My client's business is renting out chalets. Her tax practitioner opened a pty ltd in june 2017 and made the company's financial year ending 31 January. From a tax planning point i would change the financial year end to 28 February and apply for turnover
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Under paragraph 3 of the Sixth Schedule to the Income Tax Act, a “person does not qualify as a micro business for a year of assessment where—
(f) in the case of a company—
(i) its year of assessment ends on a date other than the last day of February;”
The next problem is that, under paragraph 8(1), a “person that meets the requirements set out in Part II may elect to be registered as a micro business—
(a) before the beginning of a year of assessment or such later date during that year of assessment as the Commissioner may prescribe by notice in the Gazette; or
(b) in the case of a person that commenced business activities during a year of assessment, within two months from the date of commencement of business activities.”
The legislation therefore does not allow SARS to do what you suggested.
We need to remind you that in the Sixth Schedule, unless the context indicates otherwise, “investment income” means—
(i) “any income in the form of annuities, dividends, interest, rental derived in respect of immovable property, royalties, or income of a similar nature;”.
Under paragraph 3, referred to above, the company does not qualify as a micro business for a year of assessment where …
(b) more than 20 per cent of that person’s total receipts during that year of assessment consists of—
(ii) where that person is a company, investment income and income from the rendering of a professional service;”