Why should I want to?
The purpose of a company is to make a profit. Every business owner wants to make a profit.
However, when you make a profit, you need to pay taxes. The overwhelming consensus from business owners and individuals is that they don’t want to pay tax.
By extension of that thought pattern, you don’t want to make a profit. That is a strange theory indeed because you want to make a profit. It’s circular logic that will never make sense to anyone but you.
In South Africa, as a qualifying small business, you can make a profit and not pay tax. In the 2023 financial year, the lower threshold is R 91 250*.
The question is still, why don’t you want to pay tax?
In order to pay R10 000 tax as a qualifying small business, you have to make about R240 000 in profits.
Is that too much profit?
What is too much profit? Why is it too much?
VAT registration
All business owners are very wary of VAT (Valued Added Tax) because of its process.
Many questions go unanswered and generally it is misunderstood. It is seen as an unnecessary payment. Yes, it is a payment. The unnecessary is not true in all respects.
Another angle
There is another angle to VAT that not many people see. As a gold standard, no one wants to register for VAT.
As a South African company, you cross the involuntary registration for VAT at one million rands in 12 months of trading.
As a small business, that is a great target to aim for! To aim at that VAT registration means that you are aiming at one million rands in turnover in one year!
That’s good going for a small business, especially one that is just starting up!
Again, this begs the question of why . . .
Why don’t you want to be registered for VAT? Is one million too much turnover?
What is too much turnover? Why is it too much?
I know there are other reasons not to register for VAT. The main one is the cost of the registration itself and the extra work involved in submitting returns every two months.
Why is this “extra” work? At the bare minimum, you ensure that your accounts are accurate and up to date every two months. That can never be a bad thing!
Every new(ish) business should have the twin goals of being VAT registered and paying tax.
*this was correct at the time of writing and changes every year with the budget speech presented by the Minister of Finance.