Archive for category: News

In South Africa, taxpayers have the right to dispute tax assessments, interest, late payment penalties, and administrative penalties for various taxes, including Personal Income Tax (PIT), Corporate Income Tax (CIT), Value-Added Tax (VAT), and Pay-As-You-Earn (PAYE). This is done by submitting requests such as Request for Reason, Request for Late Submission (Condonation), Request for Remission (RFR), Notice of Objection (NOO), Notice of Appeal (NOA), and Suspension of Payment.

Recent changes to the procedures to lodge an objection and appeal against an assessment or decision aim to enhance the efficiency and effectiveness of tax dispute resolution. Here are the key changes:

• Taxpayers now have 80 business days to file a Notice of Objection against a SARS assessment or decision, a significant increase from the previous 30-day window. Taxpayers are not obliged to wait the full 80-day period.
• All substantiating documentation must now be submitted within the extended 80-day objection period, making it crucial to request reasons for an assessment before objecting. Previously taxpayers were only required to list the substantiating documents.
• Taxpayers can request an additional 30-day extension beyond the 80-day period for valid reasons and, in exceptional cases, an extension up to three years.
• Taxpayers and SARS can agree on shorter periods for dispute resolution, not just extensions as per the old rules.
• Taxpayers can appeal the outcome of an objection on new grounds not raised in the NOO, if it doesn’t pertain to a previously unchallenged part of the assessment.
• Alternative Dispute Resolution (ADR) changes now require facilitators to have appropriate tax experience and to be acceptable to both parties. A senior SARS official must appoint the facilitator within 15 days of the ADR commencement. Interim ADR reports must be delivered within five days after the meeting, and final reports within 10 days following the end of ADR proceedings.
• SARS must now issue assessments within 45 days of a settlement being reached in a dispute and/or after receipt of the Tax Court’s decision from the Registrar.
• SARS must provide a statement explaining why they made an assessment and why they oppose an appeal to the tax court. SARS can now add new grounds for disallowing objections or appeals, unless it changes the assessment basis significantly or requires a new assessment.
• Changes to the Tax Board and Tax Court processes include the issuance of subpoenas by the Tax Board clerk or Tax Court registrar, with parties having the right to challenge these if they find them irrelevant or unreasonable.
• An email address is now expressly included as an ‘address for delivery’.

 

What’s still the same?

• SARS must inform taxpayers of assessments, notifications or communications issued by also sending a message to the taxpayer’s last known number or email. Keep your contact details updated and check your compliance status regularly, especially when receiving emails or SMSs from SARS.
• Submitting an objection or appeal does not suspend the payment of a tax debt. To prevent SARS from instituting collection proceedings, taxpayers must file an objection as well as a “Request for Suspension of Payment.” If granted, SARS cannot commence collection proceedings pending the outcome of the objection or appeal, but interest will accrue on the unpaid debt.
• The importance of involving a qualified tax advisor early in the process cannot be overstated, especially where penalties and interest have already been imposed, and particularly if the objection is submitted after the prescribed due date.

 

Knowing whether to hire a freelancer or full-time employee for any particular role is vital for the successful running of a modern business. With budgets constantly being constrained and the pressure to perform going up, ensuring you maximise your workforce is absolutely essential if you want to build a successful company.

Here is our quick guide to help you decide whether the roles in your company should be filled by a full-time employee or a freelancer.

When to bring on an employee

• Training: If the role requires specific knowledge or a significant amount of training, it will always be better to bring in a full-time employee. While the risk always exists that you will train an employee only for them to leave, this risk is far greater with a freelancer given the fact that they are already working with multiple companies.

• Oversight: If the role requires careful oversight, it is also a good idea to make it full-time. Freelancers work with multiple clients and as such schedule work to their calendar and not strictly to when your managers and supervisors are online.

• Culture and brand awareness: Freelancers are exceptional at delivering on their specific tasks but may not have the same general awareness and knowledge of your company. This is important to consider especially when choosing staff who will be interacting with your clients and customers, where it’s vital they are living the company culture and fully cognizant of the nuances of the brand.

• Recruiting a leader: Anyone who is set to take a senior role in your business should be a full-time employee, simply because these roles require someone who is fully dedicated to the business and not distracted by other roles and concerns.

