Nwanda internal news (February)

1. Annual Tax and Legislation Update Seminar

We will be hosting our annual tax and legislation seminar on the 14th of May 2014 at St Andrews Schools for Girls.

Please email annelize@nwanda.co.za to book your seat.

2.  Nwanda Incorporated’s Facebook Page. Go and have a look!

To all readers, like our facebook page and if you are the 100th person you get R250!

Facebook-Like-Button

3. Congratulations to:

Melvin Gregory, CA (SA) for passing his BOARD II, and to Pravesh Manick, for obtaining his B-BBEE Management Development Programme Qualification.

4. Awesome Reward

This Month’s awesome reward goes to: Shivani Govender, excellent Junior Manager and Sharlotte Modibedi, for always being friendly and helpful in and around the office.

5. School Visits

Thank you to Edenvale High School for inviting us to their Career Expo on 29 January 2014.

6. Valentine’s Day

Thank you to the Sports and Social Club for arranging Cupcakes and Chocolates for Valentines Day.

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7. Resigned Employees:

Kimeshan Munsamy and Alisha Potgieter have resigned. We wish them the best in their future endeavours.

Financial statement and accompanying reports: An overview

03BThe commencement of the Companies Act No 71 0f 2008 created more awareness amongst company directors, shareholders, investors and other users of financial statements, of the different types of financial statements that exist. The following brief overview attempts to place these instruments in some perspective.

There are, amongst others, financial statements with an audit report, financial statements with a review report, financial statements with a compilation report, provisional financial statements, and management statements. The type of financial statement to be drawn up depends on several factors, namely the requirements of the Companies Act No 71 0f 2008 together with the memorandum in the case of acompany or close corporation, the trust deed in the case of a trust, the constitution in the case of a non-profit organisation, the investors in the entity, and other users of the financial statements. If, in terms of the provisions of the Companies Act No 71 of 2008, only a review report or a compilation report is required, the directors, shareholders, investors or any other user of the financial statements may require a voluntary audit.

What is the difference between an audit report, a review report and a compilation report?

An audit report provides the user of the financial statement with assurance that the financial statement is in all essential respects a reasonable account of the entity’s financial state. An audit comprises an in-depth investigation of the entity’s controls, and the execution of validation tests and analytic tests to obtain applicable and adequate proof that the financial statements are in all essential respects a reasonable account. An audit report can be modified in one of three ways: the auditor may qualify the report, he may hold back his opinion or he may express a negative opinion about the financial statements. A qualified audit report means that the financial statements are in all essential respects a reasonable account except for certain audit areas that are pointed out. If the auditor holds back his opinion it means that he does not express assurance about the financial statements and has not found applicable and adequate audit proof to support an unmodified audit opinion. If the auditor expresses a negative opinion about the financial statements it means that he wishes to warn the user of the statements that the statements are faulty.

An audit report may only be issued by a registered auditor.

A review report provides limited assurance to the users of the financial statements. A review mainly involves obtaining proof by means of enquiries made to management, and the execution of analytic procedures.

The number of procedures executed are fewer than in the case of an audit. A review report may only be issued by a registered auditor or a chartered accountant. A compilation report is issued for entities which are not subject to an audit or a review. A compilation report provides no assurance that financial statements are free of misrepresentation in all essential respects.

When is an entity obliged to be audited?

In the case of a company or a close corporation, the provisions of the Companies Act No 71 0f 2008 apply. A Public Interest Score is calculated based on the company or close corporation’s number of employees, its turnover, its third party debt, and the number of individuals who have a direct or indirect interest in the entity. If the Public Interest Score exceeds 350 the company/close corporation must be audited. If the score is less than 350 but more than 100, a review report is required, while only a compilation report is required if the score is less than 100. Regardless of the size of the Public Interest Score an audit must be done if required by the company’s deed, or if the directors are not the shareholders, or if the company holds assets of more than R5 million in a fiduciary capacity on behalf of third parties.

A trust deed may require that the trust be audited, and the constitution of a non-profit entity may likewise require that an audit be done.

In terms of an announcement by the Estate Agency Affairs Board (EAAB) on 21 June 2011, the trust accounts and business accounts of all estate agencies must be audited. The Attorneys Act 87 of 1989 determines that the trust accounts of attorneys must be audited.

What is the difference between a provisional financial statement and a management statement?

A provisional financial statement is one that has been drawn up but is not yet complete and is therefore subject to change. It is not accompanied by a report. A management statement is drawn up by an entity’s accountant or financial manager as required by the user of the statement (usually the management of the entity). It is usually done monthly. Management statements are simply an indication of the financial state and performance in the review period and do not provide any assurance.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Should I buy a shelf company?

