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How do business tax brackets differ from individual ones?

by , 09 May 2014
It's important that you comply with all your tax obligations. If you don't, you'll face harsh penalties or worse, criminal prosecution. Don't take that risk. Make sure you understand the meaning of a 'tax bracket' when it comes to your company so you can fully comply with all your tax obligations and avoid penalties.

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Here's what you need to know about a tax bracket

According to Investopedia.com, a tax bracket is the rate at which SARS taxes you.

The site explains that tax brackets are set according to income levels. This means individuals with lower income levels are taxed at a lower rate than individuals with higher income levels.

Note: While most people use the words 'tax bracket', SARS refers to tax rates as 'statutory tax rates'.

In South Africa, statutory tax rates are proposed by the Minister of Finance in his annual Budget Statement and fixed or enacted by Parliament.

If you want to find out about the statutory tax rates for individuals for the 2014-15 tax year, check SARS' website.

But things are a little different when it comes to companies and the tax bracket.

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Here's what you need to know about companies and the tax bracket

According to trading conomics.com, the corporate tax rate (Corporate Income Tax) in South Africa stands at 28%.

Corporate Income Tax (CIT) is tax that SARS imposes on your company.

Trading conomics.com says its amount is based on the net income your company gets while exercising its business activity, normally during one business year.

Why are tax brackets or statutory tax rates important when it comes to your tax obligations?

It's simple. Tax brackets or statutory tax rates come into play when you submit your tax returns. You have to know the tax rates so you can fill out your returns (whether individual or company) correctly and comply with your tax obligations.

Individual tax payers must complete the ITR12 form. And companies must submit the ITR14 to account for tax.

There you have it. Knowing what a tax bracket is will bring you a step closer to complying with all your tax obligations. If you want to find out more about this topic, check out the Practical Tax Loose Leaf Service.



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