{"id":68964,"date":"2021-03-15T09:00:31","date_gmt":"2021-03-15T07:00:31","guid":{"rendered":"https:\/\/www.sage.com\/en-za\/blog\/?p=68964"},"modified":"2026-02-03T16:17:05","modified_gmt":"2026-02-03T14:17:05","slug":"a-tax-guide-for-your-first-year-in-business","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-za\/blog\/a-tax-guide-for-your-first-year-in-business\/","title":{"rendered":"A tax guide for your first year in business"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-za\/blog\/category\/strategy-legal-operations\/compliance\/\" class=\"entry-header__link\">Compliance<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tA tax guide for your first year in business\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2021-03-15T09:00:31+02:00\">Mar 15, 2021<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"A tax guide for your first year in business\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-za\/blog\/a-tax-guide-for-your-first-year-in-business\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-za\/blog\/author\/yolandiesterhuizen\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/07\/Yolandi-Esterhuizen-Sage-1-350x350.jpg\" class=\"entry-author__image\" alt=\"Yolandi Esterhuizen\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/07\/Yolandi-Esterhuizen-Sage-1-350x350.jpg 350w, https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2019\/07\/Yolandi-Esterhuizen-Sage-1.jpg 512w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Yolandi Esterhuizen<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>It\u2019s a brave thing to start a business.<\/p>\n\n\n\n<p>Developing a product or service that people need, want, and are willing to pay for takes skill, hard work, and of course, some luck. And in your first year of business, working on what you sell can be all-consuming. But there are other areas of your business that, if left unattended, can derail your hard work \u2013 tax compliance is among the most important.<\/p>\n\n\n\n<p>By understanding your business\u2019s tax responsibilities and putting the right systems in place to meet those requirements, you\u2019ll avoid costly mistakes and frustration and, most crucially, improve your chances of running a successful business.<\/p>\n\n\n\n<p>We\u2019ve put together a guide to help you navigate the tax during your first year in business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-to-register-or-not\"><strong>To register or not?<\/strong><\/h2>\n\n\n\n<p>The type of business structure you choose will impact how you pay tax. The simplest is to run your business as a sole proprietorship, which comes with the following tax-related benefits:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Less paperwork<\/strong> \u2013 you are not required to legally register your business because a sole proprietorship is not a legal entity, i.e., there\u2019s no separation between the business and the owner\/proprietor. However, you will still be required to register with SARS, as an individual, for the relevant taxes.<\/li>\n\n\n\n<li><strong>Easier tax returns<\/strong> \u2013 your business\u2019s taxable income is simply included in your personal tax return, though you will be required to make provisional tax payments (more on this in the next section).<\/li>\n\n\n\n<li><strong>Lower effective tax rate<\/strong> \u2013 the profits your business makes will be taxed at your individual marginal tax rate, whereas profits in a registered company are subject to corporate income tax (CIT) of 28% (27% from next year). Below a certain revenue threshold, you\u2019ll pay less tax as a sole proprietor.<\/li>\n<\/ul>\n\n\n\n<p>Of course, there are some good reasons to register your company: it adds an element of credibility to your business; it allows your business to access funding and creates a separate legal entity that protects your personal assets from creditors.<\/p>\n\n\n\n<p>If you decide to register your business, the Companies and Intellectual Property Commission (CIPC) has an easy-to-follow <a href=\"https:\/\/www.bizportal.gov.za\/default.aspx\">online registration process.<\/a> Once registered, SARS will automatically generate an Income Tax number for your business that you\u2019ll use as a reference when submitting your tax returns and payments.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-welcome-to-provisional-tax\"><strong>Welcome to provisional tax<\/strong><\/h2>\n\n\n\n<p>So that you aren\u2019t lumped with one large tax bill every year, businesses are required to pay their annual income tax in three separate instalments, known as provisional tax, as per the below schedule:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>First: 6 months from the start of your financial year<\/li>\n\n\n\n<li>Second: at your financial year end<\/li>\n\n\n\n<li>Third: 6 months after your financial year end<\/li>\n<\/ol>\n\n\n\n<p>The first two payments are based on <em>estimated taxable income<\/em> because you are required to submit before the end of each period so you can\u2019t know the exact amount. The third payment exists in case you underestimated your income and, as a result, paid too little tax.<\/p>\n\n\n\n<p>Similarly, if you overestimated your income, the third submission may lead to a tax refund. The form that substantiates your calculations for each period \u2013 detailing your income and deductible expenditure \u2013 is called an IRP6. You will need to submit three of these forms in every tax year.