02BThere are several misconceptions about the advantages of buying a shelf company rather than registering a new company. Since we regularly receive the same questions in this regard we provide here, for wider cognisance, some of these questions and the answers to them, together with some information about the time frames and procedures involved in registering a new company.

 

1. Is it cheaper to buy a shelf company than to register a new company?

The price paid when buying a shelf company may well be less than the fee required to register a new company. What many people do not bear in mind, though, is that additional costs have to be incurred to change the directors of the shelf company, to reserve and register a new name for the company, to change the registered address, etcetera. In the long run these costs work out to be more or less the same as the costs of registering a new company.

2. Can a shelf company start trading immediately?

Before a shelf company can start to do business the directors who will act on behalf of the company must be appointed. At present it takes about two to three months to register the change of directors with the CIPC. A name change takes about three months. In practice these changes are usually accepted if signed minutes of a meeting confirming appointment of the directors can be produced, and also if proof can be provided that the necessary documents have been submitted to the CIPC.

3. Can a bank account be opened immediately for a shelf company?

Only a properly registered director of a company may open a bank account in the name of the company. However, most banks are satisfied if signed minutes of a meeting to appoint the directors of the company, as well as proof of submission of the necessary documents to the CIPC, can be provided. There are, though, still banks which accept only the proper registration documents of the CIPC.

4. Can a shelf company register immediately for Value Added Tax (VAT)?

SARS requires a prospective VAT vendor to have a bank account in the name of the vendor before registration for VAT is approved.

At present the procedure and the time frame to register a new company are as follows:

1. Registration documents: Once all the required information has been collected and submitted together with the required documents to the CIPC, it takes about one day for a new company to be registered. The information to be provided includes, inter alia, the personal particulars of the directors (ID, postal and employment address, occupation), the authorised and issued share capital, year-end date and registered address of the company.

2. Reservation of name: In terms of the new Companies Act a company may be registered without a name. In

this case only a company number is allocated to the company and this number serves as the name of the company until it registers a name. Should, however, the prospective directors of the company choose to register a name at the time of registering the company, the first step is to submit the required name reservation documents to the CIPC. At present it takes about four days from the time that these documents are submitted until the name is approved.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

Tax administration Act 2011

01BThe following are extracts from the SHORT GUIDE TO THE TAX ADMINISTRATION ACT, 2011  regarding records that are to be kept in terms of the Act.

Record retention:

The duty to keep records.

This Act imposes a duty on a person to retain the records, books of account or documents needed to comply with a tax Act. It is important to note that certain taxpayers, for example employers and vendors, are required to keep additional specific records in terms of the relevant tax Acts.

In what form must records be kept?

Regarding the manner of keeping records, a new requirement is added. This is to ensure the orderly and safe retention of the records and efficient access thereto by SARS, for purposes of an inspection or audit, during the prescribed retention period. To ensure that records are kept in the correct form, provision is made that SARS may inspect the records for this purpose, in addition to an examination, audit or investigation under the Act.

A person obliged to keep records must:

  1. Keep the records in:
    • Their original form;
    • The form generally prescribed by the Commissioner by public notice; or
    • The form authorised by a senior SARS official upon request by a specific taxpayer for the retention of information contained inrecords or documents by that taxpayer in a different but acceptable form;
  2. In an orderly fashion;
  3. In a safe place; and
  4. Open for inspection, audit or investigation by SARS.

SARS can do an unannounced inspection to ensure that the records that have to be retained are actually retained and a taxpayer has the duty to keep the necessary records open for inspection by SARS in South Africa.

For what period must records be retained for?

The periods for which persons are required to keep records are set out in Table 3.

Table 3: Record retention periods.

Person Period
A person who has submitted a return From the date of the submission of the return until the last day of a period of five years
A person who is required to submit a return for the tax period and has not submitted a return Indefinite, until a return is submitted, as from when the period of five years applies
A person who is not required to submit a return but has, during the tax period, received income, has a capital gain or loss or engaged in any other activity that is subject to tax or would be subject to tax but for the application of a threshold or exemption Until the audit is concluded or the applicable five year period, whichever is the latest
A person who has been notified or is aware that the records are subject to an audit or investigation. If required to submit return: Date of submitting returnIf not required to submit return but received income: End of the tax periodIf failed to submit return: End of the tax period
A person who has lodged an objection or appeal against an assessment or decision under this Act. Until the disputed assessment or decision becomes final or the applicable five year period, whichever is the latest

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.