I saw something coming a while back when SARS started sending out reminders to submit Provisional Returns. Although I expected it to be leading up to more Administative Penalties.Anyway here it is –
Tax
SARS is getting more and more aggressive. In early May they started hitting trusts with penallties for non-submission of annual tax returns. Then, on 6 May, we received correspondence from SARS advising that they intended to auto assess a 2nd Provisional Tax return for one of our inactive clients if it was not submitted within 10 business days. Our Customer Relations Manager (CRM) system is designed to keep our active clients informed of upcoming returns, but please be aware that we cannot accept responsibility for failing to inform you of an up-coming return because our notifications are sent as a…
I registered a new company and shortly thereafter received this email from SARS Ah! That is clearly the Tax number of the new company. Great service! double click on the pdf and guess what? State secret! It would have been really funny if the password had been the tax number, but I looked up the tax number at CIPC and tried it, but no, not the tax number, not the company number, not my ID.
My AI generated weekly update advises me that from 4th May 2026, SARS will be imposing monthly administrative penalties on trusts that fail to submit their annual tax returns. This was gazetted on 27 March and specifically confirms that, as is the case with companies, it will apply even when the trust earns zero income. The probability is that the penalties will be R250 per month for every outstanding tax return. Since posting this article, we have received, on 5th May, our first notification of the imposition of R250 per return for a trust. So, it’s real and it’s happening.…
I asked three AIs and the answer was consistently no. There is no mechanism enabling you to resign from the above appointments without a replacement. SARS also advised on numerous occasions that it cannot be done. They were all wrong! I was on the spot because of all the shelf companies that we sell. I have to be the Registered Representative in order to maintain the tax affairs up until we sell the company. Then I’ve had to rely on the client to undertake the onorous task of appointing themselves in my place, which they frequently fail to do. I…
Your company ceased trading in, say, September 2025. What expenses between October 2025 and February 2026 are deductible for tax? We first have to go to s11(a) of the Income Tax Act which states that an expense is deductible if it is actually incurred in the production of income, provided it is not of a capital nature. There was no income after September 2025, so are all expenses thereafter disallowed? My opinion (and that’s all it is) is that certain expenses were required as a result of the production of income and would therefore be deductible. I can think of…
You’ve lent money to your trust’s company, perhaps for a deposit on a property purchase or perhaps from selling your property to the trust when it didn’t have the money to pay you. Either way s7C of the Income Tax Act kicks in. In simple terms, it says that you must charge interest at least at the official rate (which is the repo rate plus 1%). If you don’t, then the shortfall that you didn’t charge is deemed to be a donation and that is subject to Donations Tax at 20%. Now it gets interesting. If you don’t earn any…
This is the first time that I have seen SARS getting a judgement for Administrative Penalties. What does it mean? Well, the judgement was against a company, and that company has already been deregistered at CIPC. It was always dormant, so it owns no assets that the sheriff can seize. In other words, the judgment can have no effect whatsoever on the company. Can other assets be seized? No, not those of the shareholder, the director, the Public Officer nor the Tax Representative, none of whom were mentioned in the judgement. I asked Perplexity.AI whether there had ever been such…
The revised VAT compulsory registration means that if your company turnover is less than R2,3m you could consider deregistering it for VAT. What are the pros and cons? In favour of deregistration You only need to get the bookkeeping done annually. That saves a lot of fees. You don’t have to pay someone to submit the VAT returns. If most of your customers aren’t VAT registered, they will be no worse off if you charge them the same as when you were VAT registered. If you don’t have much Input VAT claim, this will increase your profits by about 15%.…
There were a lot of changes to the tax rates in this budget and there’s plenty of reporting on the subject. For my followers, these are the important ones that you may have missed. Primary residence exclusion for CGT is now R3m from R2m Annual Donations Tax allowance R150 000 from R100 000 Voluntary VAT registration from R120 000 (or average R10 000 per month over at least two months) previously R50 000 (from average R4 200 per month over at least two months) Compulsory VAT registration now R2,3 m from R1m