<\/p>\n\n\n\n<p>Within 12 months of your financial year end, you are also required to submit an ITR12 (if you\u2019re running your business as a sole proprietor) or an ITR14 (if you\u2019ve registered your business). In this form, you are required to declare your total income and deductible expenses for your financial year so that SARS can calculate whether you\u2019ve paid the correct amount of tax, or if an additional payment or refund is due.<span data-ccp-props=\"{&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559739&quot;:0,&quot;335559740&quot;:240}\"><div class=\"single-cta\">\n\t<a\n\t\tclass=\"button button--primary gate-7b1755c6-efc9-4e6f-bcd5-14742c0aca55\"\n\t\trole=\"button\"\n\t\tdata-button-location=\"content_area\"\n\t\thref=\"#gate-7b1755c6-efc9-4e6f-bcd5-14742c0aca55\"\n\t>Download your free copy of Quickstart guide to Payroll Tax Year-End<\/a>\n<\/div>\n<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-deductible-expenses\"><strong>Deductible expenses<\/strong><\/h2>\n\n\n\n<p>In calculating your taxable income for your provisional payments, you are permitted to deduct certain business-related expenses from your turnover. Here are some examples of the expenses you may be allowed to deduct from your revenue to reduce your taxable income and, by extension, the taxes you pay:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Day-to-day business expenses (rent, salaries, equipment, office supplies, etc.)<\/li>\n\n\n\n<li>Capital expenses (business vehicles, renovations, hardware, etc.)<\/li>\n\n\n\n<li>Entertainment expenses<\/li>\n\n\n\n<li>Business start-up expenses<\/li>\n\n\n\n<li>Education expenses<\/li>\n\n\n\n<li>Losses accrued in previous periods<\/li>\n<\/ul>\n\n\n\n<p>If you run your business from home, you\u2019ll be able to deduct a portion of certain expenses when calculating your taxable income.<\/p>\n\n\n\n<p>What you\u2019re permitted to deduct is often nuanced so involving a tax practitioner to remain compliant is advisable.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-s-the-deal-with-vat\"><strong>What\u2019s the deal with VAT?<\/strong><\/h2>\n\n\n\n<p>You are only required to register for VAT once your business generates or is expected to generate taxable supplies in excess of R1 million over any rolling 12-month period. Once that threshold is crossed, you have 21 days to submit your VAT registration either via eFiling&nbsp;or by completing a VAT101 registration form and handing it in at a SARS branch. If your business has made more than R50,000 in the last 12 months but remains under the R1 million threshold, you may still register for VAT voluntarily \u2013 in some cases this makes sense.<\/p>\n\n\n\n<p>Once you\u2019re a registered VAT vendor, you\u2019ll need to add 15% to invoices you send to your customers, making sure to collect (and not spend) those monies. Then, you are required to submit a VAT 201 form, accompanied by a payment to SARS for the VAT you\u2019ve charged and collected on behalf of the government.<\/p>\n\n\n\n<p>As a VAT vendor, you are entitled to offset the amount of VAT you owe to SARS (known as output tax) against your business-related expenses on which you were required to pay VAT (known as input tax). If the latter is in excess of the former, SARS will need to refund you the difference within 21 days of you submitting your VAT return.<\/p>\n\n\n\n<p>The frequency of your VAT submissions and payments depends on the \u2018taxable period\u2019 your business qualifies for. As a general rule, businesses with less than R30 million in annual turnover will be required to submit every second month, while businesses with revenue above that threshold must submit monthly.<\/p>\n\n\n\n<p>Manual VAT payments \u2013 via post and SARS branches \u2013 must be made no later than the 25<sup>th<\/sup> of each month, while electronic VAT payments can be made on the last day of the month.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-handle-paye-sdl-and-uif\"><strong>How to handle PAYE, SDL, and UIF<\/strong><\/h2>\n\n\n\n<p>You may need to hire people in your new business. As soon as you employ someone, you become responsible for certain deductions from that employee\u2019s remuneration and\/or contributions, which are subsequently paid to SARS.<\/p>\n\n\n\n<p>These include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>PAYE (pay-as-you-earn): <\/strong>This is the personal income tax, owed to the government by the employee on their remuneration, that you as their employer must withhold and then pay over to SARS. You have 21 days from hiring your first employee to register for PAYE, unless their level of income exempts them from paying taxes.<\/li>\n\n\n\n<li><strong>UIF (Unemployment Insurance Fund): <\/strong>An amount equal to 2% of your employee\u2019s remuneration must be paid to SARS on a monthly basis. 1% is deducted from the portion of your employee\u2019s remuneration that is subject to UIF, while the other 1% is contributed by your business. You are required to register for and pay UIF if you are registered at SARS for PAYE. You can register directly at the UIF if you are not required to register for PAYE, and make direct payments to them.<\/li>\n\n\n\n<li><strong>SDL (Skills Development Levy): <\/strong>If your total employee remuneration is expected to exceed R500,000 over the next 12 months, your business will need to register and pay the SDL. An amount equal to 1% of your employee\u2019s remuneration, subject to SDL, must be contributed by you as the employer. This levy is paid to SARS which is then allocated to a SETA (sector education and training authority) for learning and development initiatives within South Africa. As the employer, you can claim back some of your SDL contributions by submitting your Annual Training Report (ATR) and Workplace Skills Plan (WSP) to the SETA you are registered with before the end of April each year.