SARS Administrative penalties on dormant companies
I’m ready to give up!
This is what the Lwazi Bot on SARS website says –
“According to the law, a Company must submit tax returns annually and declare that the company is dormant, failure to do so may result in Administrative Penalties.”
And they certainly are hitting dormant companies with a R250 penalty every month for every outstanding tax return.
Here’s what their final demand says –
Trading Name: T TRADING PTY LTD
FINAL DEMAND TO SUBMIT OUTSTANDING RETURN(S) AS PER THE PUBLIC NOTICE ISSUED IN TERMS OF SECTION 210(2) OF THE TAX ADMINISTRATION ACT, 2011.
According to the records of the South African Revenue Service (SARS) you have failed to submit the following tax return(s): 2022. You have 21 business days to submit the outstanding return(s) from date of this notice.
Failure to submit the return(s) within the said period:
– Will result in administrative penalties being imposed on a monthly basis per outstanding return
– Could result in a summons being issued, and/or criminal prosecution which upon conviction is subject to a fine or to imprisonment for a period of up to two years. In the case of a successful conviction and all appeal or review proceedings are completed or are not instituted within the relevant timeframes, the following may be published for general information:
– Your name and area of residence;
– The particulars of the offence, if the Commissioner thinks fit; and
– The particulars of the fine or sentence imposed.
Difficult to imprison a company and impossible to collect a fine from one that is dormant!
Here’s an example of the accumulated penalties of R74 500 on a dormant company
Now let’s look at what the law actually says (s66 of the Income Tax Act ) –
66. Notice by Commissioner requiring returns for assessment of normal tax under this Act.—(1) The Commissioner must annually give public notice of the persons who are required by the Commissioner to furnish returns for the assessment of normal tax within the period prescribed in that notice.
And this is what the Notice says –
2. Persons who must submit an income tax return
The following persons must submit an income tax return:
(a) Every company or other juristic person, which was a resident during the 2022 year of assessment that—
(i) derived gross income of more than R1 000;
(ii) held assets with a cost of more than R1 000 or had liabilities of more than R1 000 at any time;
(iii) derived any capital gain or capital loss of more than R1 000 from the disposal of an asset to which the Eighth Schedule of the Income Tax Act applies; or
(iv) had taxable income, taxable turnover, an assessed loss or an assessed capital loss;
Now am I going crazy, or isn’t the effect of the Notice that a dormant company that has never traded does not have to submit a tax return and therefore cannot be charged penalties for non-submission?