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would you like to save a minimum of 95,000 rental income tax coming case below if that is the case in this video I'm gonna show you exactly how to do it step-by-step my name is Andrew Whovian I'm a professional accountant and today I'm gonna show you exactly how to get this right in a few easiest tips remember to like this video if you've got anybody out of this and if comment below if you want to get in touch with me Oh visit our website is he counting into it does your today well without further ado let me jump to my computer and then I'll show you exactly how this is done so in this part I'm gonna show you exactly how to save ninety five thousand rated company income tax in South Africa you know income tax act there is a small section in there which is called where they talk about small business corporation so the specific section in the act itself a section 12a of the Income Tax Act so there's two main things with that they talk about in the income tax act the first one the first thing is that they talk about the decatur with tex rates and the other one that they're talking about this that are giving foster depreciation rates so the benefit of those two together just a one alone as I was changing that in this fastest now that it is the income tax rate the lower that rate you save ninety five thousand venting income tax just by doing that one thing alone but let me show you so just jumping back to the start you'll see OPM and somewhat normal income tax rates are like in South Africa so for normal companies you know they're you get taxed at a flat rate of 28 the same but if you can qualify as a small business corporation then you can see the first ninety seven seventy nine thousand rate depends Europe is in text then makes them out from seventy nine thousand two hundred and sixty five thousand range and if a 7% tax the romans 365 up to five hundred fifty thousand you pay twenty one percent X and then the phone father to 50,000 up then when you start paying the twenty eight percent so if you do the calculations which I'm gonna show you this now with the example as well that you'll see that the aq save ninety five thousand one hundred thirty third rain in income tax so if you look at just that calculation although there's a lot of money betting and safe but obviously with these type of things there is a couple of requirements and that's what we're gonna work through could be and there's a quick level look a vm so there's a quick explanation of how it works you'll see that the depreciation so the second one where they talk about the foster depreciation under normal circumstances with the income tax research gives us these guards is like a long document that explains to us exactly what period of time yield after out of assets a new financial statements for tax purposes and in offenders you bought something for hundred thousand brain and starts today this is that you can use the desert for a period of five years then what we'll do for every year then you can write up as an experienced twenty thousand a and as they explain to see so this is what we're referring to here so just an example that I gave you cast for extract from that little piece of document as we were talking about sewing and machine so you can see that if you talk about sewing machines and such is that for sewing machines you can write that off over six years so that is the time period that sauce gives us if you own a sewing machine that is then out that ef-tu says it's not something that they have to choose as a compulsory thing that search tells you what to do so now if you look under small business corporation right so that same example we were talking about small for sewing machines once again you can see they give it two options so the one is taken in the right of under percent in the same year that they actually both a decision to use or otherwise laser there is a accelerated appreciation where they say that you can water fifty percent in the first year thirty percent in the second year and twenty percent in the last year so what makes the difference is with it using that asset for manufacturing is now using it for manufacturing you can use the hundred percent assess in depreciation right if you're not using it for manufacturing then you have to used then you can use the other one the 50 percent thirty percent and twenty percent so as you can see on this father p.m. there's a under section 42 cents of an acrylic accelerated depreciation rights potentially applied to an Assessor for small business cooperation subject to certain conditions as it used are written in the process of an effect dream on the process of symbol in nature my koala father under percent right off in the year of assessment in recent essay was Putin to use assets that do not fall in this category might qualify for right off of a period over three years and write a fifty percent to keep us in the 20s percent in the respective year so you can see just that alone is another big benefit if you can qualify as a small business corporation so you can see so years model example let me just get mom and self out of the wagons you can see exactly how this works so no both circumstances under normal income tax if you have a tournament my sample of two million rent and you've got expenses of 1 million rate of which you can see that the depreciation on the manufacturing equipment remember we were talking about the same machine if you take 1 million when Tom sixteen point six seven or divide about six years then you can write a parrot or sixty six thousand six hundred and sixty-seven arrangers depreciation and if your other expenses that if colony is eight hundred and thirty three thousand range means that all the expenses to give this one 1 billion rent which will give you a taxable income of a million grants and now if you had to wake up the text at 28% on that the 1 million rent then you can see your text works out to 280,000 read because it's obviously 28% of 1 million so now in the case of a small business corporation you can see that were the same exactly the same calculation if you have a tune of of 2 million read then you've got expenses you can save the day with our see depreciation of manufacturing equipment say if you using the sewing machines and the proven demand in the manufacturing industry then you allowed to use that I don't possess a depreciation rate that well was talking about this now so in the first year that would bring that machine into implement into into operation you can write after full million rent immediately a snake speaks so that is what happened on the spider be you then I can see other normally expenses as I tell 830 3,000 way so it can see your taxable income came down from 1 million read all the way down 200 new 66,000 reinsert the text on that but then work out to 46,000 Rediffusion that business cooperation rates so you can see on a business of two million rent they actually have at exiling potentially of up to two hundred thirty three thousand rent and I mean that and it for small business so I mean that in itself is a lot of money that again side on income tax so this quickly run through the requirements of the stuff that you need to be careful for so if you look at them in the requirement sources that is four requirements the first one is a legal entity requirement the second one is a gross income requirement the third one is the shielding requirement and the last one as a business activity requirement so I said oh yeah that you must cheat please stick with such with the expectation because if you miss this thing and you trying to claim the is company tax rates as a small business corporation and such catches you up then it gonna be in big trouble