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CIDB GRADE 5

HomeCIDB GRADE 5

CIDB GRADE 5

The CIDB grade “5” designation gives construction companies the opportunity to bid for government construction tenders between the values of R4, 000,001 to R6, 500,000. In order to qualify, companies need to have completed at least one single large construction project between the values of R1, 500, 001 and R3, 000, 000 within the past five years. Construction projects completed more than five years are not accepted as at the date of application.

Therefore, if you are going to be applying for a grade 5, all your project paper work should be within a period of last 5 years. In addition to the above, companies need to also be compliant with the general legislative requirements such as tax as well as the companies and intellectual property commission. I shall be discussing all these requirements in more details in the paragraphs that follow.

WORKS CAPABILITY

Works capability refers to the single largest historical construction project ever carried out by the company within the past 5 years.Let me illustrate this by using an example. Let’s say you had 3 projects in the past 5 years. The first project was R500, 000, the second R1, 000, 000 and the third R1, 800, 000.

You cannot claim a works capability of R3.3 million. The CIDB will only consider the R1, 800, 000 as the single highest project and therefore, qualify you only for a grade 5 despite having performed a total works capability that qualifies you for a higher grade 6.

As mentioned above, the works capability for a grade 5 is calibrated between construction contracts between the values of R1, 500, 001 to R3, 000, 000.

fixonate Accounting2
Tax registration- fixonate

FINANCIAL CAPABILITY

Financial capability refers to the best of total revenue between two comparable financial years generated by the company. It also refers to the net assets value which is derived by taking the total assets of the company less its total liabilities. For a grade 5, the company has to comply concurrently with its financial and works capability. What this means is that in addition to meeting the above mentioned works capability thresholds, the company must also meet the financial capability scores as mentioned below. Meeting the financial capability scores on Grade 5 applications. The financial capability score for a grade 5 is that the company needs to have made revenue of between R3, 250,000 and R6, 500,000.

In addition to this, it also needs to have a net assets value of between R650, 000 and R1, 300,000. As you can see, for grade 5, the application requirements are far much more stringent. Revenue is the total sales made by the company whereas net assets value is the net difference between a company’s total assets and its liabilities. Please note that when the Annual Financial Statements to be submitted to the CIDB, meet the works and financial capability minimum score thresholds. There is absolutely no point in submitting financials that do not meet the thresholds as you shall not qualify for the upgrade sought for.

TAX CLEARANCE CERTIFICATE

It seems pretty obvious that a tax clearance certificate should be the easiest part about complying with when submitting a CIDB grade 5 application however, from the look of things, it appears that there is more to be considered when submitting a tax clearance. In the previous years, tax clearance certificates were valid for a period of 12 months as at date of printing, however, as from late 2019, it appears that the tax clearance certificate is only valid as at the date of confirmation.

What does this mean?

It means that when you submit your tax clearance, you must remain compliant throughout the period of submission. Since you can’t predict the date when the CIDB will be conducting checks on your taxes with the South African Revenue Service, it is advisable to remain compliant throughout the entire 21 days. This is especially true for clients who have companies that do submit monthly payroll.

Should you miss a monthly payroll tax return during the time of application, your tax affairs that were compliant a couple of days ago, might no longer be so. This is immediate grounds for disqualification of your application. Therefore, it is wise that your company remains fully tax compliant throughout the period of application as well as the periods when your CIDB has been granted. Remember, your CIDB shall be taken down in case of non tax compliance.

COMPLIANCE WITH THE COMPANY INTELLECTUAL PROPERTY COMMISSION – CIPC

The CIDB requires applicants to be compliant with the CIPC. Being compliant requires the filling of annual returns on the commissioner’s website. To determine if your company is compliant, you should print out the latest company’s registration documents from the Commissioners website to determine your enterprise status. Enterprises indicated by “In Business” mean that those companies are compliant whereas those indicated by “In deregistration process” simply mean that they need to file and pay their annual returns immediately.

SHAREHOLDERS CERTIFICATES

If your company is a close corporation, then there is no need to look for a shareholders certificate, however, if the company’s designation ends with a (PTY) Ltd or (Inc), then a shareholders certificate shall be needed. The shareholders certificate must be done by a competent professional. The stamp date of the oaths of commissioner must be within 3 months as at the date of submission.

OTHER DOCUMENTATION

All other documents as mentioned on the application form (Grades 2 to 9) must be certified by a commissioner of oaths. The stamp date must also fall within the 3 months period.

FEES

Application is set at R750 administration fee plus R1 750 in annual fees. The total is R2, 500

APPLICATION FORM

The application form must be filled in properly and submitted to the CIDB in person.No online application for grade 4. You must physically go and hand in the documents at the CIDB offices.

DURATION

The maximum waiting period, provided that all your documents are in order, is +-21 working days.

CONCLUSION

All in all, a CIDB grade 5 will qualify you for government construction tenders between the values of R4 to 6.5 Million and will require you to have carried out at least one single large contract between the values of R1, 500,000 to R3, 000,000

In addition to this, the company needs to have generated revenue between the values of R4, 000,000 to R6, 500,000 and at least maintain a net asset value between the values of R650, 000 to R1,300,000.