Visit our COVID-19 site for latest information regarding how we can support you. For up to date information about the pandemic visit www.sacoronavirus.co.za.

Community

Share knowledge. Find answers. Ask questions.

Online Share Trading

Engage and learn about markets and trading online

Tax Issues

Reply
Highlighted
Contributor
Hi experts. Would I pay less tax by starting a company and trading under the company name instead of trading as a private individual? What sort of difference in tax rate can I expect?
0 Kudos
Reply
14 REPLIES 14
Highlighted
Frequent Contributor
I recommend checking with a professional, but
its very similar, you either pay 40% in your own name
or 28% in a company and then another 15% if you pull it out,
or 28% and 40% in your own name. (depending on how you get the money out)

0 Kudos
Reply
Highlighted
Super Contributor
That 28% is only available if recognosed as SE. Criteria determines that inter alia you have to have 3 employees.
0 Kudos
Reply
Highlighted
Frequent Contributor
Sorry Im not following you.
Are you saying this will be 40% if you do trading?
What provisions look at 3 or more employees?

Im just wondering if your thinking of a personal service company or a trust.
0 Kudos
Reply
Highlighted
Contributor
Thanks Bchip. So there's really not much benefit to going with the company then?
0 Kudos
Reply
Highlighted
Super Contributor
Worse - you lose your capital gains exemptions.
0 Kudos
Reply
Highlighted
Contributor
0 Kudos
Reply
Highlighted
Frequent Contributor
...you dont have capital gains exemption if your trading.
0 Kudos
Reply
Highlighted
Super Contributor
Yeah, yeah. Looking at the whole story. We all know all about the bottom drawer.
0 Kudos
Reply
Highlighted
Super Contributor
I have been investing as a registered cc for 20 years now.I also invested in my personal capacity at the same time-I found advantages eg I set up a provident fund-i also set up health care-paid a salary to myself and claimed alloweable expenses.there are pros and cons but I certainly have not regretted setting up the cc-I also set up a family trust over 20 years ago with my father and despite negative comments about trusts it has worked well for my family.suggest you consult a professional accountant and understand the pros and cons and then make a call-good luck
0 Kudos
Reply
Highlighted
Super Contributor
I actually think a Pty is probably a better option than a trust - if carefully conceived and structured - if for no other reason than the certainty about its legal status.
0 Kudos
Reply
Highlighted
Super Contributor
pty for sure more flexible than trust but u need enough revenue to justify accountant costs -u can have a trust as well-its a way of making donations yearly to put aside money for family and avoid inheritance tax if you can look that far ahead-when i started i was unsure how big my portolio would grow so I chose a cc as it is 'cheaper' to set up and run
0 Kudos
Reply
Highlighted
Super Contributor
CC's are now a thing of the past. Small companies no longer require an auditor - so the same cost as a CC. The only complexity is capturing the dividend stream. Salary structures based on internal return are the most obvious solution.
0 Kudos
Reply
Highlighted
Super Contributor
I understand you can still buy a second hand cc but if small pty not audited then pty seems better.not sure I understand your comment about capturing divs .obviously div tax does not apply but if u make profit then normal company tax is applied -salary is upto how much company can afford I guess.my view would be if you generate enough income and you expect to be doing this for a long time a pty is certainly worth considering.
0 Kudos
Reply
Highlighted
Super Contributor
The advice given on the take out rates and hurdles was the best. Juat start there and se a competent firm of accountants or tax specializing lawyer - especially if you want to go the trust - route. the idiots who given advice on trusts out there are like the bubonic plague- to be avoided. Just remember once you introduce a third party - trust or company - you introduce two things - which are never going to go away. 1. Costs and this is not only a yearly cost- but at least remember that those costs will rise faster than inflation. 2. Secondly, you introduce a target for SARS. And planning on the basis of what you see as existing rules is not necessarily going to be enough. This I say on while having cast an eye over the run- up to where we are - and casting forward a glance into what one could term scenario tax planning in the light of a government which needs money - and a closed world tax system. SO while the Newcastle man is right - don't forget the problems of tax. And remember - we don't make those laws.
0 Kudos
Reply