because they're gonna give you a salesman at the correct rate and possibly even a penalty and those penalties can sometimes be be up to two hundred percent I've actually seen in the past that companies have to press done because they use the talking that the wrong text right so just be careful and that's why I wanna show you now just so you can be aware of these things that you gotta be careful of so the first requirement where they talk about a legal entity requirement you can see one of the requirements to qualify as a small business corporation is a taxpayer must be juristic person in form of close cooperation a cooperative or private company as defined in section one of the companies or personal limited love there's no liability company so those are the ones that they all have to qualify as a small business corporation so you probably an osteon with what is not included in they the first one as obviously sole proprietors if you're trading in a personal capacity you cannot qualify as a small business corporation and the other big one that we need to be aware of is trust so if you're operating us and trust me I mean you can't qualify as a small business corporation so that is do or immediately of the gods so if you are trading as a software party this might be a good incentive for you to do a test as a company and jump on board onto this tech system then the second requirement you can see there's a gross income requirements again like an you have to be careful because these it strains every yes obviously those things these are relevant to the current financial year which is the 2019 2020 financial year if you're watching this video next year then just make double sure to the receiver of Revenue's website download the small business corporation tax card app today and just make sure that it digital for inside that record so you can see every year that I say that so this is actually extract from that card what I'm gonna show you the link just now I'm gonna give it actually so the gross income of a qualifying that he might not exceed 20 million grant for the particularly of assessment key factors for consideration what constitute gross income what is a year of assessment in which the limitation of 20 million rent must be reduced and then they talk about considerations like us all given the tax code as well in the link below you will find it and on my website you'll find it as well so this domain taboos sure about the twenty million went to never limitation the third requirement they talk about a shield a requirement in dickensian octillion read every day so the qualifying entity must during the relevancy of assessment be a natural persons no part of she capital or members or interest of a small business corporation can be out by two eristic person as such as another company so that's really important so initial oldest in the company that you want to try and qualify it has to be natural people's if you have one company that has another company then that that company cannot qualify as a small business corporation so be careful yeah the next one that I said the shareholders in shades of members of the calling entity my not in any time during a particularly of assessment all images we have any interest in equity of another company as the final section one so you must be carefully as well they said that if I am owner of one company and I failed a shareholding in another company's what is a couple of small exceptions the market could not get to fill the thyristor that I'm gonna give you but if you're into companies and sorry then you can't qualify for this and so there's one thing that you have to be very very careful for via the third or the fourth requirement is the business activity requirement so yeah what this whole thing is about they say that he can seriously hit I saved more than 20% of the income sister Findus meant income or if there's a rendering of a personal service so there is two things investment income personal services then you cannot qualify as a small business corporation so this text was actually originally brought out for people that's actually trading so people who's buying and selling stuff for people that's in the manufacturing industry so that's not the type of people that they actually trying to talk about this famous fashion to help them with better tax rates of people that come if you're rendering in on top of the service accountants had graphic designers had assault inside out they say anything that he had a qualification for to be able to consult us in somebody else then you add the picture then it cannot qualify for this you can see I just cut that a couple of small pieces out of the legislation and just put it onto the start you can see in general a person's personal service refers to a service rendered of which the income derived is my tearful reward for the personal efforts of skills of individual now there's one small extinction but this thing they're saying that if you have three full-time employees for the full financial year with a couple of limitations again both India that it's not allowed to be connected persons and stuff like that then it might still be able to qualify as a small business corporation and they can say that they the last point of the day section twelve year 484 excuse any company which is a personal services provided then again once again in that guard you'll see that there's a full explanation of what a personal services through bodies whose policy if you're not sure about that get in touch with the text consultant or even further sure you just make sure that you're not missing that every day as well so those are the requirements that they have to be careful and as I mentioned every as well you must be careful and to make sure that it goes through this full card and the SAS we observed and you can see that they are given you the link of agree that you can go look at this well I would otherwise he can done that a copy of the Titan obvious art as well and this like I said once again please make sure was a Soviet accent consultant or accountant before making the final decision if you qualify as a small business corporation if you're not sure where they qualify then you comment below we can get in touch with each other fill in the contact as website and we will also pay a DSS to see whether we can get this done one more thing that I want to share with him their guard that we were talking about you can see if I can get out of that so if we go to now babes are TSA counting into a website and in this move myself down the AEGON you'll see that on the main page there is a button on the left is a lift inside this is company Texas if you click on that patent ability you'll see it gives you all the stuff about income tax and every year I've written a small thing a bit about Small Business Corporations and you'll see all the way down there there is the card that I was talking about so you will see if you click on the link that would actually open up the card and you need to make sure that like this one dedicated from the search website at the time of publishing publishing this video that's gotta be tight at 25 to 20 to 18 then you can say VA gives you the whole thing you can say that a is those requirements that we were talking about the qualifying requirements legal entity holding of shares the gross income requirement and the business activity requirements so please do come make sure that you review this card because there's a lot of not equity involved to this so if you did receive any belly out of this video then please my momma my youtube channel and I'm comment below and we'll see if we can get in touch to help you to get this thing sorted out to see if we can get the maximum benefit out of income tax for you thanks