YOU BOUGHT A THING.WHAT HAPPENS?

Accounting fees for your business books and annual financial statements are fully deductible.

You can claim this · Sole proprietor or freelancer

This is an ordinary running cost of carrying on a trade. It covers the annual financial statements, management accounts, payroll processing and the business tax computation. Where the accountant also prepares your personal return, that portion is a private cost and should be split out.

An antenuptial contract is a personal expense with no deduction, but it changes how your income and assets are taxed for the rest of the marriage.

There is no relief for this · Anyone

The notary's fee is private. The consequence is not. Married in community of property means certain income, notably interest and rental, is split fifty fifty between the spouses for tax, and capital gains follow the joint estate. Out of community with or without accrual keeps each spouse taxed on their own income and assets.

If the contract is part of how you earn your ordinary trading income, the attorney's fee is a normal deductible business cost.

You can claim this · Sole proprietor or freelancer

The test is what the contract is FOR. A standard supply or customer agreement that keeps your existing trade running is revenue expenditure and comes off in the year you incur it. A contract that creates a new income producing structure, buys a business, or brings a lasting asset into existence is capital, and the same attorney's bill is then not deductible. Split the invoice if the attorney did both.

Audit and independent review fees are a normal deductible business expense.

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Whether you need an audit at all depends on your public interest score and your MOI, and many small companies qualify for an independent review or no assurance engagement instead, which is far cheaper. Whichever applies, the fee is deductible. Fees for special purpose work such as a due diligence on an acquisition follow the underlying transaction and may be capital.

B-BBEE verification and consulting fees are deductible as a cost of being able to win work.

You can claim this · Sole proprietor or freelancer

Verification fees, the consultant who prepares you for it, and the annual recertification are all incurred to maintain your ability to earn income from customers who require a certificate, so they are revenue and deductible. Note that many small businesses qualifying as exempt micro enterprises need only a sworn affidavit, which costs nothing but the commissioner of oaths.

Bookkeeping fees are fully deductible whether the bookkeeper is a contractor or an employee.

You can claim this · Sole proprietor or freelancer

If the bookkeeper is a contractor you deduct the fee. If they are an employee you deduct the salary and the associated employer costs, and you have PAYE, UIF and SDL obligations. Accounting software subscriptions are deductible on the same basis.

A settlement paid is deductible if the risk of that claim is an inseparable part of how you trade, and not deductible if it is not.

The answer turns on the facts · Sole proprietor or freelancer

The test is whether the liability arose from the ordinary operations of your trade and is a risk inseparably connected with carrying it on. A builder settling a defective workmanship claim is close to the line and often deductible. A settlement that is really the price of acquiring or protecting a capital asset, or that arises from something outside your trade, is not. Fines and penalties imposed for unlawful conduct are separately and specifically blocked.

An annual business or trading licence fee is a deductible cost of being allowed to trade.

You can claim this · Sole proprietor or freelancer

Recurring licence and permit fees paid to keep trading are revenue and deductible in the year incurred. A once off application fee for an initial licence that gives you a lasting right can be argued as capital, though for ordinary municipal trading licences the amounts are usually small enough that it is not worth arguing about.

Costs of defending a CCMA or Labour Court matter arising from your own staff are deductible as an ordinary cost of employing people.

You can claim this · Sole proprietor or freelancer

Employment disputes are a risk inseparable from carrying on a trade that has employees, so both the legal or consultant fees and any compensation award ordered are generally deductible. An award of compensation for unfair dismissal is different in character from a fine, so the fines prohibition does not usually bite, but check how the award is described.

The CIPC annual return fee is a small deductible cost of keeping the company in existence.

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It is an ongoing statutory compliance cost of carrying on the trade, not a cost of acquiring anything, so it is revenue and deductible in the year incurred. Penalties for late filing are a different matter and are unlikely to be deductible.

The cost of registering the company is a capital cost of bringing the business into existence and is not deductible.

There is no relief for this · Company

You cannot deduct the cost of creating the income producing structure itself, only the costs of running it once it exists. Pre trade expenditure has its own rules and may be carried forward and allowed when the trade starts, but formation and incorporation costs are capital in nature and do not get in that way.

