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Is your business correctly registered as a 'resident' for tax purposes with SARS?

by , 21 May 2013
Multinational companies that operate across the globe are having their say about tax at the moment. First, executives from Google Inc and its auditor, Ernst & Young, were called before a British parliament committee to testify on taxes due to 'inconsistencies' based on its sales in the UK. Now, Apple's joining the fray, urging for a reform of the US tax system so that multinationals can stay competitive in the global economy. What's interesting is that Apple's also being labelled as a 'tax evader' for supposedly adopting elaborate schemes to avoid taxes on its international profits. Here's how to make sure SARS doesn't lump your business with the same 'tax evasion' label if your trade extends beyond South Africa...

Multinational companies across the globe are battling the 'tax evasion' label at the moment.
For example, Google's tax status in Britain could be affected as the result of an investigation, opening the possibility of much bigger tax bills for the company, says FSPBusiness.
But it's not just in the UK – Google's coming increasingly under fire for the amount of tax it pays in smaller countries where it rakes in the revenues too, says Memeburn.
And if you set your sights on the US instead, Apple's defence against 'tax evasion' claims is that it's been storing cash overseas as it's following an outdated US corporate tax code, which has the highest corporate tax rate 'in the developed world' at 35%, says The Financial Times
Does SARS see your business as a resident for tax purposes?
If your business is in a similar boat, as you conduct business globally, you need to make sure you're paying your taxes to SARS properly to avoid penalties and the 'tax evader' label.
The Practical Tax Loose Leaf explains that to be considered a 'resident' for tax purposes, your business needs to have been incorporated or established in South Africa if it's a company or CC, formed in South Africa if it's a trust, and have its effective place of management in South Africa.
Just remember that the 'effective place of management' isn't the same as control of the company.
Four factors relating to your business' place of management that'll determine if it's seen as a 'resident' for tax purposes…
It involves factors like where top management is located, where the headquarters of your company are based, the scale of onshore versus offshore operations and where the business operations are actually conducted.
If you're in any doubt, it's a good idea to ask SARS for clarity to make sure your business is properly registered for tax purposes so you avoid fines for tax evasion down the line!

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