SARS is hitting companies (especially dormant ones) with monthly Administative Penalties of R250 for every outstanding annual tax return. The result is a debt to SARS that quickly grows to tens of thousands of Rands.

This catches many people unawares because there’s a common misperception that if the company is dormant it does not have to submit tax returns.

What should you do if your company got hit?

First off is to ignore the threatening emails you are getting from SARS’ appointed collecting agent. They are threatening the company, not you (although they deliberately mislead you in this regard).

Next, you should stop the penalties from continuing by submitting all outstanding nil tax returns. Continue to submit nil annual tax returns until the problem is resolved as described below. At this stage, there are no Administrative Penalties being imposed for failure to submit Provisional Tax Returns, so you can skip those.

Then you have to deal with the penalties that have built up.

There are three of scenarios:

• Your company is in “AR Final De-registration” at CIPC.
  • Send SARS proof that the company did not trade (nil bank accounts or an affidavit) together with proof of the de-registration and request a reversal of the penalties as well as suspension of tax registration.
  • If they decline your request you need to consider your risk.
    • They cannot collect the debt from the company because it has no money and is no longer registered.
    • The company is de-registered and is not, therefore, liable to continue submitting tax returns after de-registration.
    • If you are the Representative Taxpayer for the company, SARS cannot hold you personally liable for non-payment of taxes because you did not divert money from SARS that could have been utilised to pay taxes.
    • If you are the Public Officer, then it is a criminal offence for you not to have submitted company tax returns. But you’ve now submitted them all, so you are in the clear. You are only guilty of late submission and that is not a criminal offence. SARS can (and has) imposed penalties on the company, but not on you personally.
    • You can ignore SARS and their attorneys from here on. This will not prejudice you if you start another company at some stage.
• Your company is “In de-registration process” at CIPC.
  • Submit the company’s Beneficial Ownership Return to CIPC.
  • Do not submit any more Annual Returns to CIPC.
  • Continue submitting nil Annual Tax Returns to SARS.
  • When CIPC finally de-registers the company, proceed as above.

• Your company is “In business” at CIPC.
  • Submit the company’s Beneficial Ownership Return to CIPC.
  • Do not submit any more Annual Returns to CIPC.
  • Continue submitting nil Annual Tax Returns to SARS.
  • When CIPC finally de-registers the company, proceed as above.