The tabling of Finance Minister Enoch Godongwana’s fourth Budget in February was marked by an unprecedented three-week postponement, following a deadlock around the original Budget proposal to increase VAT by 2%.  A revised Budget, finally tabled on 12 March, proposed a 0.5% increase from 1 May 2025, with a second 0.5% VAT increase from 1 April 2026 – but the proposal was still not enough to satisfy most other political parties.  In his Budget Speech, the finance minister called the Budget proposals “a bold and pragmatic approach” to ensure the economy grows “much faster and in an inclusive manner”. He admitted that the economy has stagnated for over a decade, with GDP growth averaging less than 2%, while forecasts for medium-term GDP growth are a dismal 1.8%.

While the powers that be attempt to reach consensus on the Budget 2025 proposals, businesses and individuals in South Africa will find little support from the fiscus to survive these low-growth economic conditions.  This is evident from our overview below of the most pertinent Budget 2025 proposals. In a nutshell, the finance minister is trying to cover another substantial Budget shortfall by directly and indirectly increasing the tax burden on corporate and individual taxpayers.

Change can be uncomfortable and often we humans love to avoid it. In business, however, being brave enough to embrace change could be the difference between going under and thriving. All business owners should be constantly on the lookout for opportunities to improve their products, services or offerings. A good pivot into a new area, technology or even target customer base could be just the ticket your business needs to position itself for a very bright future. But how do you know when it’s time to change tack? 

Why Top Up Your RA?

• Contributions are tax-deductible, reducing your taxable income up to certain limits.
• Growth within the RA is entirely tax-free, free from capital gains tax, dividends tax, and tax on interest.
• These benefits enhance the compounding effect, helping you build a stronger retirement fund.

Why Top Up Your TFSA?

• Contribute up to R36,000 per year, with a lifetime limit of R500,000.
• All growth in a TFSA is completely tax-free, providing a smart way to grow your wealth.

To ensure your contributions are allocated before the tax year ends, please reach out to us before 21 February 2025.

What is provisional tax?
Provisional tax allows corporate and individual provisional taxpayers to pay their annual income tax in advance by making two or three payments during a tax year. The aim is to prevent taxpayers from facing large income tax liabilities that are only revealed at the end of the year of assessment, when the annual personal income tax (PIT) return ITR12 or the annual corporate income tax (CIT) return ITR14 is filed in January. While provisional tax payments can assist taxpayers by spreading their income tax liability over the tax year, they also create additional administrative obligations such as completing and submitting a provisional tax return (IRP 6) on time, twice or thrice a year. What’s more, they increase the risk of penalties, most notably under-estimation penalties.

Luckily you have us in your corner.

Are you a provisional taxpayer?
Companies are automatically provisional taxpayers. Individuals who receive income other than a salary may also be provisional taxpayers, depending on various criteria. Because SARS places the onus on you to determine if you are liable for provisional tax, it’s best to check your provisional tax status with us.

The 3 provisional tax payments
The first compulsory provisional tax payment is due within six months of the start of the year of assessment. So, if your or the company’s 2025 tax year commenced on 1 March 2024, the first provisional tax payment was due on 31 August last year. This forward-looking payment is based on half of the total estimated tax for the full year, less employees’ tax already paid and any applicable tax credits and rebates. The upcoming second compulsory provisional tax payment deadline is the last working day of the year of assessment (on 28 February if your tax year started on 1 March). It works somewhat differently, and the rules are far stricter – with harsh penalties for under-estimating taxable income for the year. A third optional payment can be made after the end of the tax year, but before the issuing of the annual income tax assessment by SARS each year.

Crunch time!
The provisional return for the second period to 28 February is retrospective and based on the total estimated tax for the full tax year (less the first period provisional tax and employees’ tax already paid, and any applicable tax credits and rebates). The second estimate must be quite accurate as heavy under-estimation penalties apply.

• Where the taxable income is less than R1 million; and the second period estimate is less than 90% of the actual taxable income and less than the ‘basic amount’ (taxable income assessed for latest preceding year of assessment), a 20% penalty is imposed on the difference between the employees’ and provisional tax already paid and the lesser of normal tax on 90% of the actual taxable income or normal tax on the basic amount, after deductible rebates.
• Where the taxable income is more than R1 million; and the second period estimate is less than 80% of the actual taxable income, a 20% penalty is imposed on the difference between the employees’ and provisional tax already paid and the normal tax on 80% of actual taxable income after deductible rebates.