<\/li>\n<\/ul>\n\n\n\n<p>These provisions, and the payment thereof, are handled in a single form. An EMP201 must be submitted on a monthly basis, no later than the 7<sup>th<\/sup> day of the following month, or the Friday before that day if the 7th falls on a weekend or public holiday declaring the total amounts due for PAYE, UIF, and SDL. A payment to SARS for that amount must be made within the same timeframe.<\/p>\n\n\n\n<p>In addition, you\u2019ll be required to submit an EMP501 twice a year. This form essentially reconciles the EMP201&#8217;s you\u2019ve already submitted with the payments you\u2019ve made, and the employee tax certificates (known as IRP5&#8217;s, the document your employees need for their own tax submissions) you\u2019ve generated. Here&#8217;s a\u00a0<a href=\"https:\/\/www.sarsefiling.co.za\/downloads\/EMP201_eFiling_Guide.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">SARS guide<\/a>\u00a0to accessing the new features for Monthly Employer Declaration (EMP201) on eFiling.<\/p>\n\n\n\n<p>Registering for PAYE, SDL, and UIF can be done simultaneously on the eFiling website.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-one-step-at-a-time\"><strong>One step at a time<\/strong><\/h2>\n\n\n\n<p>We know this looks daunting. But registrations are once-off events, and many of the submissions discussed above can be simplified with <a href=\"https:\/\/www.sage.com\/en-za\/sage-business-cloud\/accounting\/\">the right software<\/a>. Take small steps. Breathe. Check things off your to-do-list. You will get there.<\/p>\n\n\n\n<p>If you need help, speak to a registered tax practitioner and\/or a payroll specialist. There are many cost-effective, time-saving solutions that will give you the comfort of tax compliance, and the energy and motivation to tackle your next business challenge.\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The quick guide to payroll compliance <\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Advice from experts on how to manage and maintain payroll compliance. Managing the many aspects of payroll compliance can be tricky with the landscape of rules changing so often. While changes to PAYE are routine, legislative complexity makes it difficult to keep tabs on everything. The consequences for failure to maintain compliance hits businesses where they feel it most: their time and their wallets.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-c3914996-00e3-4361-8025-aca0c610681d\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download your guide<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1282\" height=\"810\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2021\/02\/iStock-637233964-1282x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2021\/02\/iStock-637233964-1282x810.jpg 1282w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n<\/p>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice enewsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get a roundup of our best business advice in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-84fe79b5-668d-41f8-a0cc-6229018c4ac9\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2022\/04\/GettyImages-1181404518-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s a brave thing to start a business. Developing a product or service that people need, want, and are willing to pay for takes skill, hard work, and of course, some luck. And in your first year of business, working on what you sell can be all-consuming. But there are other areas of your business [&hellip;]<\/p>\n","protected":false},"author":813,"featured_media":68902,"menu_order":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[35],"tags":[321],"business_type":[2],"lilypad":[],"context":[],"industry":[],"persona":[14],"imagine_tag":[57,99],"coauthors":[408],"class_list":["post-68964","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-compliance","tag-compliance","business_type-small-business"],"sage_meta":{"region":"en-za","author_name":"Yolandi Esterhuizen","featured_image":"https:\/\/www.sage.com\/en-za\/blog\/wp-content\/uploads\/sites\/9\/2021\/02\/iStock-1180215925-scaled.jpg","imagine_tags":{"57":"HR and Payroll","99":"HR software"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice South Africa","distributor_original_site_url":"https:\/\/www.sage.com\/en-za\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/68964","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/users\/813"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/comments?post=68964"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/posts\/68964\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media\/68902"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/media?parent=68964"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/categories?post=68964"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/tags?post=68964"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/business_type?post=68964"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/lilypad?post=68964"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/context?post=68964"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/industry?post=68964"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/persona?post=68964"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/imagine_tag?post=68964"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-za\/blog\/api\/wp\/v2\/coauthors?post=68964"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}