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How should the drawings account of a sole proprietor be treated for tax purposes?

03 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical  

Q: How must the drawings account of a sole proprietor (income is 100% from psychotherapist services) be handled with regards to taxes? Can the drawings account be written back into the accounting records as dividends and be subject to dividends tax? Or otherwise how must it be handled? 

A: A sole proprietor is taxed in his personal capacity on his trade and other income. He therefore cannot in a legal sense have drawings as he cannot borrow from himself. Furthermore, dividends tax would only be applicable on a distribution from a company. In our view it is also not advisable to undo transactions that have already occurred merely to change the tax consequence as the recording of transactions in the records of taxpayer should merely reflect the substance of the transaction and its corresponding form.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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