Ongoing company secretarial fees are deductible as a cost of keeping the company compliant.

You can claim this · Company

Routine work such as maintaining the statutory registers, filing director and address changes and preparing resolutions is revenue and deductible. Work on share issues, restructures, conversions or an MOI amendment tied to a capital transaction follows the capital transaction instead.

South Africa has no general copyright register, so there is usually no fee to claim: copyright arises automatically when the work is created.

There is no relief for this · Anyone

Copyright in most works exists the moment the work is created and fixed in material form, with no registration required. The one recognised registration in South Africa is for cinematograph films. So for the vast majority of people, the honest answer is that there is nothing to deduct because there is nothing to pay. Where you do incur costs to acquire an existing copyright for use in your trade, the acquired intellectual property allowance may apply.

What you received is taxed according to what it replaced: lost profits are income, damage to a capital asset or reputation is capital.

The answer turns on the facts · Anyone

This is the fill the hole principle. If the payment compensates you for income you would otherwise have earned, such as lost trading profits or unpaid fees, it is gross income and fully taxable. If it compensates you for the loss or impairment of a capital asset, it is a capital receipt and goes into the CGT calculation instead, potentially with a rollover if it was an involuntary disposal. Personal injury and defamation awards to an individual are generally treated very differently again.

Damages paid are deductible only where the wrong arose out of your ordinary trading operations, never where they are a fine or arise outside the trade.

The answer turns on the facts · Sole proprietor or freelancer

Damages for a trading mishap, for example a delivery vehicle causing damage while on a business run, are generally closer to deductible. Damages arising from conduct that is not part of the trade, or that relate to a capital asset, are not. Any element that is a fine, penalty or payment for unlawful activity is expressly disallowed regardless of how it is described.

Commission you pay a debt collector to recover trade debts is a deductible business expense.

You can claim this · Sole proprietor or freelancer

It is incurred in the production of income from your existing trade and is revenue in nature. Claim the commission actually incurred, and remember that the commission is calculated on the gross recovered amount even though you only bank the net. Where the collector deducts commission before paying you over, your income is the gross figure and the commission is the expense.

Annual domain renewals are a small deductible running cost, but paying a large premium to buy an existing domain from someone is capital.

The answer turns on the facts · Sole proprietor or freelancer

A normal registration or renewal of a domain, together with hosting, is a recurring operating cost and comes off in the year. Buying a valuable existing domain from a third party for a substantial sum is acquiring an asset with lasting value, which is capital and goes to base cost rather than being deducted. The size of the payment and whether it is recurring are the practical indicators.

The cost of having a will drawn up is personal estate planning and is not deductible.

There is no relief for this · Anyone

It produces no income and has no trade connection. Many banks and trust companies draft the will free on condition they are nominated as executor, which is not free at all, it is prepaid out of the executor's fee your estate will pay later.

Getting employment contracts drawn up is an ordinary running cost of employing people and is deductible.

You can claim this · Sole proprietor or freelancer

This sits squarely on the revenue side. You are not acquiring anything lasting, you are managing the workforce that produces your income. The same applies to a set of template employment contracts drafted once and reused, and to updating them when labour law changes.

Estate administration costs are not an income tax deduction for the heirs, though they do reduce the estate for estate duty purposes.

There is no relief for this · Anyone

Two different taxes are at work. Executor's remuneration, Master's fees and advertising costs are administration expenses that come off the estate before estate duty is calculated. They are not deductible on the deceased's final income tax return or on any beneficiary's return. What the heirs inherit is not taxable income in their hands.

Goodwill you pay for when buying a business gets no deduction and no annual write off: it sits in base cost until you sell.

No deduction now, it reduces tax when you sell · Anyone

Goodwill is a capital asset. There is no wear and tear allowance for it and it is not on the list of intellectual property that qualifies for an acquisition allowance. Accounting amortisation of goodwill is added back in the tax computation. The relief comes only on disposal, when the purchase price forms part of base cost and reduces the capital gain.

