Must my dormant company submit returns?
I
t is a very common misunderstanding that a dormant company does not have to submit returns.
Quite simply, all companies must submit tax returns and CIPC returns, albeit Nils.
So what happens if they don’t?
Tax returns
- Your company will not be able to obtain a Tax Clearance if there are any provisional or annual tax returns outstanding. But if it’s dormant, then this is not likely to bother you.
- SARS is hitting dormant companies with a penalty of R250 per return, each month that the return is outstanding. This will not bother you until you start trading, then you’re in big trouble, because, by then, the penalties can have grown to several thousand Rands. If the company never trades, then the penalties don’t matter, because SARS can only go after the company for them and it has no money to lose.
CIPC annual returns
- If there are 2 or more returns outstanding, then CIPC will put the company into “De-registration process”. Every so often CIPC hits the de-registration button, and all such companies are de-registered. This cannot be reversed if the company was not trading at the time of de-registration.
39 comments
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Hi Derek
I’ve registered a company in 2023 and it has never traded at all. Now I want to close it and cipc needs a tax clearance for them to close it. Do I need to register at sars for me to get the tax clearance? The company was just a name only it doesn’t have any bank account.
Hi Mamonyana,
We can fix this at no cost to you. I will send you an email.
Hi Derek,
For a dormant company do you have to submit Annual Financial Statements displaying nil balances too, when you submit to SARS?
Thank you
Hi Caitlyn,
Simple answer – No
However, you refer to Annual Financial Statements. For trading companies, we only submit an Income Statement and Balance Sheet unless the company chose to have formal AFS prepared for some other reason.
Hi Sir. Got my company registered in 2016 and now it has been inactive due to not operating and haven’t since been registered. Now i wanted to start using it since I’m now focused on making it work. Now thr problem is that i don’t whether i should still continue using it or just register another one but CPIC denies my application cause i already had one?
Hi Katleho,
We have already discussed this be mail but for the sake of our readers:
In order to restore a company, an application is made online. It will then go into a semi-restored state and the resstoration will only be final when all outstanding annual returns to CIPC hve been submitted. Then you have to deal with all outstanding returns to SARS and possibly request that Admistrative Penalties be written off.
If you want to register a new company, then the problem with SARS will not go away, but CIPC will certainly not prevent you.
I registered company in 2014 and it never traded or worked .And SARS says I owe them what can I do as the company doesn’t have money or never traded
Hi Mavis,
SARS have been hitting dormant companies with penalties for non-submission of tax returns. These quickly accumulate to 10s of 1000s of Rands as is no doubt the case with your company.
Fortunately, we have a solution that will not cost you anything. I have emailed you separately about this.
Hi
I registered my company in 2022 and its never functioned since i received a message from CIpc February this year and i think i paid a fee of R100 something
However SARS also sent me a message that i owe and it seems linked to my work IRP5 im confused if the company is linked to my personal Sars account or what because i am registered as the sole director with no employees even though its registered as a private company
Hi Louise,
No, SARS does not link your personal tax to that of your company in any way. Doubtless what has happened is that SARS has imposed Administrative Penalties of R200 per month for each of the company’s outstanding Annual Tax Returns, even though they would have been Nils. Submit the outstanding returns and SARS will probably reverse the penalties. If they don’t then you can apply for a reversal.
If you need help with this, drop me an email derek@harb.co.za
Hi
If you buy a dormant company that never submitted any returns
What is the process to follow to get everything sorted out
Thank you
Hi Divan,
Strange, I was so sure that I had responded, but nothing here or in my emails, so I guess I got interrupted.
It all depends on the actual status.
If the company is finally deregistered at CIPC, then it must first be restored. Thereafter the Beneficial Ownership return must be submitted, followed by the FAS and Annual returns. That’s CIPC.
Then SARS. Appoint a Registered Representative and thereafter do all the returns and finally, if Admin Penalties have been imposed, apply to have them reversed.
Hi
I have registered a company in 2022, and it’s been dormant because of covid, and it’s been deregistered I think for AR noncompliance. I was going to use it as a new business but never really got the time for it. So what will be the best thing to do? I don’t want to leave it and get any nasty surprises later on.
Hi Jandre,
First you must get the full facts.
1) Has the company been hit with SARS penalties? If it has, then prove to SARS that it is finally deregistered and ask them to reverse the penalties and deregister it as a taxpayer. Then register a new company.
2) If no penalties at SARS, then restore the company at CIPC and submit the outstanding CIPC returns or follow the procedure above.
3) We can assist if you need help. If you would like a, then drop me an email with the company details and reminding me of the issue derek@harbourassociates.co.za
Hi. I registered a company in November 2021. Since registration the company never traded, it was dormant basically from inception. I haven’t filed any returns. I have researched and it seems like I was supposed to have still filed dormant returns but I did not. In this case will I be liable for a huge penalty if I try to rectify the situation. I want to deregister this company but it seems to be a lengthy process. Thanks
Hi Prasha,
It is not the filing of overdue returns that triggers Administrative Penalties. Either the company has been hit already or it hasn’t. I suggest that you don’t do any CIPC returns except the beneficial ownership return. Do all Nil tax returns and keep doing them until CIPC de-registers the company, then ask SARS to reversee any Admin penalties and suspend the company as a tax payer.
Good afternoon
I registered a company in 2020 it has not trade since then .In 2022 I recognized that it had been deregistad by cipc.Now is it possible to reopen it or register a new one.What will happen about the administrative penalty of the old one.
Hi Mashambu,
If it did not trade it cannot be restored at CIPC. So, you need to register a new company, but before you do, be sure that it is going to trade. there’s no point in registering it and then leaving it dormant.