When to bring on a freelancer

• Budget: If the budget is a concern, then you should definitely be using a freelancer. Even if that freelancer is charging a premium your company will often save money on benefits such as health insurance, paid holidays, retirement annuities and bonuses, while also saving on their office space and supplies and equipment. With freelancers the company only pays for the hours worked, and dead time around the coffee machine is no longer an expense. If you find the job is larger than expected the option exists to take the freelancer on a retainer for a set number of hours each month at a set rate, which can activate even more savings. Your accountant can easily run the costs for you in each scenario, making this decision an easy one.

• Risk: As freelancers aren’t employees, they are significantly easier to terminate should their work not be up to standard. Further, they aren’t generally considered when tallying the employee numbers for determining the size of a business, and their working conditions are not regulated by the Basic Conditions of Employment Act. In general, taking on a freelancer runs far lower risks for an organisation than hiring in a similar position. Beware however of tax and labour law rules on when a freelancer or “independent contractor” will be deemed to be a full-time employee no matter the terms of your contract – ask us for help in need.

• Quality: For the freelancer in particular, quality reigns supreme. With their livelihoods dependant on repeat work and satisfied clients, freelancers must be the epitome of dedication and excellence in their craft. Unlike staff members whose performance might fluctuate, freelancers understand that their contracts are always up for renewal, driving them to consistently deliver their finest work.

A good businessperson pays attention to the price of their products. With accountants by their side, they wisely analyse every expense, tax and logistical possibility to ensure their product goes out at the best rate for maximum profitability. Like with everything in society, no matter how thorough the maths, pricing strategies can also be influenced by the underlying psychological principles that drive consumer behaviour and purchasing decisions.

Ultimately, customers want to know that they’re getting either the best price point, the best quality, or the best value. Psychological pricing leans into that idea, and ethically uses price as a way to send the right signals to make customers feel one of these three benefits.

By decoding these subtle nuances, businesses gain a competitive edge by subtly adjusting their pricing strategies to lure customers and bolster profitability. Here we uncover the strategies and insights essential for businesses aiming to thrive in today’s dynamic market landscape.
Price Appearance

All businesses know that pricing an object at R49.99 is more likely to attract a sale than simply pricing it at R50. In the West people read from the left so the lower number on the left is attractive. Of course, many customers know this too, but there are other ways of making the appearance of the price boost sales.

The first of these is simply to leave off the cents in a price. Studies have shown that marking a product as R49 is more likely to make a sale than R49.00 simply because it looks shorter. In fact, according to The New York Times, even putting the currency sign at the start of a price can trigger purchasers into feeling the “pain of paying.” The best route? Remove the currency sign and cents altogether.

Premium Pricing and Price Anchoring

• Premium pricing is when a brand chooses to price themselves at the top of the market rather than set a competitive price. This can work due to the public’s long-established perception that higher prices equal higher quality or rarer products. This does not always work, but there is a far subtler way to take advantage of the same effect – price anchoring.
• Price Anchoring is where a business releases their first product at a premium price but releases subsequent products at more competitive rates. The existence of the premium product makes the other products seem that much more reasonable than they otherwise would and encourages sales. Price anchoring can also refer to a practice in retail where the store puts an expensive product alongside a cheaper one, thereby making the cheaper one’s price seem like a bargain. For example, retailers, putting prime virgin olive oil at R89.99 for 500ml next to the sunflower oil, makes the latter seem cost-effective, even if they have priced it above the usual market price.

Discount language

Offering discounts is a great way to sell off stock that may be moving too slowly or to encourage people to try a new product for the first time, but did you know the words you use can influence how likely it is for people to take up those discounts? For instance, telling people they get 50% more of a product for the same price has been shown to be far more effective as a sales incentive than offering them 33% off. This is despite the fact that these are the exact same offer.

Then of course, there is the crafted discount offered by many large supermarkets these days. With the crafted discount you mark a product up significantly and then tell customers they can get the normal price if they buy two. For example: Bacon is usually R35 a packet, so mark it at R50 a packet and then offer the discount of “2 for R70”. Not every business owner will be comfortable with using this tactic without ensuring that the customer does in fact get some benefit (by offering “2 for R65” perhaps) but it certainly should boost sales.

