February 2019

UKnow Editorial – Feb 2019

As an avid reader of just about anything (I am one of the proud bibliobibuli), I recently read again and was reminded of two interesting things about my beloved profession. The first is the debate on whether the accounting profession is indeed the oldest or the second oldest profession in the world. Then, interestingly enough, the first recorded name in history belongs to an accountant! The 5 000 year old Kushim tablet appears to record the receipt of shipments of barley in Mesopotamia, recorded by Kushim.
The significance of this is not the fame or glory of these claims, but indeed that accounting has always been that significant in daily life – whether it is your own personal finances, a multi-national company or a non-profit venture. So whether you like it or not, having transactions and financial information recorded and stored properly from the outset will not only save you time, money and administration later on, but it will serve as a proper basis for making important personal and business decisions. Take care of this basic necessity, even if you outsource it, and you will reap the rewards!
If you want to respond to or comment on any of our news items or other relevant information, please contact us at news@unikone.co.za or 022 – 482 1169, or join the conversation on our social media platforms on Linkedin, Instagram and Facebook.

Warm regards until next month.

Oddette Boshoff

Read more →

From Bookkeeping to Audit to Tax – Who is responsible for what?

In the (not so) olden days, the auditor or accountant handled everything related to finance and business for a client: from bookkeeping to financial statements to tax and business advice. Those were simpler times….

With all the new legislation and regulation of the various professional designations, the increase in technical complexity in the individual fields (such as tax, accounting and audit) and the imposition of independence requirements, corporate governance and the like, it has become very important but also very difficult to distinguishing what tasks or services are being executed, and more importantly to determine who is responsible for what.

The environment and circumstances in which a person or business operates are unique and will require individual discussion. However, we want to illustrate below in simplified terms how important it is to address this between clients, colleagues and service providers in order to gain clarity and avoid miscommunication. This is by no means an exhaustive list of tasks, responsibilities and accountabilities that need attending to, but merely serves as a starting point to facilitate discussion.

A typical year for a business that operates in South Africa in the context of accounting, tax and related accountabilities will comprise the following:

Day to Day

Bookkeeping: All transactions of the business must be accurately and completely recorded in the financial records of the enterprise. This can be done in any appropriate format, but it is advisable to use industry standard software that gives assurance on security, built in features such as audit trails, etc.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors.

Financial, operational and general business administration: The administration of an enterprise may encompass many areas and it is very important that the various responsibilities must be clearly assigned. It happens too often that an operational team assumes a finance team will attend to certain responsibilities or administration, whereas the finance team assumes that the particular task falls outside its scope of responsibilities.

In addition to this, the implementation and monitoring of internal control measures is vitally important and in certain instances addressed in legislation.

Any person/s can be given these responsibilities, and any or all of these tasks can be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors.

MONTHLY

Management Accounts: In order to properly manage a business, meaningful monthly management accounts must be compiled indicating profit or loss, asset and liabilities, cash flow, etc. This can be done in any appropriate format and include as much information as is needed by the business owner or appointed executives.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers.

Reconciliations: Various reconciliations should be done at the end of every month such as bank, debtors, creditors, VAT, payroll, etc. These reconciliations might also be required by SARS, independent auditors, etc.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors.

Payroll Administration: The payroll of the business should be properly administered as the risks of non-compliance with various legislation and the consequences of errors are significant. This can be done in any format, but it is advisable to use industry standard software that gives assurance on security, built in features such as audit trails, etc.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors.

EMP201 PAYE return: The monthly employer declaration to SARS on the EMP201 return must be submitted and paid by certain due dates.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors. The enterprise may appoint a tax practitioner in this regard.

BI-MONTHLY

VAT201 return: The bi-monthly (in most instances) VAT return to SARS must be submitted and paid by certain due dates. SARS will often raise queries or require supporting documentation after the submission of the VAT return, which must be provided timeously and with great care. VAT legislation is complex and as with any tax legislation there are often amendments which must be complied with. Incorrect VAT returns or payments can have significant consequences for the enterprise.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors. The enterprise may appoint a tax practitioner in this regard.

BI-ANNUALLY

Provisional Tax: The provisional income tax of the enterprise must be calculated, submitted and paid on the IRP6 return to SARS every six months. Income tax legislation is complex and as with any tax legislation there are often amendments which must be complied with. Incorrect provisional tax calculations, returns or payments can have significant consequences for the enterprise.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors. The enterprise may appoint a tax practitioner in this regard.

EMP501 Employer Reconciliation: A reconciliation of the payroll declarations must be completed and submitted to SARS every six months, and the corresponding tax certificates must be issued with the year-end reconciliation.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors. The enterprise may appoint a tax practitioner in this regard.

ANNUALLY

Compilation of Annual Financial Statements: Various laws and regulations require the compilation of annual financial statements for an enterprise, each with specific requirements.

