also reduce the risk of an IT14SD and the time it may have to take you if you did this only because SARS asked you to do an IT14SD. Remember, SARS systems are designed to pick up discrepancies between your VAT return submissions and your annual income tax return turnover.
    • Before you hit submit, ensure that the VAT201 is correctly populated and the amounts contained are correct and matches your now correct VAT reports. Remember, once submitted you can only increase not reduce the amount payable.
    • Take care that cash register slips and tax invoices issued from 1 April 2018 reflect the correct VAT rate. This will generally be 15% unless a specific time of supply rule or a rate specific rule applies.
    • VAT vendors issuing debit or credit notes from 1 April 2018 must ascertain that the correct VAT rate is reflected and applied when determining the VAT amount. Debit or credit notes will generally reflect the old VAT rate of 14% where it relates to supplies of goods or services before 1 April 2018, subject to certain exceptions. Similarly, debit or credit notes relating to supplies made after 1 April 2018 must reflect the new rate of 15%.
    • If your accounting systems allow, ensure that you immediately lock the submitted periods so that no further changes are effected to a closed VAT period.

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Owing SARS, what are your options?

Owing SARS, what are your options?

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If you follow my posts, you would have come across one of my articles that dealt with the approach SARS has taken to deal with the non-submission of a tax return. This is a follow up to this article.

So now you read that SARS will prosecute you for non-submission and charge you an R5 600 fine if convicted (of course, you will be convicted because there is overwhelming evidence against you/your company that you did not submit a few tax/vat returns.) You then went on to submit all your outstanding returns but you now owe SARS large sums of money.

Taxpayers are required to be fully compliant in all their tax matters by submitting and paying their taxes on time. If taxpayers are not compliant or have outstanding tax debt the SARS Debt Management department is committed to assisting businesses and individuals to become fully compliant. There are a few avenues that SARS uses to assist in this regard.

How much do I owe?

If you are not 100% certain how much you owe SARS, you will need to contact their call centre to enquire about your outstanding balances. If you stay not far away from a SARS branch, a visit to the SARS branch would not kill you. When you visit, just ensure you have all your particulars with you to avoid being turned away. Lastly, if you were registered for e-filing, run a statement of account to see how much you owe SARS. Your next step is to make the outstanding payment to SARS. Contact SARS or your tax practitioner to help you load a payment that can then be released from your bank account.

What if I can’t pay the outstanding amount now?

Every taxpayer must be aware that it is best practice to always file a tax return on time in order to avoid penalties and interest. But, if you are currently unable to pay your taxes, please contact SARS without delay. The following options may be available to you:

  1. Payment arrangements: 

Under certain circumstances, SARS can reach an agreement with a taxpayer to defer a tax debt for later payment or for payment by instalments. A deferred payment arrangement is s when a taxpayer can not settle the full amount owing to SARS immediately and want to apply for a payment plan to settle the debt. Under this option:

  • SARS has the option to decline the request.
  • Interest will accrue on any unpaid debt.
  • If you don’t adhere to the conditions of the payment arrangement the payment agreement will be terminated and normal collection proceedings will resume.
  • The taxpayer must suffer from a deficiency of assets or liquidity, which is reasonably certain to be remedied in the future.
  • Notwithstanding this deficiency, the taxpayer must anticipate that there will be income or other receipts which can be used to satisfy the tax debt.
  • At the time of concluding the agreement, the prospects of collecting the tax debt must be poor or uneconomical, but likely to improve in the future.
  • Moreover, the deferral should not prejudice the collection of the tax debt

2. Compromise agreement:

In certain circumstances, a compromise may be requested on taxpayers’ outstanding tax debt. A SARS Debt Compromise is a process whereby a taxpayer requests that SARS permanently “write-off” a large portion of their debt, with the balance being paid in full by the taxpayer immediately on the condition that the taxpayer complies with any conditions as may be imposed by SARS.

A compromise cannot be considered if the taxpayer disputes the debt. Therefore while a matter is under objection or appeal, a compromise cannot be considered. If the taxpayer wants to compromise he has to withdraw his objection or appeal.

What if you do not agree with the debt? 

