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Four situations where you CAN'T benefit from your company's financial losses on your tax return

by , 29 August 2014
All business owners hate it when their company makes a financial loss. But the good news is you can claim those losses against your tax.

You just have to carry the losses over to the next tax year and deduct them from your taxable income.

But you need to be careful.

There are four situations when you CAN'T claim your financial loss as a tax deduction. If you do so by mistake, you'll face penalties from SARS.

Keep reading to discover what these four situations are so you don't make this mistake...

 

Here are the four situations when you can't claim your company's financial loss from your taxes

 
1. You can't carry forward a tax loss if SARS sequestrated your estate. You can remedy this if you have the order of sequestration set aside.
 
2. If you've come to a compromise with any of your creditors. If they agree to reduce a portion of debt you owe them, you can reduce the balance of your tax loss by the amount of the benefit you obtained from that compromise.
 
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Avoid 200% tax penalty
 
 
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3. You can't set a tax loss off against any amount distributed to you from a pension or provident fund, such as a distribution of a surplus in the fund.
 
4. You can't set off a tax loss you incurred from carrying on a trade outside South Africa, against income you earned while carrying on a trade in South Africa. 
 
If any of these situations apply to you, you can't benefit from your loss in any way. So, if they do suffer a financial loss, ensure you don't try to offset them against your tax or SARS will come after you with penalties that'll go up to 200%.
 


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