Review fees follow whatever the contract itself is: reviewing a supply agreement is deductible, reviewing the purchase of a business or a property is not.

The answer turns on the facts · Sole proprietor or freelancer

This is the clearest place to see the capital versus revenue split. Same attorney, same hourly rate, completely different answer depending on the document on the desk. Reviewing your standard customer terms protects existing income and is deductible. Reviewing the agreement under which you buy premises, buy a business, or acquire shares is a cost of acquiring an asset and goes to base cost.

Health, safety and food certificates and the inspections behind them are deductible operating costs.

You can claim this · Sole proprietor or freelancer

Certificates of acceptability, environmental health inspections, occupational health and safety compliance work and fire clearance are all ongoing costs of being legally permitted to trade and are deductible. Where compliance requires you to physically alter the premises, for example installing a new extraction system or a wash up area, that is capital expenditure on an asset and follows the wear and tear or building allowance rules instead.

Ongoing certification and surveillance fees are deductible, but a large once off accreditation that opens a genuinely new market can be capital.

The answer turns on the facts · Sole proprietor or freelancer

Annual surveillance audits, recertification and the consultant who keeps your system current are revenue costs of maintaining the business you already have. A substantial first time accreditation that is a precondition for entering an entirely new market, and that gives an enduring benefit, is more exposed to a capital argument. In practice the amounts and the facts decide it.

The upfront fee to join a franchise buys a lasting right to trade under the brand, which is capital and not deductible.

There is no relief for this · Sole proprietor or freelancer

The initial fee gives you an enduring benefit, the right to operate the franchise for the term of the agreement, so it is capital in nature. It goes to the base cost of what you acquired, giving relief only when you eventually sell or exit. This is the opposite of the ongoing royalty, which is fully deductible.

The attorney's fee for a normal business lease is usually deductible, but a lease premium and leasehold improvements follow completely different rules.

The answer turns on the facts · Sole proprietor or freelancer

Three separate things get confused here. The legal fee for drafting or registering the lease is normally revenue and deductible where the lease is for ordinary trading premises. A lease premium (a lump sum paid on top of rent to get the lease) has its own allowance regime spread over the lease period. Improvements you are obliged to make to the leased property are handled under the leasehold improvement rules, not as a repair. If it is a long lease that must be notarially registered, the registration cost is more likely to be capital.

Defending a claim that comes out of your ordinary trading is deductible, defending your title to an asset is capital and is not.

The answer turns on the facts · Sole proprietor or freelancer

The specific legal expenses provision covers claims, disputes and actions at law arising in the course of the ordinary operations of the trade, and excludes expenditure of a capital nature. Defending a customer's complaint about the work you did is revenue. Defending your ownership of a property, a trademark you own, or your shares is protecting a capital asset, and those costs go to the base cost of that asset rather than into your deductions.

Divorce legal fees are personal and are not deductible, no matter how much of the fight is about business assets.

There is no relief for this · Anyone

There is no trade connection, so the general deduction fails at the first hurdle and the private expenditure prohibition closes the door. Where the divorce order divides a pension interest, that has its own tax rules on the fund side, and where assets transfer between spouses the capital gains rollover may apply, but neither of those makes the attorney's fee deductible.

Legal fees on a private matter are not deductible, and a salaried employee has almost no scope to claim legal costs at all.

There is no relief for this · Salaried employee

Private and domestic expenditure is expressly excluded. Salaried employees are separately restricted from deducting ordinary work related costs, with only a short list of exceptions. Even a work adjacent dispute is difficult for an employee to claim, and a purely personal one is impossible.

Legal fees on buying or selling a business are not a deduction, they go into base cost and reduce your capital gain instead.

No deduction now, it reduces tax when you sell · Anyone

Costs directly related to acquiring or disposing of an asset form part of base cost, which includes attorney fees, valuation fees and agent commission on the transaction. On a sale they reduce the proceeds side of the gain. On a purchase they increase what you paid. Either way the relief comes through capital gains tax, not through your income tax deduction.

Renegotiating a contract you already have, to protect income you already earn, is normally deductible.