If you are not in agreement with your tax debt, you may lodge a dispute.  To lodge a dispute please go to objections and appeals. Even though you are disputing the tax debt you remain under obligation to pay the debt whilst your dispute is being handled.
Why you should consult Eva Financial Solutions if you need a debt arrangement or compromise
  • We deliver on our promise
  • Compromise solutions are difficult to obtain
  • For this reason, it is important that it is handled by qualified and dedicated tax practitioners.
  • We have a team of experts who will always work to get the best result.
  • Click here to contact us

How to guard yourself against being sued by SARS

How to guard yourself against being sued by SARS

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Since April 2018, SARS has been cracking down on non-complying taxpayers in filing their tax return. Since April, SARS has successfully prosecuted and convicted 10 taxpayers for failing to submit their outstanding tax return. Among these people is prominent soccer player, Teko Modise. Most of you would have also read about the socialite Bonang being dragged to court by SARS over non-compliance.

In terms of the Tax Administration Act, the following are viewed as criminal offences:

  • Avoiding paying taxes
  • Not submitting tax returns
  • Failure to submit information to SARS
  • Submitting false information to SARS
  • Giving an incorrect answer to SARS, whether in writing or orally
  • Failing or neglecting to register or failure to notify SARS of changes in registered particulars
  • Issuing an erroneous, incomplete or false document required under a tax Act

Here are a few tips to guard against being sued by SARS:

Appoint a tax practitioner:

Tax laws and requirements are constantly changing. Each year new laws are introduced. It is hard to keep up to date with these changes if you are non-tax experts. It is advisable to appoint tax practitioners to always advise you on tax-related matters and to submit the tax return for you in terms of the relevant laws. This will save you the costs of objections and “fighting” with SARS.

Always check your tax compliance status and inbox: 

One should regularly check their tax compliance status, which is a platform that gives an indication of whether one’s tax affairs are in order.

Your tax compliance profile should be green in all aspects as per the above image. The minute any of those tabs turn red, something has gone wrong with your tax affairs. You should immediately investigate and address these issues. SARS will also often send you a notification when your tax compliance status changes. When you receive this, immediately investigate and resolve it. If you hired a tax practitioner, you must also immediately notify them so that they can investigate and help you to resolve these identified issues.

Do not miss a return submission: 

You must always submit all your tax return where you are required to do so. Missing a tax return is a criminal offence and may land you in trouble. There are few instances where one may not be required to submit a tax return. If in doubt about whether or not you need to submit one, consult with your tax practitioner/professional. Generally, only people who meet the four below criteria do not have to submit an income tax:

– Your total employment income/salary for the year is not more than R350 000

–    You only received employment income/salary for the full year of assessment from one employer.

– You have no car allowance/company car/ travel allowance or other income (e.g. interest or rental income).

– You are not claiming tax related deductions/rebates (e.g. medical expenses, retirement annuity contributions other than pension contributions made by your employer, travel).

Keep and submit supporting documents: 

One must always ensure that for everything on their tax return, there is a valid supporting document. Constantly check your inbox to ensure that you respond to request for supporting documents by SARS. SARS is becoming quite strict with these. So, ensure that you have proper and valid supporting documents for your tax return.

Be truthful and honest: 

Remember, there is a difference between tax avoidance and tax optimisation. Tax avoidance is a criminal offence in terms of the Tax Administration Act and can land you in big trouble. When submitting your tax return, ensure that you have honestly done so. Declare all income that accrued to you in that tax year (salaries, rental income, commission and other incomes). In terms of expenses, you must take care not to include personal or expenses of a capital nature. As an example, personal groceries or drawings will not be allowed as deductions and should not form part of your deductions. Similarly, if you are in the business or renting cars or accommodation, the capital repayments on the car or property cannot be deducted as business expenses. If you have a home office, you may not claim your entire house’s rental expense.

For home office expenses, one would need to work out the total square meterage of the home office in relation to the total square meterage of the house, and then convert this to a percentage. One then applies this percentage to the home office expenditure in order to calculate the portion, which is deductible.

Conclusion: 

It is a criminal offence not to submit a tax return. Late submission of a tax return also has huge consequences. Submitting late can attract penalties, interests and administrative penalties, which can range from R250 to R16 000 per month. If you have a couple of outstanding returns, this is when SARS can get the NPA involved leading to an individual’s case being heard before the court.

Do you or your business need help to comply with tax laws or SARS? Click here to contact us

6 Key factors to consider when choosing an accounting software or a business App

6 Key factors to consider when choosing an accounting software or a business App

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It goes without saying, there are thousands of software and Business Apps available on the market and on the internet. Additionally, each accounting software may also come with a thousand business apps on their various app marketplace. So, one has to choose carefully before adopting a piece of software. Not everything that looks cool works for every business. Some factors to consider.