Bear in mind that SARS can ask for your estimate to be justified, so you will need accurate records of all the source documents and calculations used to determine your estimate. Even so, SARS can increase the estimate if they are dissatisfied with your amount, and this is not subject to an objection or appeal. To avoid this, SARS provides the following advice: “the amount of the estimate must be determined sensibly and by careful reasoning and judgment, in a mathematical manner, and using experience, common sense and all available information”.

We can ensure this holds true for your provisional tax, be it corporate or individual.

Further penalties to watch out for…

• Even if you or your company owes no tax, a ‘nil’ return showing taxable income as equal to zero must still be filed timeously. Failing to do so will attract administrative penalties.
• If an IRP6 is filed more than four months after the deadline, SARS will consider a ‘nil’ return to have been submitted. Unless the actual taxable income really was zero, an under-estimation penalty will also apply to a late submission.
• Not making your provisional tax payments on time will also result in an immediate late payment penalty, calculated at 10% of the provisional tax amount, regardless of whether it’s not paid at all or simply paid late.

Interest will also be levied on the underpayment of provisional tax because of under estimation, and on late payments.    

1. Going it alone
   Self-funding, also known as bootstrapping, is when a business owner goes it alone, providing all funding, time and energy themselves.

   Pros of bootstrapping     
   Whether you’re finding the money from savings, or your monthly pay cheque at another job, bootstrapping is perfect for the entrepreneur who wants full control over their business. With no partners on board, all decisions are yours to make, and all the profits, achievements, and losses are yours alone. Apart from the independence it offers, bootstrapping can also be easier. There’s no time spent filling in application forms or putting together pitch decks to impress would-be investors. There is also no accrued interest on the debt involved and no loss of equity in your own business. This makes running the business far simpler.    

   Cons of bootstrapping    
   On the downside, bootstrapping can be much slower. Each cent spent on the business needs to come from your own pocket and so necessary investments need to be prioritised from month-to-month. Things that are essential for success may need to wait another month – and this can mean your break-even point takes longer to arrive.  Bootstrapping also increases your chances of failure, as some expenses simply can’t wait if you want to make money. Bootstrappers are also more likely to become frustrated with the slow pace and give up.      

2. Tapping into venture capital
   Venture capital (VC) is one of the most popular routes for finding funding in entrepreneurship. This is where a company or an individual provides funding to your business in exchange for a percentage of ownership.  
   
   Pros of VC
   Venture capitalists are able to offer significant investment in the company and can often provide all the funding necessary to take the company from start-up to established business. What’s more, venture capitalists likely come with significant experience in business and a strong network of contacts.           
   
   Cons of VC
   Working with venture capitalists requires that you give up some control of your business. This new partnership can create friction if the person who pays the bills doesn’t share your ideas of where the company should be headed. In some instances, their investment may even give them a majority stake and the dream you had of being your own boss might now be a thing of the past.        
   
   
3. Touched by an angel (investor)
   Angel investors are also happy to provide the financing necessary for your business to thrive. Unlike VC, however, they are typically looking to take a more background role and are hoping to cash in when your company has become established.
   
   Pros of angel investors   
   Angel investors generally offer more flexibility than VC. They aren’t looking to get involved – they’re looking for business owners and ideas that stand a good chance of succeeding without their intervention. This means they’ll often provide funding to businesses others may not touch.
   
   Cons of angel investors  
   Angel investors are looking for part ownership of the business and you should therefore expect to lose some of the equity in your company. Because they’re investing without getting involved, angel investors know they may lose their money. This means they are generally unwilling to invest as much time or money as a venture capitalist might, so you should expect to still do some of the bootstrapping yourself. Remember that angel investors are interested in one day getting a big payoff. They are looking for that moment when the company can be sold or listed on a stock exchange. This means they may pressurise you to make decisions that aren’t necessarily in the company’s best interests.
   
   
4. Borrowing from the bank
   An old-fashioned bank loan is another way of bringing money into a business.
   
   Pros of bank loans
   Taking out a bank loan gives you the money you need to grow the business. You also do not lose any equity in your company. 
   
   Cons of banks loans
   The interest on a loan can be problematic and over time may add up to a significant amount – often the cost of debt is much higher than the cost of giving away equity to investors. If the company fails, you may still be required to pay off the loan in your personal capacity. There may also be some trouble securing the loan in the first place: banks want to know that they are lending to people who can pay them back!