In terms of South African income tax legislation, South African tax residents and non-South African tax residents are taxed differently, as is the case in almost every country around the world. A South African tax resident is taxed in South Africa, by SARS, on its worldwide income, irrespective of where the income originates from or the source of the income.

A non-South African tax resident on the other hand, is only taxed in South Africa on the income that they earn from a South African source. For example, Barry is a French tax resident. He invested money into a South African bank account and earns interest on his investment in the South African bank account. Although Barry does not live in South Africa and he is not a South African tax resident, he will be required to declare this income on an income tax return to SARS and pay tax thereon. He will however be allowed the annual interest exemption, which is R23 800 for an individual below 65 years old and R34 500 for individuals above 65 years old. Whatever income Barry earns from a non-South African source though, will not be taxed in South Africa and Barry need not declare it in South Africa.

The same rule applies to immovable property, where a property is situated within South Africa, it has a South African source and thus if that immovable property is disposed of, there will be tax payable to SARS, whether the seller is a South African resident or a non-South African resident. If the seller of the immovable property is a non-South African resident, there will be an amount of tax withheld form the selling price, known as a withholding tax, which is considered to be a pre-payment of the capital gains tax that will eventually be due and payable by the non-resident taxpayer.

It is important to note that taxpayers operating in two or more jurisdictions are governed by double tax agreements between countries. A double tax agreement is where the two countries have agreed on who will have the taxing rights over a certain source of income earned by a taxpayer. It is therefore always important to consider first a double tax agreement, if there is a taxpayer who falls within more than one tax jurisdiction. If there is in fact no double tax agreement, both jurisdictions tax legislation may apply to the income earned by the taxpayer.

Take note that tax residency is a complicated matter and is determined from your ordinary residence and your physical presence in South Africa. It is therefore advisable to not make any assumptions when considering your tax residency status but instead consult with an experienced tax advisor.

Willem Oberholzer is executive director and Jade Els MCom Tax is a tax adviser at Probity Advisory.

PERSONAL FINANCE 

Five rules for effective cash flow management

Fin24 blogger Anderson Lele writes:

MAKING sure that your company is a viable business means that you have to pay attention to and manage your cash flow effectively. Business experts agree that one of the most common reasons for the failure of small businesses is that they run out of cash.

As a successful entrepreneur, you know that careful consideration must be given regularly to your business operations; this also should include following some basic rules for examining and managing your cash flow.

1. Have a cash flow budget 

Even though you have a spreadsheet of your revenue and expenses, you need a sheet that reflects the timing of how and when cash flows into your company. It’s also critical to have projections of what you think your cash flow will be in the coming quarters.

You can base some of this information on your contracts and payment terms that you have with your clients. This budget will let you know if the cash flow that you have is adequate to cover the amount of expenditure that you have ahead.

Being alerted to shortfalls ahead of time can help you elicit help from others.

2. Keep your costs under strict control

Make cuts whenever and wherever you can to minimise your overheads. You’ll find that leasing furniture saves money, taking advantage of inexpensive marketing strategies helps, and doing some of the tasks that you might hire others to do can help you get through a difficult time.

It will be easier to add to the cost of overheads as your company grows rather than cut services and operations because your cash flow won’t cover the obligations that you have.

3. Don’t let your cash be slowed up in accounts

It’s imperative that your clients pay on time every time; by offering incentives for early payment you can improve the status of your finances.

You must send out your invoices after work is finished or the product has been supplied, track the records, and make sure that late payments are dealt with quickly and efficiently.

If you have a process in place, you’ll let your clients know that you expect payment when services or products are rendered.

4. Establish a payment reputation

In order to make sure that your company has a good reputation, you must meet your financial obligations on time.  Pay your bills when they are due and after you have established yourself as a professional company, ask for extended time if you need it.

5. Have a plan in place for shortfalls

If you have cash reserves on hand, your company will never experience a shortfall that can dramatically impact your bottom line.

If you can’t manage to have some savings ready for an emergency, by doing an examination of your cash flow projections you can arrange recruitment finance which will alleviate your cash flow problems until you have enough funds to cover your costs.

If you simply follow the rules listed above, you’ll find that your company will be a vibrant, thriving business with funds that cover expenditure effectively.

– Fin24

Disclaimer: All articles and letters published on MyFin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.

Fin24 reserves the right to obtain service providers’ comments before publishing any articles or letters, and to edit any material used. Fin24 also reserves the right to edit or delete any and all user comments received.

Accurate accounting is the single most important aspect of many successful businesses. In order for any business to remain successful employees must share the same values and commitment. It may also be the size of your business and employee responsibilities that could determine how they managed your accounts. Outsourcing may just be the answer in order to relieve the pressure and stress a small business may inflict on staff and you as owner.

So what are the benefits of outsourcing?

  • Accuracy

Accurate accounting is key to any successful businesses in order to avoid running out of cash as cash levels may not always be accurately stated. Furthermore, accuracy remains paramount in order for you to focus on the single most important aspect! YOU’RE BUSINESS.

  • SARS

Generally, as with most small businesses, employees take on a variety of roles and responsibilities, increasing their potential for mistakes. Removing the accounting / bookkeeping part of your day to day business management activities will eliminate aspects like late payments to SARS and incomplete monthly management accounts.