 

Does my business need this?

Before adopting a system or business App, one needs to do a needs or systems analysis. This is where critical questions are asked before buying or implementing a system or App. Think about what problem your business is actually trying to solve. Is it an inventory management problem? It is that your business has no way of keeping track of cash in versus cash out, what sort of reports do you expect or actually need to run, what is the volume of data that should be handled by this system, can this system or app handle such volume of data, etc. Once a systems or needs analysis is performed you can then look at other factors.

Can this system or App integrate with our key software? 

Some Apps or systems may look cool and all functions work perfectly fine. However, there may be a problem in integrations with your primary compliance software. Some may require you to run a report then process a manual journal into your primary software because there is no integration with your primary software. This, in turn, may lead to human errors such as incorrect journals being processed or whoever processed them not remembering why they processed such journal in the first place. A system or App that integrates with your primary system and auto-sync would be a preferred choice over one that does not. You do not want to spend a lot of money on a business App or system only to find out that you need to spend more to find another App that will help with the integration. A system or App that integrates with your primary system will have lots of advantages such as improved efficiency as there is a degree of automation in as far as communication between the two is concerned. Also, you will not need to manually and separately update each software as what happens in one will be updated in the other software or App.

How long will it take to set up the system?

Often how long it takes to set up a system or App depends is a function of when in the financial year the implementation is done. It is often easier to implement a system or App at the beginning of a financial year than in the middle of a financial year. Implementation of a new system or App may mean moving data from the old system to the new system. This may time and errors may happen. It is important to do proper research before implementing a system. Even better, seek the help of a system specialist or ask the system vendor to help you with setting up the system.

Is there training required? 

Often businesses make the mistake of implementing a system that no one in their organisations knows anything about. After implementation, the staff is left out to figure out things on their own. This is not the right approach. The correct approach is to provide sufficient training before the system is fully rolled out to all staff members. This is to make sure that your staff knows the system well before they can actually start to use it and to use it to interact with your customers. Where possible, do a parallel run of the new system with the old one so that there is enough time to train staff and to iron out any teething issues with the new system. Also, it is important to establish who in the team will be the new system champion. A system or business App champion will be your go-to person when there are issues with the new system or App. If this is not possible, make sure you have the system or App vendor contact details or help desk at hand for when you need help with the system or App.

Get the basics right: 

You also need to get the basics right. By basics, we are referring to the operational things like who does what and who does what when, who has access to the system, who has admin and basic user rights, are the system or App user rights set up correctly, etc. The last thing you want is having the wrong people having access to information that they should not have access to. This may include such things as, who should see a certain report or certain client information.

Multi-currency: 

Lastly, consider if the new system has a multi-currency functionality. This is critical especially if your business invoices or buys/trades in a variety of currencies. You want your system or App to be able to convert to your base currency without having to do it manually in a spreadsheet or otherwise.

In conclusion: 

Not everything that looks cool works for every business. In order to implement the best and right system/App or tools, you need more than just the standard system specifications. Perform detailed systems/need analysis to determine the needs of your entity and whether the system or App you are considering is the best fit.

Do you need cloud-based solutions for your business? Click here to contact us

How to pay for your house (bond) quicker

How to pay for your house (bond) quicker

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Do you want to know how to get fewer years to pay off your first property or how to pay for it quicker? Let’s look at a few ways through which you can do this, pay off your mortgage quicker. For this article, we will assume the property you want will cost R1000 000. We will also assume the repayment term to be 20 years straight without any reduction tactics.

  1. Raise a deposit:

This is the most important first step. Saving for a deposit will work in your favour because it can serve as an indication to the bank that you are a good personal finance manager. It also reduces your credit risk and exposure and makes it easier for banks to fund your first house.

Lets’s look at what the numbers will look like without a deposit:

  • Your monthly instalment will be R7752 over 20 years
  • This means, at the current interest rates, your total interest will be R860 480 by the time you finish paying for this bond in 2040.

Who covers the bond and transfer costs:

Another issue to consider here is that your first property will have transfer and bond registration fees. If you do not have a deposit, assuming your first property is R1 million, then you are looking at an additional cost of R55 712 in both transfer and bond costs. If you do not have any cash savings to cover this, you are more likely going to ask the bank to cover this as well. How does this change the numbers?

