Trade or no Trade - You still have to comply
SARS now issues compliance penalties for late submissions of returns regardless of whether the company or entity has been trading or not.
Directors and Entrepreneurs who simply ignore compliance requirements will be exposed to a very unwelcome surprise from SARS. A dormant company even though not trading is still registered as a business with the relevant authorities and these authorities require annual and tax submissions whether you are trading or not for example SA Revenue Service (SARS) and Companies Intellectual Properties Commission (CIPC).
SARS issued a notice in December 2022 starting that administrative penalties will be charged on income tax returns which are still outstanding from 2007 to 2020. This is significant enough that those taxpayers that have outstanding returns especially dormant entities, should pay attention before the tax compliance bill grows even further. Important to note is that these penalties accumulate monthly ranging between R250 and R16000 based on the taxable income of the taxpayer. These penalties will remain payable to SARS even if you submit the outstanding returns, this is why compliance becomes essential.
For example, a dormant company with outstanding returns for 35 months could be looking at a penalty totaling in the region of R18 000 and this is only income tax penalties, what if there are other tax types registered to the company? Taxpayers should note that you can't deregister the entity in the hopes that the penalty will disappear. Once of the requirements to deregister an entity with SARS is that the entity must be tax compliant first, yes that means submitting all the returns that are outstanding.
So how do you resolve this? The first step is to check with CIPC to check on the directorships held with companies. Thereafter a Tax Practitioner can do a compliance check on the entity to establish what is outstanding from a tax returns and penalties perspective. Once all tax compliance issues are resolved then the deregistration of the dormant/trading entity can begin.
The revenue of SA Revenue Service has grown with billions since 2018 and a lot of this can be accredited to compliance related income.
It is certainly very clear that there is no time to waste when it comes to your Tax Compliance because SARS will not stand idle waiting for taxpayers to action their compliance requirements.
Should you find yourself in this position feel free to reach out to Zeelie Professional Accountants SA for assistance.
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