You can claim this · Sole proprietor or freelancer

Protecting or preserving an existing income stream is revenue in nature. Renegotiating a supplier price, extending a customer agreement on similar terms, or fixing an unworkable clause all sit here. The answer changes if the renegotiation is really the acquisition of a materially new and enduring right, for example converting a short term arrangement into a long exclusive licence.

Legal costs to recover money owed to you from your trade are deductible, and there is a specific provision for exactly this.

You can claim this · Sole proprietor or freelancer

Legal expenses actually incurred in respect of a claim, dispute or action at law arising in the course of the ordinary operations of your trade have their own deduction, provided the claim is not of a capital nature and the expenditure is not otherwise disallowed. Chasing a trade debtor is the textbook example. If the debt itself becomes irrecoverable, the write off of the debt is a separate claim under the bad debt provision.

The annual renewal is deductible, but the cost of obtaining a new liquor licence for the first time is capital.

The answer turns on the facts · Sole proprietor or freelancer

This is the capital versus revenue split in one clean example. The first application, including the attorney's fee, advertising and the liquor board fee, obtains a valuable and enduring right that attaches to the premises and the business, so it is capital and not deductible. The annual renewal fee simply keeps an existing right alive and is revenue. If you buy a business that already holds a licence, the value attributed to the licence forms part of the base cost of what you bought.

An NDA used in the normal course of trading is a small revenue legal cost and is deductible.

You can claim this · Sole proprietor or freelancer

NDAs signed with staff, contractors, suppliers and prospective customers are part of running the business, so the drafting fee comes off in the year incurred. The exception is an NDA signed as part of a sale of business or a capital transaction, where the fee follows that transaction into base cost.

The ongoing royalty and marketing levy you pay the franchisor are fully deductible operating costs.

You can claim this · Sole proprietor or freelancer

Recurring payments based on turnover, for continued use of the brand, systems and marketing, are revenue in nature and deductible in the year incurred. Where the franchisor is a non resident, withholding tax on royalties may apply and you may have a withholding obligation, which is a separate question from your deduction.

POPIA and PAIA compliance work is a deductible cost of operating lawfully.

You can claim this · Sole proprietor or freelancer

Drafting privacy policies, registering the information officer, preparing the PAIA manual, staff training and the consultant's time are all recurring compliance costs of the trade and deductible. Where compliance requires you to buy software or hardware, that portion is a capital asset written off under the wear and tear rules rather than deducted outright.

Setting up the partnership itself is a capital cost, so the drafting fee is generally not deductible.

There is no relief for this · Sole proprietor or freelancer

The agreement creates the structure the trade will be carried on through, rather than producing income within an existing trade. Later amendments that deal with day to day operating matters are more arguable as revenue, but the original formation agreement is capital. Each partner deducts their share of partnership expenses, so even if a portion were deductible it would be split according to the profit sharing ratio.

Filing and renewing your own patent gets a deduction, while buying someone else's patent is written off over time under a separate allowance.

The answer turns on the facts · Company

The costs of obtaining registration, renewal or extension of a patent fall under the intellectual property registration provision and are deductible. If instead you acquire an existing patent for use in your trade, there is a separate annual allowance for acquired intellectual property, at a different rate for patents than for designs and copyright, and it has conditions including a threshold below which the cost may be claimed in full. Research and development spending that generates the invention has its own regime again.

A payment collected by a debt collector or a debt-review Payment Distribution Agency is a repayment of an existing obligation, not a new expense, and cannot be claimed a second time. PLEASE CONFIRM WITH YOUR TAX PRACTITIONER: this item is matched to an existing rule by general principle, not a SARS ruling written for this exact situation, so check it applies before relying on it.

There is no relief for this · Sole proprietor or freelancer

This is the mirror case of EX-LEG-022 (a business recovering ITS OWN debts from customers): here the taxpayer is themselves under debt review or being pursued for a debt, paying a Payment Distribution Agency such as DC Partner (NCR registration NCRPDA02) or a collections agency such as MBD/Nutun. Whatever the original debt was for was either already incurred (and possibly already claimed) at the time it arose, or was always private. Either way the repayment itself is not a fresh deduction.