  • Your initial capital outlay increases from R1 million to R1 055 712
  • Your monthly instalment increases to R8 200
  • Your total interest over the 20 years increases to R910 288

2. What if you raised a deposit?

Lets’ assume you can raise a 10% deposit, that is R100 000 of the purchase price. Without complicating the maths with bond and transfer fees, you have already managed to reduce your loan amount to R900 000:

  • Your instalment falls from R7 752 to R6 977 monthly
  • You have also now managed to reduce your total interest over the 20 years to R774 480

So, you can already see how the deposit can help you to be able to qualify for a home loan more than when you did not have a deposit.

3. Negotiate the price:

You can also negotiate the price or buy directly from the seller without having to go through an agent. From personal experiences, I have noticed that most agents will increase the selling price by between 6 and 10% of what the seller is asking for. So, when you put your offer, assuming you will be the first one and the seller accepts, put an offer that is between 6 and 10% lower than what the agents told you the house is worth.

The reason for this is because the agents are not your friends. They are in the business of making money through commission and they might want the owner to still get what your actual offer would have been after the agent’s commission.

Assuming the same examples as above, and assuming you have been able to negotiate the price by 10%, this is what the numbers would look like:

  • Your purchase price is now R900 000.
  • Because you raised a deposit of R100 000, your initial loan amount is R800 000
  • Your monthly instalment falls to R6 202 as compared to the original R7 752
  • Your interest is now R688 480. What a saving on interest!

4. Negotiate the interest rate:

In the book “Is your thinking keeping you poor,” Douglas Krugger talks about the concept of being able to represent your interest. One example he gives is that of an employer and employee. He asks whether we negotiate employment contracts with employers before we start working. If we do not, he urges us to do so because a contract is just a document that documents the interests of two parties. It is in our best interests to negotiate the terms of the contract that represents our interest.

The same concept should apply to negotiate for interest with the bank. The interest rate you see on those papers is in the banks’ best interests. What is your best interest? It is in your best interest to negotiate a better interest rate with your bank. I negotiate a minus 0.5% on my first house. I am sure you can do the same.

If this sounds like a huge mountain for you to climb, apply to a few banks and use the results of your application for negotiating with the banks to get the best interest rate you can get.

5. Pay extra if you can:

In this article, I referred to some advice I received from my property mentor, let me repeat it here for the benefit of those that have not seen this article yet:

  • If you have a high-value vehicle, sell it and put the money into your bond.
  • If you pick up even a ten-cent coin, put it into your bond.
  • Pay your bond as quickly as possible and get onto your next property, preferably within 5 years.
  • If you are renting out your property, make it unique and different from other properties in your location so that you always have tenants and tenants who are willing to pay for whatever you ask for.

Why is this so? Interest on your bond is calculated daily. So, whatever you put into your bond works in your favour by reducing the interest. If you can, and because interest rates are low right now, pay more into your bond as much as you can.

6. Are you self employed?

If you are self-employed, you might have already noticed that it is more difficult for you to qualify for a bond than it is for your employees. My advice for you is this simple, take a salary(have a payslip for it) from your company/business consistently and make sure this salary lands in your account on the same day every month. Secondly, your business and you are two different people. Do not treat your business as your second personal bank account.

7. Emergency fund:

The pandemic has reminded us how important emergency funds or excess funds in our bond accounts are. Most of us had to negotiate for a payment holiday because we did not have an emergency fund or any funds available in our bond accounts. What was the effect of this? Had it not been for the reduction in the interest rates, loan balances and instalments increased. This also implied more interest until the end of the bond because interest rates will not remain this low forever.

Let’s get talking:

  • What have you found a challenge when it comes to qualifying for a bond?
  • What other tactics have you used to pay off your bond quicker?

Drop a comment in the comment section. I reply to all comments. And even better, others can also cheap in and help. We are all about sharing ideas that can make us grow together.

Why accountants should see themselves as doctors to their clients

Why accountants should see themselves as doctors to their clients

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Imagine your business takes a visit to the doctor. Now imagine this doctor is an accountant, your business advisor or mentor. How would the visit go and what should you get out of that visit?

I have not been to a doctor in a very long time. But, I do remember, from a few visits that I have had, what the visit was like and what we chatted about with my doctor. The last time I went there, the visit took the following steps:

1. Familiarity: 

The first thing my doctor did was greet me and made me feel welcome. We also chatted about a few personal things that we had talked about on my last visit. What also made me feel good was that he remembered what we last spoke about and he also remembered and knew my name.

