Unlock the Benefits of an End-of-Year Company Review
“In the business world, the rearview mirror is always clearer than the windshield.” (Warren Buffett)
Every business should conduct an extensive review of its business operations at least once a year. Doing a review allows you to track your company’s progress towards achieving its goals, to evaluate current strategies, practices and operations, and to determine what’s working and what isn’t. Think of it like going to the doctor for an annual checkup.
The benefits of a year-end review
A year-end review enables you to evaluate business performance across business functions and to identify trends and issues before these become serious problems.
It requires checking progress on goals, objectives and key performance indicators (KPIs). This will reveal what is already working well (these processes can be enhanced and replicated), as well as what is not working – prompting you to realign the team or change tactics. All of this empowers you to chart a well-informed plan of action for the year ahead.
What should be included in an annual business review?
For a big-picture understanding of your business’ performance across the various business functions over the last year, a multitude of factors should be reviewed. Luckily, we can help with putting everything together.
- Financial reports, including:
- Annual financial statements and management accounts
- Profit and loss (P&L) statement comparing total income to total expenses
- Cash flow statement to identify cash flow problems and inform budgeting and spending decisions
- Debtors’ reports enabling proactive management of current and overdue invoices for improved cash flow
- Budget vs actual spending report to identify areas over or under budget
- Balance sheet summarising total assets and liabilities, shareholders’ equity, investments and retained earnings
- Company vision, mission and values
- Business plan covering:
- Market conditions, industry changes and competition
- Client base, changing client needs and client satisfaction
- Goals, objectives and KPIs (Key Performance Indicators)
- Current and pipeline projects, new opportunities
- Human resources, key roles and employee satisfaction
- Customer acquisition cost and lifetime value
- Products/services, value proposition, quality, prices and fees
- Sales, advertising, marketing and branding
- Costs and expenses, including tax liabilities
- Internal systems and processes, equipment, and resources
- Statutory documents, registrations, certifications and contracts
The smartest way to benefit from a year-end review
Collating all this information may seem overwhelming, but with our professional assistance it can be done quickly and efficiently.
Our team will also assist you to understand the numbers and what the data says about your business. This insight will enable you to enhance or duplicate the processes that are already generating good results and to identify the changes necessary to obtain better results in other areas. It’s all about creating a solid plan for the upcoming year, so you can set your business up for greater success in 2025.
Your Tax Deadlines for November 2024
- 07 November – Monthly PAYE submissions and payments
- 25 November – Value Added Tax (VAT) manual submissions and payments
- 28 November – Excise duty payments
- 29 November – VAT electronic submissions and payments, Corporate Income Tax Provisional Tax payments where applicable.
Global Corporate Tax Changes: Advice Is More Crucial Than Ever
“Over the next few years, we are also implementing a global minimum corporate tax to limit the negative effects of tax competition.” (Enoch Godongwana, Minister of Finance, Budget 2024)
There have been significant shifts in the corporate income tax landscape in South Africa and globally. Recent trends noted by the OECD and The Tax Foundation include:
- Statutory corporate income tax rate changes in 13 countries in 2023
- A reversal of a two-decade downward trend in corporate tax rates
- An increase in the average global CIT rate from 20% to over 21% in the last year.
Corporate tax rates have declined from the highs of an average 40% in 1980 and 28% in the early 2000s to around 21%. South Africa has also reduced its CIT rate over the years, from 30% in 2000 to 27% in 2022 – but it is still substantially above the international average.
A new global tax treaty
Dubbed “an historic step towards changing the financial landscape”, 110 UN Member States, including South Africa, recently voted in favour of the terms of reference for a new global tax treaty. The UN says that all 193 UN Member States could vote on a finalised UN global tax treaty as early as 2027.
In the meantime, more than 140 countries have already agreed to this global minimum tax, and some have already implemented this tax reform, including South Africa. Finance Minister Enoch Godongwana announced in his 2024 Budget Speech that South Africa will be implementing the global minimum tax with effect from years of assessment commencing on or after 1 January 2024.
Why a minimum global tax?
Multinational companies use tax planning strategies, like moving profits to low-tax jurisdictions, to minimise their tax liabilities. A global minimum tax aims to ensure that these multinationals pay their fair share of taxes, regardless of where they operate.
This limits the race to the bottom of effective corporate tax rates for large multinationals, with countries competing to attract income by offering low tax rates and tax incentives.
On a social responsibility level, it goes without saying that companies should contribute fairly to the financial stability of the countries they operate in.
Who is affected?
A global minimum tax will ensure that any multinational enterprise group with annual revenue exceeding €750 million (+-R15 billion) will be subject to an effective tax rate of at least 15%, regardless of where its headquarters, operations, sales or profits are located.
Implementation in South Africa
Government plans to introduce two measures to effect this change for qualifying multinationals:
- The income inclusion rule applies to multinational entities headquartered in South Africa and requires a tax top-up if the effective rate in the jurisdictions the multinational entity operates in is lower than 15%. This tax is payable to SARS as opposed to the relevant jurisdiction.
- The domestic minimum top-up tax applies in situations where the multinational entity’s effective tax rate in respect of its South African profits is lower than 15%. In such circumstances, the South African constituent entities of the multinational entity are jointly and severally liable for the top-up tax.
What is the expected impact?
A global minimum tax will ensure that multinational corporations contribute their fair share of taxes in jurisdictions where they operate, curbing tax avoidance and safeguarding countries’ tax bases. It’s expected to generate significant additional tax revenues for many countries, especially those in the Global South.
In South Africa, National Treasury predicts that implementing the global minimum tax will bolster our corporate income tax base by approximately R8 billion in 2026/2027.
Whether a global minimum corporate tax can deter corporate tax avoidance and evasion remains to be seen. Concerns have also been raised about the impact on companies’ competitiveness, likely increased compliance costs, and possible double taxation.
Will it affect SMEs?
In the long run, the changes should benefit smaller local companies. With a broadened tax base, there may be opportunities in South Africa to lower the personal income tax burden on individuals, or to consider more globally competitive corporate tax rates than the current 27%, which is well above the international average.
The change may also create a more certain and predictable global tax environment, which is conducive to long-term planning and investment decisions.
What needs to be done?
Qualifying multinationals should assess their effective tax rates for the income inclusion rule and domestic minimum top‐up tax from 1 January 2024. Their local and global tax planning, and financial structuring, may need to be reviewed and updated.
While this probably doesn’t apply to your business (yet), companies of all sizes should note the significant shifts in international and local tax policy. This makes our up-to-date, expert tax assistance a must-have for every company navigating the changing tax landscape.