Decoy Effect

Decoy pricing is a strategy companies use to convince clients that a slightly more expensive product is in fact the one offering the best value. It takes advantage of how buyers weigh price relative to the value they perceive. With decoy pricing the salesperson will offer clients products they know they will not take simply to guide them to the one they actually want to sell. For instance, they might be trying to sell you a car that’s a little out of your price range, but then say, “You are right, let’s look at this one which is in the price range you were looking for.” Of course, the new option is significantly lower quality, thereby highlighting the original car as the wiser purchase even if it is a little more expensive.

This gets even smarter when we take into account a psychological state known as the compromise effect, in which customers will gravitate toward the middle ground in any offer. If there are three choices for fibre connections with the fastest speeds being the most expensive, customers are more likely to take the medium speeds at the medium price. Some restaurants who know this make their second cheapest bottle of wine, the one with the highest mark up. Want to make your product seem better value? Simply offer the customer one that’s much more expensive and one that’s much cheaper as well.

Tiered pricing

Let’s say the product you want customers to buy is, in fact, the most expensive one. Then what you need is tiered pricing. This strategy lays the benefits of the highest priced product out in a way that makes it seem like a bargain compared with the others.

For example: Your lowest tier product has 3 features for R50, the middle tier has four features for R75, and the top tier has eight features for R100. In this case the middle product is a kind of decoy that could have been priced with one or two more features, but by giving the top tier product that sudden jump-up in feature numbers, the salesperson can be sure the client is much more likely to buy that.

We can help you formulate a pricing strategy tailored to your business model.

Companies must, within 12 months of their financial year-end, submit to SARS an Income Tax Return for Companies (ITR14), as well as supporting documents, declaring their full income tax responsibility to SARS. This declaration, return and supporting documents may be selected for verification by SARS.

A verification involves the comparison of the information declared on the return to the taxpayer’s financial and accounting records and other supporting documents. The purpose of a verification is to ensure that a declaration or return represents a taxpayer’s tax position fairly and accurately.

Previously, when companies were identified for a verification, SARS required them to submit the Supplementary Declaration for Companies or Close Corporations or IT14SD form. This is no longer required by SARS, but it will increase the scrutiny companies face when selected for verification.

What has changed?

The requirement to submit an IT14SD in a verification case is replaced by a letter requesting specific relevant documents based on the reason for verification.

SARS also says that as of September last year, companies are no longer required to submit any outstanding IT14SDs and that should taxpayers receive any further notification or final demand letter to submit an IT14SD, such request should be ignored. However, taxpayers should always check with their accountant before disregarding correspondence of any kind from SARS.

What’s still the same?

• The requirement to submit relevant documents upon submission of the ITR14.

• All correspondence will still be issued as before.

• The process of dealing with the verification case will remain the same.

• The submission of specific relevant documents will be required during the verification process.

• The verification of a company always requires the submission of a signed set of Annual Financial Statements (AFS), as well as a detailed Tax Computation and the underlying supporting documentation/schedules (e.g. Tax pack).

• When requested to submit specific relevant documents based on the reason for the verification, companies are still required to submit the documents within 21 working days.

How does this affect your company?

When a company is now identified for verification, it will be notified of the verification, as is the current practice and will be requested to:

1. Submit specific relevant documents based on the reason for the verification, or
2. Submit a revised Corporate Income Tax ITR14 return.

To comply with a request to submit specific relevant documents, the requested documents must be uploaded using eFiling, or any other submission channel, including SARS Online Query system (SOQS).

Once the relevant documents are uploaded, a SARS verifier will be able to action the case. If the relevant documents are deemed insufficient, or additional documents are required, this will be requested. The relevant documents must still be provided within 21 working days. If a company does not comply with the request for relevant documents, SARS will raise a revised assessment to resolve the verification case, and will add back the related expenses, dependent on the specific relevant documents requested.

Companies can comply with a request to submit a revised Corporate Income Tax ITR14 return through a request for correction (RFC). Companies have the option of submitting one correction, which may or may not resolve the verification. However, the revised ITR14 will also be subjected to a risk evaluation.

Seek professional assistance

Being selected for a verification entails significant risk to any business. In addition to the time, cost and effort to collate the information, documents and clarifications required, the taxpayer could still be referred for audit as part of the SARS compliance process, even if the verification process has been completed.

Whether submitting a Corporate Income Tax ITR14 return or facing a SARS verification with a request to submit documents or to file a correction, you would be well-advised to rely on the expertise of your accountant to ensure compliance.