Accountants, before you start a meeting with your client, take some time to talk with them on a human level. This is important because it shows that you do not just care about the money that you are getting out of the relationship but also about the welfare and wellbeing of your clients. Remembering their names and what you last spoke about may also be a sign that you value them and their businesses.

2. Symptoms: 

The next phase of my visit involved me as the patient having to present my complaints or symptoms to the doctor. This was my turn to chat about what I thought was wrong with me. At this stage the doctor was quiet, just taking notes as I spoke.

As accountants, we often want to jump to provide solutions. Maybe this how we were trained. Maybe it is because we know a client who came to us with a similar business and we immediately assume they have the same problems.

But this approach is wrong. You need to take time to listen to what challenges your client faces before jumping into solutions. If you jump into solutions, you may provide the wrong prescription that will not work.

Also, very important, do not interrupt your client when they speak to you about their “symptoms.” If you have a question, write it down and only come back to it when they have finished talking. Similarly, if you think of a solution while they speak, hold off your excitement to provide a solution. It may be too early or maybe a wrong solution altogether.

3. Diagnosis: 

The discussion about my symptoms was followed by an in-depth diagnosis. The diagnostic procedure involved the process of the doctor obtaining further information about my symptoms, previous state of health, living conditions, and so forth.

Satisfied that he had understood my situation, I was made to lie down on his surgery bed for further examination. I do not know what this process is called but, I would imagine it was a process to check if my body system was functioning properly. At one of the visits, he even drew a sample of blood, which was sent for further examination.

How does this work for accountants?

After, your client has given you a series of “symptoms” you need to ask further questions that make you understand their business and/or situation better. Take this process as though you are looking at a tree and then going into each branch to analyse why this branch has no leaves, if it needs pruning, if it needs additional care or if it needs to be cut down altogether. Just bear in mind that you are still not providing a solution at this stage. You may need to take some of the branches away for further examination at your laboratory (your office for you and your teammates.) The process may also involve having to look at their systems and process to further understand the challenge at hand.

4. Prescription: 

The next step involved the doctor handing me a few tablets and medicines, some of which I had to take right in his office. But, of course, he first had to find out if I have any allergies and if I had tried or was on any other medication. I also had to get a prescription to get more tablets at the pharmacy.

Accountants should only be providing proposed solutions after they have understood the clients business and their challenges. I say proposed solutions because businesses do change every day and you also do not want to tell your clients how to run their businesses. They came to you to get insights. They are still the directors/shareholders responsible for making decisions in the business.

Have you noticed that I have not spoken about the prescription that has to be taken to the pharmacy yet? I want to combine this with my next point.

But, before we get there, please remember to find out if your client has tried or tested any process or solution before jumping to providing a solution that they may have tried and has not worked or that their business is ‘allergic’ to.

5. Specialist: 

There are certain things that my doctor may not be able to do because he is not trained to do those things. As a result, sometimes he may have to refer me to a specialist that deals with those specific issues. For example, at one stage he had to refer me to an ear specialist for further examination.

Accountants should not pretend to know everything and try to provide a solution for something that is outside their skill set. There is no shame in referring your client to a specialist as long as you maintain and manage the relationship and project. I call this the contractor model.

There are some projects you just have to outsource because you are not a specialist in these. Your client will still respect you for this.

Oh, the prescription! This is the same as giving your client “homework.” For example, this could be where you tell them how they should and implement a new process. Giving a “prescription” is good, but always follow this up to ensure that it is being implemented as intended. And hopefully, your fees cover this as well.

6. The past: 

Have you noticed how much time my doctor spent on past events? Not much. The majority of his time was spent on the present (how I feel and why) and the future (getting me better and back to health.)

There is little value in historical financial information. Accountants should be focusing more on the future projections, cash flows, plans and strategy for the business. The focus should be on helping your client to grow their business, not punishing them for past mistakes like “you have not allocated this expense item correctly.”

7. Duration: 

My visit to the doctor was something in the region of 16 mins. But, so much was done in that 16 minutes.

I am not prescribing time for meetings, but I am encouraging accountants to be prepared as much as they can. There is nothing as embarrassing as inviting a client to a meeting only to appear unprepared and arranging for another meeting. Ensure that the agenda is clear before the meeting starts.

Value is not in how long your meeting with a client lasts. In fact, as one of my clients put it, “The shorter the meeting, the more prepared you were.”

What did you wish your accountant knew that would help you get a better service? Please comment below

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