If Administrative Penalties have been imposed, you (or we) can send proof of final de-registration to SARS and request that they suspend the tax registration and reverse the penalties. you will probably have to submit the outstanding Nil returns.
Hi, can someone help me I registered my company this year february I haven,t start working because I waited for a Tax Clearance Certificate can I do a dormant company return
Hi Thembani,
If you registered your company in February 2023, then you should have submitted a Nil 2nd Provisional Tax Return 2023 by 28 February 2023, a Nil 1st Provisional Tax Return 2024 by 31 August 2023 and must submit a Nil 2nd Provisional Tax Return 2024 by 28 February 2024.
Also by 28 February 2024, you need to submit a Nil Annual Tax return 2023.
And in February 2024 you need to submit your Annual CIPC return.
And, finally, your Beneficial Ownership return to CIPC is already overdue.
If you need help with any of these call us on 011 805 0030.
Govt Gazette is very relevant – it says dormant companies are not required to submit tax returns.
Hi David,
I did eventually reply after being discharged from a lengthy spell in hospital.
Why was my comment on the Govt Gazette ignored. It’s very relevant – it says dormant companies are not required to submit tax returns.
Hi David,
I did eventually reply after being discharged from a lengthy spell in hospital.
Hi Derek, I bought a shelf company in 2013. Never submitted any tax returns. Company hardly made anything and was dormant for the since 2016.I see on cips website it was finally deregistered in 2020. Now today received an sms from sars stating I have 10 days to submit tax returns for this company or they will come after me: Dear Tax Representative of ..you failed to submit your company income tax returns with reference…. Failure to submit the returns is a criminal offence in terms of section 234, (2)(d) of TAA. to avoid more administration penalties being levied against you, kindly submit all the outstanding returns wthin 10 days of this SMS, Should you fail to submit the returns, we will initiate the criminal process and send you a NOTICE OF INTENTION TO SUMMONS. Please ignore if you have since complied. SARS… can they come after me personally for not submitting returns and for penalties etc?The company has not been trading for over 6 years and bank account was closed over 6 years ago too.
Hi Lucy,
I fail to see how SARS can attack you personally. You are not the company. We have a few of our own companies in the same position and I just delete all such correspondence from SARS.
Govt Gazette 48788 dated 23 June 2023 states in para 2 (a) that every company with assets or liabilities in excess of R1,000 or income in excess of R1,000 is required to submit a tax return. That makes it very clear that dormant companies that meet these criteria should not be required to submit a tax return – yet I have received threatening demands to submit returns for these companies.
Hi David,
My apologies for the late response. I have been hospitalised.
I agree wth you. The penalties are stupid and illegal.
I sinse wrote another article which relates to this. https://www.harbourassociates.co.za/seo-blog/sars-administrative-penalties-on-dormant-companies/
Good day,
I have been sent an SMS from SARS telling me a company I had registered in 2018 hasn’t paid it’s returns and needs to do so in the next 10 days or I’ll be taken to court. I however registered the company as a Pty ltd and it never made money, nor did it actually run and has been dormant since then. How do I approach this as the company was registered and was incorporated but remained dormant.
Regards,
Hi Skye,
My apologies for the late response. I have been hospitalised.
Your best bet is to do nothing, either with SARS or CIPC. Eventually the company will be de-registered and if SARS imposes Administrative Penalties they can’t collect them from a company that has no money. I am doing this with some of own companies that aree in a similar position.
Good morning.
I know this might be too late, but for a dormant company what should I submit when SARS asks for supporting documents after submitting returns?
Hi Mthobisi
If your return stated that the company was dormant then there should have been no such request. I suggest that you either submit a new return, which is the correct thing to do, or for the SD submit a letter in .pdf stating that the company is dormant.
I know this is a very late comment, but if you can help, I really appreciate it. I registered a private company with the CIPC, completed the process, but I’ve never done anything with it since. I assume that counts as dormant, since its’ never traded, or done anything whatsoever.
Would it be safe for me to just leave it to be de-registered by the CIPC if I don’t submit the annual returns? I’m afraid of finding the company owes SARS thousands of rands it doesn’t have, since it’s dormant, and hasn’t submitted any tax returns. I registered it in August 2022. Would I have to pay that money myself as the only member and shareholder?
At this point I just want to let it be de-registered, the stress and hassle of trying to figure out all this tax stuff for a company that’s dormant and never traded is not worth it.
0729507352
Hi Langa,
SARS will start imposing penalties on the company for non-submission of tax returns. However, you are not personally liable for these penalties or any other charges to the company, so you can ignore SARS. Also you can ignore CIPC and they will eventually de-register the company.
Hi Langa,
You are not personally liable for the company’s debts, so you can ignore SARS and any penalties that they apply. You can also ignore CIPC and they will eventually de-register your company.
And by ignore, I mean ignore. If they phone, SMS, email or whatever, do not respond.
There is an alternative. We could de-register the company at CIPC and then at SARS, but the cost is prohibitive (somewhere around R7 000 in all, but right now I can’t connect to the office server for an exact figure because it shut down with load shedding)
So what is submitted in lieu of the financial statements if the company is dormant?
Nothing
Good Day
I am seeking clarity. Do dormant companies have to pay for their annual returns with CIPC?
Regards
Lethabo Seboni
0723190037
Hi Lethabo,
Absolutely, otherwise the company will eventually be de-registered by CIPC.
Your company must also submit nil provisional and annual tax returns otherwise SARS may start imposing a R200 penalty every month for every outstanding tax return.
It’s possible that SARS is already doing so without your knowledge. If you want us to assist, call Tumi on 011 805 0030.