If you trade for your own account the professional body fee is deductible, but a salaried employee generally cannot claim it.

The answer turns on the facts · Sole proprietor or freelancer

For a sole proprietor, partner or consultant, registration with the body that licenses you to practise is a direct cost of earning your income and is deductible. For an employee on a payslip the deduction rules are restrictive and this is not on the permitted list, so the practical answer is no. Many employers pay these fees directly for employees, which is usually the cleaner outcome for everyone.

A restraint of trade payment you make is deductible, but spread over the restraint period with a minimum spreading period set by the Act.

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There is a specific provision allowing the deduction, and it does not allow the whole amount in year one. The amount is allowed over the number of years of the restraint, subject to a statutory minimum number of years, so a short restraint is still spread. The deduction is generally available only where the payment is taxable in the hands of the recipient.

A restraint of trade payment you receive is fully taxable as income at your marginal rate, not as a capital gain.

There is no relief for this · Anyone

Restraint of trade receipts by natural persons and certain other recipients are specifically included in gross income, so the old argument that they are capital no longer works. It is taxed in full in the year of receipt or accrual, and a large restraint can push you into the top bracket for that year. If it is paid by an employer it should go through the payroll and appear on your IRP5.

Severance and retrenchment payments to staff are generally deductible for the employer, and taxed on the favourable retirement table in the employee's hands.

You can claim this · Sole proprietor or freelancer

For the employer this is a cost of the trade and normally deductible when incurred. For the employee a qualifying severance benefit is taxed on the retirement lump sum table rather than at their marginal rate, which is materially better, and it requires the employer to apply for a tax directive. A payment dressed up as severance that does not meet the definition, for example a normal notice payment or leave pay, is taxed as ordinary remuneration.

An SLA governing services you supply or buy is an ordinary trading document, so the legal fee is deductible.

You can claim this · Sole proprietor or freelancer

This is revenue expenditure whether you are the service provider tightening your obligations or the customer protecting your uptime. It regulates an ongoing trading relationship rather than acquiring anything lasting.

A shareholders agreement structures the ownership of the company, which is capital, so the legal fee is generally not deductible.

There is no relief for this · Company

The agreement does not produce income. It governs who owns the shares, how they are transferred, how disputes between owners are resolved and what happens on death or exit. That is the capital framework of the business, in the same category as incorporation costs. Where the agreement also contains genuine operating provisions (for example service terms for a working shareholder), that portion may be arguable, but you need the attorney to split it.

If you are a salaried employee, the fee you pay to have your personal tax return submitted is not deductible.

There is no relief for this · Salaried employee

Employees may only deduct a short list of specified items, and the cost of complying with your own tax obligations is not one of them. The position is different for a sole proprietor or a person carrying on a trade, where the portion of the fee relating to the business tax computation is a business cost. Rental owners can likewise claim the portion attributable to the rental trade.

A contract template bought for business use is a small deductible cost, and you claim it in the year you buy it.

You can claim this · Sole proprietor or freelancer

The amount is normally too small to argue about and it relates to your ordinary trading. Keep the receipt or card statement plus the download confirmation. If the seller is a foreign supplier, note that no South African VAT input tax arises unless the supplier is registered here.

Trade union subscriptions are not deductible on your personal income tax return.

There is no relief for this · Salaried employee

The deductions available to a salaried employee are a short closed list and union subscriptions are not on it. The amount often appears as a deduction on your payslip, which makes people assume it has already been given tax relief, but a payslip deduction is not the same as a tax deduction: it reduces what you are paid, not what you are taxed on.

The cost of obtaining or renewing the registration of a trademark has its own deduction provision, but buying an existing trademark from someone else does not.

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There is a specific provision allowing a deduction for expenditure to obtain the registration, renewal or extension of intellectual property including trademarks, which covers the attorney and filing fees. That is quite different from the price paid to acquire a trademark that already exists: the general allowance for acquired intellectual property specifically excludes trademarks, so a purchased trademark is a capital asset with no annual write off.