Re: Company for DC16 - some research
On 07/02/2015 10:19 PM, martin f krafft wrote:
> also sprach Allison Randal <allison@lohutok.net> [2015-07-02 23:58 +0200]:
>> - DC16(Pty)Ltd will register for VAT, and pay 14% VAT on all
>> sponsorships it receives from local companies.
>
> … and charge that VAT on to the compnay, obviously, and be explicit
> about that in the brochure.
>
> E.g. Bronze @ 28,000 will hence cost the sponsor 31,920, of which
> we'll owe 3,920 to SARS.
Yes, that's what we discussed.
>> - The vast majority of DC16(Pty)Ltd's income will come from SPI (a
>> US-based non-profit). These funds will be transfered into
>> DC16(Pty)Ltd's bank account, and DC16(Pty)Ltd will then pay the
>> university, caterers, bus rental companies, venue for conference
>> dinner, travel companies for the Day Trip, etc.
>
> An alternative is *not* to channel all this through DC16(Pty)Ltd,
> but for SPI to be the contractual partner with bus rental companies,
> conf dinner venue, etc.. This is what we're doing for DC15, but
> mainly since the German entity (a tax-exempt non-profit) cannot
> really gratuitously pay for booze of people without its tax status
> being scrutinised.
Aye, we also talked about that. It really boils down to a question of
whether funds from SPI are subject to VAT, so we need to ask before we
make a decision.
> Yes, this will mean that we'll have a few payments >R10k coming in
> to the country, but I believe this isn't actually going to break our
> necks.
Payments coming into the country aren't a problem. It's payments going
out of the country that get complicated over R10k.
> The plan Allison mentioned (DC16 invoices SPI) will IMHO almost
> certainly not work as the service provided by DC16 to SPI (for which
> it invoices) is (a) "delivered" in ZA, and (b) I'd be surprised if
> it weren't VA-taxable.
In the IRC conversation we were talking as if "of course" funds from SPI
wouldn't be subject to VAT, but yes, I had the same thought in writing
it up. It totally depends on local interpretation. The "service" is
really being provided to the conference participants locally, but how
that relates to a foreign entity with no local presence isn't clear.
We'll have to ask.
>> - At the close of each tax year while DC16(Pty)Ltd exists, it will
>> pay corporate income tax on any profits remaining. Profits are
>> income from SPI and local sponsors, minus any amounts paid to the
>> university, caterers, bus rental companies, venue for conference
>> dinner, travel companies for the Day Trip, etc. We expect profits
>> to be near zero. (Verify that this is a reasonable expectation,
>> and that all of those categories of expenses reduce our "taxable
>> turnover".)
>
> Yes, we can certainly engineer for this, given enough time.
>
> If DC16(Pty)Ltd will not have enough cash at the time of venue
> downpayment, then a transfer by SPI will be required, which we'll
> book as a liability and can pay off at the end of the year to anull
> all profits.
If we run it through DC16(Pty)Ltd, then it's just income completely
spent within the year. (South African tax year ends in February.)
Or, just have SPI pay the university directly.
>> - Final question: is there anything else they recommend we
>> consider related to incorporation, taxation, or business
>> operation?
>
> What will be our main expense, and what's the VAT situation for
> that? Is it all payable at a fixed rate of 14%? Or is university
> housing maybe even exempt?
Yes, it looks like university housing is exempt, but we need to ask.
> If so, maybe there's a way to opt for a simplified VAT scheme (like
> there is in Germany) where you charge VAT to your customers, but you
> don't claim it from your suppliers. Instead, you pay the suppliers
> and get to deduct a flat percentage against all taxable turnover.
>
> As we don't pay any VAT on the hostel for DC15, we opted for this
> flat model, as it effectively means we can claim 7% against all
> Euros spent on the hostel, even though they don't charge it to us.
> Profit! ;)
I haven't seen anything like that in South Africa. It may be a uniquely
German loophole.
Allison
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