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Changes to the South African Companies Act
Significant proposed changes to the South African Companies Act, expected to become operational mid 2010, will have a major impact on SMEs. Arguably the most important change is that SMEs, that meet certain requirements, will no longer be subject to the current mandatory statutory audit requirement.
Significant proposed changes to the South African Companies Act, expected to become operational mid 2010, will have a major impact on SMEs. Arguably the most important change is that SMEs, that meet certain requirements, will no longer be subject to the current mandatory statutory audit requirement.
This is expected to result in significant cost savings to SMEs.
While the financial reporting standards applied in South Africa: IFRS and IFRS for SMEs, remain in place, the audit requirement will be replaced by:
The International Standards for Review Engagements 2400 for SMEs with a turnover in excess of 200 million ZAR and assets in excess of 100 million ZAR; the International Standards for Independent Reviews 4400 for all other SMEs, except when its assets and turnover are less than 5 million ZAR and 20 million ZAR, respectively, in which case independent compilation of financial statements will suffice and no specific reporting standard will be required.
Forming a company in South Africa remains a relatively simple and inexpensive process.
Taxation
For the next fiscal year, ending February 2011, the company tax rate remains at 28% and the capital gains tax rate for companies at 14%.
Dividends declared by companies are taxed at 10%, but South African branches of foreign resident companies are exempt from this tax.
SMEs with turnover in excess of 1 million ZAR pay VAT at 14%.
SMEs that qualify as Small Business Corporations in terms of the Income Tax Act enjoy accelerated write offs on items of property plant and equipment and more favourable tax rates, i.e. the first 57K ZAR of profit is tax free, thereafter tax is levied at 10% on the profits up 300K ZAR. Above 300K ZAR the normal company tax rate of 28% applies.
SMEs that qualify as Micro Businesses in terms of the Income Tax Act pay a turnover tax (in the place of income tax and VAT) ranging from 1% to 7% on a sliding scale as turnover increases, reaching the maximum limit of 7% at 750K
General
South Africa has an efficient and well developed banking system with a wide range of products aimed at the SME market.
Income tax filing and tax revenue collection systems are almost completely computerised and operate with high levels of efficiency.
Forming a company in South Africa remains a relatively simple and inexpensive process. For more information please get in touch with Page Accounting, South Africa.