Focus on Farming – Effective Tax Solutions for the Agricultural Sector

South Africa’s agricultural sector is exceptionally diverse and it plays a vital role in the growth of the country and its economy. Farmers are not only responsible for supplying the produce that feeds the nation their practices also provide numerous job opportunities within an extensive supply chain. Because of the large-scale impact that agricultural practices have on the country, the South African government has granted farmers certain exemptions and dispensations on various taxes.

Capital Expenditure Deduction

Capital expenditure is defined as the money that is used to purchase, maintain or upgrade the physical assets of a business. This could include expenditure on property, equipment, buildings, tools, roads, dams and more. Normally a business would be able to claim depreciation on many of these assets over many years. Farmers however are able to deduct the full amount invested in capital expenditure from their farming income, which can significantly reduce their tax liability. This is made possible to encourage investment in fixed assets and helps smaller farmers to improve their cash flow in order to grow their enterprise

Tax Exemption on Certain Goods

The South African Revenue Service (SARS) has declared that farmers are exempt from paying value-added tax (VAT) on certain goods, even if they are being imported from another country. This exemption only applies to goods that are directly utilised or consumed in the farming process. These goods include feed for livestock, veterinary medicines, fertiliser and compost, pesticides and the plants and seeds used to cultivate new crops. SARS also allows farmers to register for a six-monthly tax period if they meet the qualifying criteria. This is done to help producers manage their cash flow and mitigate the issues caused by the cyclical nature of farming.

Diesel Refund System

One of the biggest expenses on a lot of farms is the diesel that keeps a lot of the heavy machinery running. The diesel refund system seeks to mitigate this expense by providing primary producers in the agricultural sector with a full or partial exemption from the fuel levy tax and Road Accident Fund (RAF) levy. The diesel refund system is implemented through the VAT administrative system and an entity has to be registered for VAT to take advantage of this exemption. This system seeks to further lighten the financial burden on farmers, allowing them to be more competitive both locally and internationally.

Whether you are an aspiring farmer or you’ve been at it for years, it helps to have qualified accountants by your side to ensure that you are getting the most out of the dispensations granted to agricultural producers. Contact Booysen Accountants today to speak to one of our professional team members about your enterprise. We will help you navigate our country’s complex laws to ensure that you take advantage of all the tax benefits that are available to you.