If you fall into 1 of the above categories, or any other, be it for a dormant or trading company, heed this warning; SARS has turned their focus to tax representatives of companies that have failed to fulfill the company tax return filing obligation. If your company falls into this category, you will, if you have not already, receive an SMS warning you that failure to meet your filing obligations within 10 days from receipt of the SMS, will result in the initiation of criminal proceedings, starting with a Notice of Intention to Summons.
CIPC Deregistration Demystified
As a taxpayer, not being a financial or corporate governance specialist, one may be led to assume that when the CIPC announced automatic deregistration for companies who failed to file Annual Returns for 5 years, it was an easy out; guess again…
Although your company’s status on CIPC may be updated to “AR Deregistration”, a formal CIPC deregistration application is still needed to complete this process. This formal application must be accompanied by a Tax Clearance Certificate from SARS, confirming you have fulfilled your tax obligations, meaning no outstanding tax returns and no tax debt due to SARS.
Once satisfied, CIPC will issue a Notice of Deregistration, roughly 4 months from date of submission, as then only is the company formally deregistered on their systems.
SARS Systems Strike Again
With the CIPC Notice of Deregistration in hand, you may think this is the end of the road, and your company filing obligations are a thing of the past; enter SARS. Despite the big misconception in the market that the SARS company deregistration is automatic once CIPC is done, it is now time for your 2nd formal deregistration request.
On the SARS front, this formal deregistration application must be submitted per registered tax type, and, most importantly, must be supported by your CIPC Notice of Deregistration. The only exception here is for the deregistration of the PAYE and VAT tax types, which can be done so long as the company is SARS compliant, but this is just for the tax types, and not the company as a whole.
Unfortunately, the turnaround time to finalisation of deregistration with SARS, is 12 to 18 months. As delayed as this may sound, it is due to the most common shortcoming of business owners – non-registration of an active Tax Representative with SARS!
Tax Representatives on a Tight Rope
Depending on the activity of your company, and if you have kept up to date with your SARS filing obligations, you may or may not be aware that since May 2021, SARS has required that each company have an active Tax Representative. It is further required that the duly appointed representative must be a South African taxpayer, residing in South Africa.
The appointed representative has the duty to ensure that all company tax returns are filed with SARS, and any taxes due are timeously paid. If you, as the tax representative, have received SARS’ recent SMS with threats of criminal charges, these duties have evidently not been fulfilled.
Save Yourself From SARS, and Possible Prison Time
What this means – you may, in your capacity of Tax Representative, be held personally liable and accountable for any non-submission of company tax returns, and any debt due by such company, to SARS.
What you need to do – immediately contact a corporate governance or financial specialist, to remedy the company non-compliance, whilst SARS’ 10-day grace period remains open. Where you know the problem is deeper than just filing nil returns for a dormant company, you must consider engaging specialist tax attorneys, guaranteeing you legal professional privilege on disclosed information.
As a rule of thumb, all correspondence received from SARS, including SMSs should be immediately addressed by a qualified tax/financial specialist or where professional privilege need, an astute tax attorney. This will serve to safeguard you against SARS implementing collection measures in your personal capacity. Being specialists in their own right, Tax Representatives will be correctly advised on the most appropriate solution to remedy the tax non-compliance whilst staying out of Criminal Court.