It is important to set a date for the commencement of a business. Only after a commencement date has been established can overhead expenses, such as salaries, electricity, water, telephone and rental charges, be tax deductible.
Commencement of business is a question of fact which can be decided by reference to the commencement of an essential part of a business activity such as opening door to do business- for a trading and distribution company, employing key personnel - for marketing and service provider or beginning the manufacturing process for a manufacturing company. Documentation is required for the purpose of substantiating these facts in the event of tax audit.
REVENUE NEED NOT BE GENERATED
The generation of revenue or sales plays no part in determining the date of business commencement. Where no sale os generated for a financial year, current year business loss is said to exist. This loss can be carried forward to the following year of assessment where it can be deducted from business income.