If the basic amount on a 2nd Provisional tax return is zero and I submit a nil provisional, is there a penalty for understatement if my actual taxable income is less then R1m? That’s the question that I put to ChatBot, Gemini and Perplexity (my favourite). As always, I asked them for the specific reference sections of the relevant Acts from which they drew their conclusion. Answers: Chatbot was so way off track that what it said and the references that it gave are not worth a mention. Gemini, a well argued resounding Yes, you are liable for understatement penalties.…
The Transfer Duties Act defines “Property” as including the shares of a residential property company so, the sale of those shares attracts Transfer Duty. It also often attracts CGT. Let’s take an example. You own a company that bought a residential property for rental. The net Asset Value of the company started at R100 and has now grown to R3m due to the growth in value of the property. Now, you want to sell the shares to the trust that you registered back in 2020. My first question would be “What was the last tax year for which you submitted…
This interesting question came up during one of my recent meetings. The point was that a deceased estate usually takes over two years to wind up and it is during that time that interest may or may not be compulsory on a loan made by the deceased to his/her trust structure. Clearly, the starting point is s7C itself. Let’s see what it says. 7C. Loan, advance or credit granted to trust by connected person.—(1) This section applies in respect of any loan, advance or credit that— (a) a natural person directly or indirectly provides to (i) a trust in relation…
Yes you can. SARS often imposes Administrative Penalties of R250 per month on companies for every annual tax return that is overdue. Individuals normally get hit with R2 000 per month per return. These penalties can quickly grow to 10s of 1000s of Rands. So, you get scared and pay but still don’t do those returns. More penalties and maybe more payments. Finally, you (or your accountant) wake up and do the returns. Now what? You can ask for a remission of penalties which is usually granted, or You can wait and see what happens. Remarkably, SARS usually reverses the…
SARS has a new toy. Now, if you want to register a company for VAT or PAYE, you have to undergo a biometric examination. This means that you have to have a videocam on your computer. It then requres you to allow it to photograph your face. It first tells you to remove your glasses. Then to follow the written instructions. That’s a bit tricky for those of us who need to wear glasses to read the screen! Then it takes a full face shot, before telling you to look left and down, then right and down and I forget…
SARS has, in accordance with s23(4)(b) of the VAT Act, always had the right to enforce VAT registration when a company exceeds R1m VATable turnover. We have never known this to be enforced. Until now! There’s a department within SARS called Tax Base Broadening, Education and Outreach that we’ve never heard of before. My AI search couldn’t find out when it was established. It recently sent a letter to a client advising that his company must, within 10 days of the letter, apply for VAT registration failing which SARS would register the company for VAT in accordance with s22(5) of…
s54 of the Income Tax Act imposes Donations Tax on the South African donor irrespective of to whom the donation is made. So yes, once you have used up your R100 000 annual allowance, such a donation would be subject to the 20% tax.
s18A(A) of the Income Tax Act limits the deductible donations to PBOs to 10% of taxable income (before the donation). The donation is then deducted from your taxable income before the tax is calculated. Any excess can be carried over to future years. The donation must involve the actual transfer of money of goods, so you can’t “owe” the donation to the PBO. You must ensure that the PBO issues you with a receipt in the form described in s18A(2)(a)
This is almost a daily question so, here’s our advice. The response depends on whether or not you want the company alive. If you don’t want the company We have come up with a simple solution. Provided the company has never traded, we may agree to take it over, restore it and deal with the penalties. At the same time we will also register a new company for you at no charge if you want one. Your problem solved! You end up with a clean company and we deal with the dirty one. Send me an email to derek@harb.co.za giving…
Phew! This has been a long road. I am again deeply indebted to the Tax Faculty and specifically to Theloniuos Burrows for his assistance in clarifying this really tricky problem. The question that I am often asked, in one form or another, is “What is the VAT treatment of a Guest house/AirBnB/Student accommodation/House rental?” Guest House The easiest one to deal with is a Guest house because it is specifically mentioned in the definition of “commercial accomodation” in s1 of the VAT Act. Commercial accomodation is subject to VAT and so, therefore, are guest houses. There’s a special provision in…