As the owner or manager of a small and medium business (SMB), there are a lot of legal and regulatory requirements you need to comply with. Compliance paperwork often feels complex, particularly in today’s rapidly evolving regulatory environment. But getting it right is essential for the viability of your business.
Not only will compliance enable you to avoid issues with tax authorities and regulators, but it will also help you to run a professional and disciplined business. The exact demands you face will vary according to the size and structure of your business. Let’s break down and demystify the major compliance hurdles you will face:
- Company registration
Registering your business as a limited company brings with it several benefits in terms of separating your business and personal finances as well as reducing your personal legal liability for your business’s affairs.
It’s a relatively quick and easy process to register your company online with the Companies and Intellectual Property Commission (CIPC). Once you have done this, you will need to file annual returns with the CIPC and keep the commission up to date with changes to company details such as ownership, directors, and the registered address.
2. Tax laws and regulations
Every business in South Africa needs to register with SARS to pay tax. If you have registered a company with the CIPC, SARS will generate an Income Tax reference number for you. You will need to make provisional tax payments and file an annual return to meet your corporate income tax obligations. Your annual financial statements should include an income statement, balance sheet, tax computation, and relevant notes. You’ll need to keep accurate and up-to-date financial records to comply with this demand. If you’re a sole proprietor or in a partnership, you will need to register with SARS as a provisional taxpayer, as the owner and the business are the same legal entity, and thus the income and expenses will be declared in the owner’s personal income tax return.
If your company generates taxable supplies of more than R1 million a year, you will need to register for VAT and for businesses with taxable supplies lower than R1 million, but that have, under certain circumstances, exceeded R50 000 in the past period of 12 months, may register voluntarily. You will need to submit VAT returns and pay VAT to SARS at a period determined by the SARS commissioner upon registration. Keep VAT receipts for any purchases that your company makes to benefit from VAT refunds.
If you are an employer, you will need to register for Pay-as-you-Earn (PAYE) with SARS. From then onwards, you will need to file monthly EMP201 returns as well as bi-annual reconciliations with SARS. You must also pay PAYE each month. Drawing your own salary as a sole proprietor or in a partnership is not subject to PAYE.
When you enrol as a PAYE taxpayer, your company will register for other payroll taxes and levies, such as the Skills Development Levy (if the payroll exceeds R500,000 a year) and the Unemployment Insurance Fund (UIF). You need to issue tax certificates to employees at the end of February each year or when they leave your employment.
It’s essential to register with SARS e-Filing to transact electronically and manage submissions to SARS. If you have appointed a tax practitioner or accountant, they will do the filing on your behalf. However, it is up to the owners and directors of the business to ensure that all info provided to SARS is correct.
3. Labour laws
Every employer needs to familiarise themselves with the Basic Conditions of Employment Act (BCEA), which governs relationships between companies and employees. It sets out rules for things such as working hours, overtime, leave, and dismissal of employees. You also need to be aware of minimum wage requirements, as set out in the National Minimum Wage or your sector’s Bargaining Council agreements.
4. Compliance with health and safety regulations and municipal bylaws
South African businesses must adhere to the Occupational Health and Safety Act, which includes guidelines on workplace safety aspects like first aid, protective clothing, and hazardous environments, as well as municipal bylaws governing zoning, noise levels, hygiene, and planning permissions.
5. Protection of consumer rights
With laws such as the General Data Protection Regulation (GDPR), the Consumer Protection Act and the Protection of Personal Information Act (POPIA), consumers have strong rights protection in South Africa. You should investigate what these laws have to say about how you should advertise your goods, structure your contracts with customers, handle customer data, deal with merchandise returns under warranty, and so on.
Automation and digital recordkeeping
Accurate financial records are crucial for compliance, business performance, and profitability. SMEs should move beyond manual methods like Excel spreadsheets and invest in modern, online accounting systems. These cloud-based solutions automate transaction capture, invoice sending, payment tracking, and expense monitoring, providing accurate data for tax returns.
Similarly, automated payroll solutions simplify PAYE compliance by accurately calculating salaries, deductions and generating compliant payslips. Localised software updates automatically with the latest tax laws and manages leave according to the BCEA, covering all legislative reporting.
Non-compliance carries severe risks, including financial penalties, legal action, reputational damage, and increased scrutiny from SARS. To stay compliant, SMEs should track deadlines, seek professional guidance, stay updated with legislation through webinars and industry resources, develop internal policies, and maintain legally sound contracts. Keeping abreast of regulatory changes and implementing robust systems are essential for navigating the complex legal landscape and ensuring business success.
Compliance: the foundation for business success
Navigating South Africa’s regulatory landscape may seem daunting, but with the right tools and approach, it can be simple. That said, it demands constant focus and effort. By staying informed about key regulations, maintaining accurate financial records, and leveraging automation, you can reduce risks and focus on growing your business. Compliance isn’t just about ticking boxes—it’s about building a strong foundation for long-term success.