In the case of companies, the Companies Act requires companies to compile annual financial statements, predominantly in terms of International Financial Reporting Standards (IFRS) or IFRS for SMEs.

The annual financial statements may be compiled and reported on independently by an independent accounting professional on the basis of the financial records provided by the company and in terms of the appropriate accounting framework such as IFRS for SMEs. It can also be internally compiled by the company if the directors are of the opinion that they have the necessary expertise to do so against the requirements set.

The directors’ and other required reports, tax calculations, working papers and supporting documentation for the annual financial statements must be provided by the company and is the responsibility of the directors. It can however be outsourced to service providers or the independent compiler in addition to the compilation engagement.

Independent Review / Audit: Various laws and regulations require the independent review or audit of the annual financial statements of an enterprise, each with specific requirements.

In the case of companies, there are certain criteria which will determine each year whether the annual financial statements of the company must be independently reviewed or audited.

The independent review or audit may only be conducted by a Registered Auditor (SA) or Chartered Accountant (SA) where the public interest score of the company is greater than 100.

It is important to note that auditors may only audit and report on the annual financial statements presented to them, including the directors’ and other required reports. The auditor may not advise on, prepare, calculate or compile any of the information contained in the annual financial statements.

Income Tax Return: The income tax of the enterprise must be calculated, submitted and paid on the income tax return to SARS every year. Income tax legislation is complex and as with any tax legislation there are often amendments which must be complied with. Incorrect income tax calculations, returns or payments can have significant consequences for the enterprise.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors. The enterprise may appoint a tax practitioner in this regard.

CONTINUOUSLY

Statutory Compliance: There are various statutory and regulatory compliance requirements which will be applicable to a particular enterprise, and it remains the accountability of the owner or duly appointed executive to comply with any and all of these.

In the case of companies, there is a requirement to submit and pay annual returns to the CIPC, together with the submission of either the annual financial statements of the financial accountability supplement. There are also compulsory company secretarial duties to attend to such as the resignation and appointment of directors, the issue of shares, and the registration of amendments to the Memorandum of Incorporation (MOI), etc.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, this accountability rests with the directors.

Records of Minutes – Meetings and Decisions: Where an enterprise is managed by more than one owner, or executives appointed to do so, it is advisable, and often required by legislation and regulation, to keep records of all meetings and decisions made by such owners or executives.

Any person/s can be given this responsibility, and this task can also be outsourced to service providers. However, it remains the accountability of the owner or duly appointed executive of the enterprise. In the case of companies, this accountability rests with the directors and those charged with governance.

It is clear from the above that a review of the administration and the assignment of the various responsibilities and accountabilities within an enterprise should be done frequently. Changes in legislation and regulation and changes in the business environment could pose a significant risk to the enterprise if this is not attended to.

Oddette Boshoff

Director

Read more →

South Africans working abroad – 1 year to get your affairs in order

Many South African tax residents earn foreign employment income. This income is currently not taxed in South Africa if:

  • the person was abroad for that employment for more than 183 full days during any 12 month period,
  • the 12 month period includes a continuous period abroad exceeding 60 full days,
  • the income constitutes any remuneration received by way of salary, bonus, commission, etc. (including fringe benefits and allowances) for services rendered for or on behalf of any employer, and
  • the services were physically rendered outside the Republic of South Africa by the South African tax resident.
  • (It is important to note that this exemption may only be claimed by private sector employees, and not independent contractors or government employees.)

After much public debate, the legislation regarding the exemption of tax on foreign employment income earned by South Africans has been amended and will come into effect on 1 March 2020. The “Expat Exemption”, section 10(1)(o)(ii) of the Income Tax Act, will now only exempt the first R1 million of such foreign employment income earned by residents per tax year.

Any income tax paid on the foreign employment income in the foreign host country may be claimed in the taxpayer’s income tax return against the resulting tax liability in South Africa by way of section 6quat. However, this claim will be limited to the amount of South African tax payable on the foreign income.

South African tax residents working abroad and receiving income as described in this section will have to ensure that their tax affairs are in order by 1 March 2020 to comply with this amended legislation. This might include a review of tax planning and administration, as it might result in the taxpayer now having to submit and pay provisional tax in South Africa every six months, as well as having to submit annual income tax returns. Affected residents might also want to reconsider their contracts for foreign employment. In some cases it might be necessary to consider the provisions of the Double Tax Agreement between South Africa and the foreign host country. There has also been much talk about possible mass emigration by South African residents as a result of this amended legislation, however each case should be considered individually.

It is vital that taxpayers collect and retain all necessary documentation and information, such as proof of foreign taxes already paid, in order to properly discharge any burden of proof required by SARS.

Lobbying groups are still petitioning National Treasury for further relief, with submissions made for instance on the exclusion of fringe benefits and allowances in the R1 million threshold. Treasury indicated that a Special Workshop will be held during 2019 to investigate these submissions.

We will, as always, keep you updated on any further developments in this regards.

Oddette Boshoff

Director

Read more →