  • Software

The IT (AI) industry is for ever changing systems managing accounts. An outsourced accountant will, in all probability, make use of the latest and best programs and software available. It could therefore be a huge saving to your business to piggy back on your accountant rather than you spending much needed cash flow.

  • Expert advise

It’s not possible to be everywhere so outsourcing may just be what you need to exponentially grow your business, to the next level. Accountants are experts in their field and truly understand the importance of accurate accounting. Your accountant will always be there to provide assistance and advice so there is no better person to trust with your accounting

So why not call Accusum Accounting Services, with us it’s almost like owning your own staff without actually employing anyone. Please scroll through our website to see our extended list of service offerings.                       

 

                                         “We simply love the paperwork you hate”

A misconception exists that bookkeeping and accounting are one and the same. While they both work to assist you with your finances, there are some important distinctions between the tasks of a bookkeeper and an accountant. From the outset, it is important to understand that both bookkeepers and accountants forms an integral parts of your business. While their tasks can sometimes overlap, there are definitely certain aspects of your business that you would specifically entrust to an accountant, and others to your bookkeeper.

In layman’s terms, a bookkeeper will likely be the person that assists you with the ongoing financial day-to-day transactions that keep your business running smoothly. Your accountant, on the other hand, will be the person who analyses the data compiled by your bookkeeper, reports on it. Your accountant should have a strong understanding of your taxation requirements.

In order to understand the concept in the benefits that both bookkeepers and accountants can offer to you, from a financial perspective, it can help you making a clear decision to choose between them.

Believe it or not bookkeepers are instrumental in the ongoing day-to-day financial operations of your business.

Some of the key functions that are regularly undertaken by your bookkeeper includes:

  • Processing invoices, receipts, payments
  • Processing and maintaining your payroll system
  • Preparing initial financial statements
  • Reconciling accounts and preparing reconciliation reports
  • Managing your accounts receivable and accounts payable
  • Calculating GST (VAT returns)
  • Updating, establishing and reviewing accounting systems

There are a wide variety of other tasks that a bookkeeper can undertake, and much like the tasks outlined above, they are generally related to the ongoing maintenance of your financial records.

It is important to be aware that there is likely to be a substantial difference in fees charged by bookkeepers and accountants. In order to best utilize your budget, extensive consideration into which tasks are to be delegated to a bookkeeper or an accountant is strongly advised.

The role of an accountant in your business is often more advisory and analytical in nature. An accountant will be in a position, through analysis of past performance, offer financial projections and predict and advice on future financial performance of your business.

Further services, but not limited, offered by your accountant can also include:

  • Taxation
  • Company registrations
  • Auditing
  • Corporate reporting and compliance
  • Financial management advice

While the list of an accountant’s services is not only limited to analytical and advisory in nature but can be extended towards many other aspects of your financial needs, it all depends on the level of knowledge and size of the business you’re dealing with.

It can therefore be argued that there are substantial differences between the services offered by bookkeepers and accountants, however, both are crucial to the growth and success of your business. Instead of boxing them in a ‘bookkeepers vs accountants’, it is important to note that both must work together to accomplish success.

 

10 Fun facts about accountants

Although we at Accusum Accounting Service always aim to provide our clients with a professional and ethical service we also belief that the accounting profession is not always about numbers it can be fun too,

  1. That chewy stuff, Bubble-gum, was invented by an accountant, Walter Diemar in 1928. It was bright pink in colour because that was the only dye he had to hand at the time.
  2. It was accountants who brought down Chicago crime boss Al Capone. Although believed to be guilty of everything from bootlegging to murder, he was ultimately arrested and convicted of tax evasion.
  3. Bookkeeper and the words derived from it (bookkeeping etc.) are the only words in the English language with 3 consecutive sets of double letters.
  4. Mick Jagger, Robert Plant of Led Zeppelin and comedian Eddie Izzard are just a few of the famous names who worked in accounting.
  5. Showbiz careers took off.
  6. St. Matthew the Evangelist is the patron saint of accountants, as well as bookkeepers, tax collectors, bookkeepers, stockbrokers and bankers.
  7. Monty Python frequently poked fun at accountants. A possible reason for this is that John Cleese’s father wanted him to be an accountant; he was due to start work for Grace, Derbyshire & Todd Chartered Accountants in Bristol.
  8. Accounting has been around for millennia. Tokens dating back 7000 years were discovered in ancient Mesopotamia (modern day Iraq, Turkey and Syria). These are thought to be the earliest documented records of goods received and traded.
  9. Accountants play an important role in the Oscars. Every year since 1935 a team of accountants has spent an average of 1700 hours prior to Oscar night counting the Academy Award ballots by hand.
  10. Italian mathematician Luca Pacioli is regarded as the father of accounting. He published the first book on double entry accounting in 1494.

Accounting and or bookkeeping used to be a stable profession in the older days. When a business hired an accountant, that partnership usualy almost lasted forever. Changing to a different firm was expensive, complex and almost impossible.

To a large extent that’s still true today. But it’s getting easier for businesses to shop around. New technology means that moving to a new accountant isn’t as hard as it use to be.

This is opening up the market and improving customer choice aspecially those customers which are unhappy with their current accountants.

So if you feel that you no longer recieve quility service as you should give us a call we pride ourselves with professional and ethical service.

Don’t let your tax return become a burned to you leave all the hard work to us. At Accusum we provide a ethical and professional service, we simply walk the talk.