I would like to request your assistance. I have a client who runs a business as a sole proprietor. The Annual Financial Statements for the business shows a loss for the year. In addition, the financial statements show an annual salary of R200k. On assessm
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
As a sole trader, the client (individual) would be ‘taxed’ on his or her taxable income. It is not possible to deduct a salary ‘the R200 000’ in the return of income. It is therefore taxable income (before salaries or drawings) from the trade that is added to the individual’s other income. We don’t know how the salary was declared to SARS, we accept not by way of an IRP5. In any event, it appears that the return of income was incorrectly – taxable income from the trade (business) should be the amount excluding the salary and no salary should have been disclosed in the return in respect of the sole proprietor’s business.
We suggest that you request a correction of the return or file a notice of objection to the additional assessment.