Company Start-Ups. Presented by Candice Mullins

Transcription

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2 Company Start-Ups Presented by Candice Mullins 2

3 TOPICS TO BE COVERED 1. New Company Set Up 2. Types of Companies 3. Close Corporations vs Companies 4. Registrations for tax 5. How to fund a Start-up 6. Residence of company 7. Small Business Corporations 8. Asset for share transactions 9. Venture capital companies 3

4 New Company Set up Register company name with the Registrar of Companies Register company founding documentation with CIPC Open a Bank Account Make sure you can prove business address of company 4

5 Types of Companies Private company (Pty) Ltd Public company (Ltd) State-owned company (SOC) External company Personal liability company (Inc) Non-profit company (NPC) 5

6 CC vs Pty ClOSE CORPORATION Close Corporations Act 69 of 1984 No Audit required Owners can only be natural persons or Trusts whose Trustees are natural persons COMPANY Companies Act 71 of 2008 Company to calculate PI Score to determine whether audit/independent review/compilation Owners can be natural persons, trusts or corporates No distinction between company and close corporation in the Income Tax Act or VAT Act. But both have distinct legal personality.

7 CC vs Pty ClOSE CORPORATION Registration number ends with 23 No new registrations of CCs granted. Association Agreement (not mandatory) COMPANY Registration number ends with 07 Pty companies can be registered with the DTI The Memorandum of Incorporation (mandatory) The number of members is restricted to 10 (limits ability to raise capital) No restriction to the number of shareholders

8 CC vs Pty ClOSE CORPORATION COMPANY Members have have absolute power i.r.o. all aspects (including operational) of the business S/holders can restrict director powers and even remove directors

9 Registrations required 1 Income Tax and Provisional Tax ALL corporates must register for income tax and provisional tax except for PBOs who do not have to be provisional taxpayers. It does seem to be practice of CIPC to register for income tax directly with SARS. 2 VAT Mandatory R1M turnover Voluntary R50,000 turnover or R120,000 for B & Bs, hotels or old age homes. Category A & B submit return every 2 months Category C submit return every month TURNOVER > R30M Category D submit return every 6 months. Farming activities with TURNOVER < R1,5M Category E submit return every 12 months. Companies and trusts letting property to connected person.

10 Registrations required 3 PAYE Every employer who pays remuneration, which is subject to employees' tax, has to register with SARS as an employer. 4 UIF Employer must register for UIF where any employee works more than 24 hours a month. Learners, public servants, foreigners working on contract or commission ONLY earners are also excluded. 5 SDL Total salaries will be more than R over the next 12 months Workmen s Comp Anyone who employs 1 or more workers. Purpose to compensate for disablement, death or disease caused during employment.

11 Other examples of registrations required FSB IRBA IATA Import and Export License Micro- Business SAICA Law Society 11 SAIT EAAB

12 Funding a Start Up - Considerations Shareholder loan or Equity Interest Dividend Must be repaid No obligation to pay Hybrid instruments (S8A) Subordination agreements Transfer pricing (S31) Dividend withholding tax Non-resident ENDORSE share certificate Withholding tax on interest to non-resident

13 Residence of Company Is the company incorporated in South Africa? or YES Is its place of effective management in South Africa? SA Resident MUST CONSIDER DTA which could exclude company from SA residency

14 Permanent Establishment Definition and Draft IN6 Permanent establishment (PE) Place where key management and commercial decisions that are necessary for the conduct of its business as a whole are in substance made. Head office Delegation of authority Board Modernisation and global travel Shareholders Legal factors Economic nexus Support functions 14

15 Small Business Corporations [S12E] Must meet definition of QUALIFIYING SMALL BUSINESS CORPORATION EXCLUDES 2016 Draft Taxation Law Amendment Bill Passive income > 20% of revenue receipts Personal service corporations with less than 3 FULL-TIME non-connected employees Personal liability company 15

16 Asset for Share Transaction Section 42 Company B ISSUE of at least 10% share capital OR Company A Transfer of asset Trust ANTI-AVOIDANCE PROVISION Section 42(5) If shares sold within 18 months, proceeds become income for shareholder if assets fair value disposed of were > 50% trading stock or allowance assets at the time of original disposal 16

17 Venture Capital Companies Section 12J Qualifying Investor Any taxpayer cannot hold more than 20% of equity (cannot be a connected person) Approved VCC SA resident Not a subsidiary Passive income < 20% revenue AFTER 36 months 80% expenditure > qualifying shares spend Spend on each Investee 20%. Must register as an FSB Qualifying Investee EACH INVESTEE aggregate asset book value on date of share issue, cannot exceed 500M mining 50M other Sunset clause ends 30 June

18 Venture Capital Companies VCC WITHDRAWAL If the approval is withdrawn the VCC must include in its income an amount equivalent to 125 percent of the expenditure incurred by investors to acquire VCC shares. 18

19 Topics NOT Covered Import and Export considerations Employment Incentive Scheme Headquarter companies PBO registrations (S10 and S18A registrations) Micro-Businesses 19

20 Acknowledgments Business 2016 Draft Taxation Laws Amendment Bill sars.gov.za VCC Companies Venture Capital Companies External Guide. Labour.gov.za h-africa-corporate-corporate-residence 20

21 Thank you for your attention! 21

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