Do you speak tax?
You may not like talking about tax for many reasons. Many people simply just do not understand the tedious or very technical terms and jargon so before you try to get your taxes in order, it’s important to be familiar with that technical jargon you’re about to be bombarded with. This tax glossary can help you get to grips with that complicated language called Tax.
When dealing with any tax, you may feel you need a dictionary for the tax-speak, and explanations for the explanations. Below you will find a tax glossary of terms you might come across when filing your taxes.
Amount Due – Money that taxpayers must pay to the government (SARS) when the total tax is greater than their total tax payments (throughout the year).
Association not for gain – A religious institution or other society or organisation that is not carried on for-profit and has to use any property or income solely to fulfil its objectives. An association not for gain could also qualify as a “welfare organisation” if it conducts certain activities.
Audit – A process whereby an independent company (auditors) come in to examine a business’s accounts.
Capital Gains Tax – A tax incurred when a business disposes of (ie: get rid of example sell or scrap) of an asset or property.
Consideration – The total amount of money (including VAT) received for a sale.
Deductible expenditure – Any expenditure of a capital nature that is incurred during the tax year in order to produce income for your business, such as operational expenses, assets bought for the business and so on.
Direct taxes – Taxes that are imposed on persons. The term ‘person’ relates to individuals and to legal entities (companies, CCs, trusts, deceased estates).
Dividend – A share of profits paid to shareholders of a company at the end of a financial year.
Dividend Tax – This new tax is a withholding tax of 10%, payable by the company on behalf of a shareholder. This means that the shareholder will not pay tax on the dividends at his effective tax rate; 10% will be the final tax payable on the dividend. Dividends tax has replaced Secondary Tax on Companies (STC).
Dwelling – Any building, premises, structure or any other place or part thereof used mainly as a place of residence.
eFiling – SARS eFiling allows taxpayers to submit tax returns and payments electronically (via the internet). Currently, a limited number of forms are accommodated. This has been changing recently so for more information visit the SARS eFiling website at https://www.sarsefiling.gov.za/.
Employee – Any person (other than a company) who receives remuneration or to whom any remuneration accrues. This includes services rendered by a person to or on behalf of a labour broker.
Employer – Any person who pays or is liable to pay an amount by way of recompense to another person.
Enterprise – Broadly includes any business activity carried on regularly in or partly in the Republic, whether or not for profit, in the course of which goods are sold or services are rendered.
Exempt supply – A supply on which no VAT may be charged (or claimed) even if the supplier is registered for VAT. Exempt supplies include financial services (interest, life insurance, medical aids and others), renting a dwelling to use as a private home and educational services (primary and secondary schools, etc).
Financial / tax year – Fiscal year is a period of 12 consecutive months without regard to the calendar year. The fiscal year is designated by the calendar year in which it ends. The SA government’s fiscal year begins 1 March and ends 28 February. The fiscal year carries the date of the calendar year in which it ends. Your company can have any month as its year-end.
Gross income – Total income before taking any exemptions, deductions or allowances into account. This includes income other than cash, such as an asset given or service rendered in exchange for the sale of goods. This amount is NOT what goes into your bank account.
Income Tax – A tax imposed on all taxpayers; calculated on the taxable income of both natural and legal persons.
Indirect taxes – Taxes that are levied on transactions, e.g. the tax levied on the selling price of goods, which in South Africa is Value Added Tax (VAT).
Input Tax – VAT paid by a vendor on goods or services supplied by the vendor. Conversely, Output Tax is VAT charged by a vendor for goods or services supplied.
Net income – This is the amount of income a business is left with after subtracting costs and expenses from the total revenue. ‘Expenses’ include allowable deductions such as pension fund, retirement annuity, medical aid, PAYE, UIF, etc). This amount goes into your bank account.
PAYE – Pay As You Earn; a rate of tax deducted from the salary/wages of any person who earns over a certain threshold.
Person – For the purposed of tax, a “person” includes any natural person, public or local authority. This also includes a company, trust, body of persons (i.e. partnerships) and the estate of any deceased or insolvent person.
Provisional Tax – A person may register as a provisional taxpayer if he derives income that is not consistent. An example: a salary OR from two or more sources. Provisional tax is usually paid twice per financial year.
Rebate – An amount deducted from a taken off the tax after your tax rate has been worked out. There are rebates for both individuals and businesses. It’s important to find out if your business qualifies for any rebates, as this can decrease the amount of tax you have to pay to the Receiver.
Remuneration – Money paid to an employee, including a salary or wages, leave pay, travel allowances, overtime pay, bonuses, gratuities, commissions, pensions, annuities, any amounts paid for services rendered or variation of office, retirement lump sums and any fringe benefits.
Taxable income – The amount you will be taxed on.
Turnover Tax – Voluntary tax system that allows small businesses to save on the tax they pay.
Trust – Defined in section 1 of the Income Tax Act as “any trust fund consisting of cash or other assets, which is administered and controlled by a person appointed under a deed of trust, by agreement or under a deceased’s will”.
Unemployment Insurance Fund – UIF provides benefits for people who are out of work or unable to work because of a chronic illness or pregnancy. Contributions to UIF are compulsory and are made by employers, employees and the government.
VAT – Value-Added Tax; an indirect system of taxation that is currently levied at 14% on the value of all goods and services supplied by vendors.
Vendor – Any person who is required to register in terms of the VAT Act.
Have this tax glossary handy when you’re doing your taxes or speaking to a tax consultant and feel like a fundi. You can always just contact us and we will happily guide you through whatever you are confused about.
NEVER BE AFRAID TO ASK!
Updates and more detailed tax information, rules and regulations, are available on our website or alternatively, on the SARS website. Visit the SARS website.
This post was updated on the 10th March 2021