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The 4 tax benefits to trading as a Partnership

by , 10 April 2016
A partnership is where 2 people combine their finances, along with their assets and skills, in order to carry on a business.

The advantages of such a business setup are obvious, in that:

· Just like a Sole Proprietor, there are no formalities involved in creating a partnership, even though it's still advisable to create a partnership agreement;

· There's no need to submit Annual Returns to the Companies and Intellectual Properties Commission (CIPC), which saves you money; and

· You don't have to use a registered accountant to do your books, or to get a full audit done, if you're a partnership;

But that's not all, because there's also several tax benefits of a partnership.

Here are 4 tax benefits to trading as a partnership...


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Tax benefit#1:

You don't have to register your partnership separately for income tax.

All that's required is for each partner to disclose the partnership's income and expenses on their private income tax return, and show what percentage of it is from them.

Tax benefit#2

Each partnership is entitled to the personal tax threshold, which means that the first R75 000 of your taxable income will be entitled to the capital gains exemption in their personal capacity.

Tax benefit#3:

The personal SARS tax tables will be applied to each person's portion of the taxable income from the partnership (Please see the SARS tax table below). And as long as their portion of the taxable income from the partnership doesn't go over R701 301, their personal effective tax rate will be below the 28% which is applicable to CCs and companies.
SARS tax table: 2017 tax year (1st of March 2016 – 28th of February 2017)
Taxable Income (R) Rates of tax (R)
0 – 188 000 18% of taxable income
188 001 – 293 600 33 840 + 26% of taxable income above 188 000
293 601 – 406 400 61 296 + 31% of taxable income above 293 600
406 401 – 550 100 96 264 + 36% of taxable income above 406 400
550 101 – 701 300 147 996 + 39% of taxable income above 550 100
701 301 and above 206 964 + 41% of taxable income above 701 300

*To learn more on tax benefit#3, as well as what the 4th benefit is, simply page over to Chapter R 08 in your Practical Tax Loose Leaf Service handbook.

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