In general, all registered companies must submit corporate income tax (“CIT”) returns within 12 months of the end of the company’s financial year-end. This is applicable to all companies that are resident in South Africa, that receive source income in South Africa, or that maintain a permanent establishment or a branch in South Africa.
On 29 November 2018, the South African Revenue Service (“SARS”) issued a media release confirming that SARS will soon start imposing administrative non-compliance penalties as provided for in Chapter 15 of the Tax Administration Actfor outstanding CIT returns. To date, these penalties were only imposed on individuals with outstanding income tax returns.
This announcement follows a media release earlier in November 2018 which stated that SARS is once again embarking on a nationwide awareness campaign to reinforce taxpayers’ obligations to submit outstanding tax returns, specifically targeting companies.
In this regard, the fixed amount penalties in terms of section 211 of the Tax Administration Act range from R250 (where the company is in an assessed loss position) to R16,000 (in instances where the company’s taxable income exceeds R50 million) for each outstanding return. Once the penalty has been imposed, the penalty will increase by the same amount for every month that the non-compliance continues.
In order to determine the amount of the penalty to be imposed, SARS will consider the year of assessment immediately prior to the year of assessment during which the penalty is assessed.
The penalties will furthermore be imposed by way of a penalty assessment. Any unpaid penalties will be recovered by means of the debt recovery steps.
According to the media release, the administrative non-compliance penalties will be imposed for outstanding CIT returns for years of assessment ending during the 2009 and subsequent calendar years. Please note that this will also apply to dormant companies with no receipts or assets.
SARS will, however, issue the relevant company with a final demand which will grant the company 21 business days from the date of the final demand to submit the outstanding returns before the penalties will be imposed.
Companies may request remittance of the penalties imposed from SARS and have the right to lodge an objection via eFiling should the request for remittance be unsuccessful.
The takeaway is that all companies with outstanding CIT returns (whether these companies have assessed losses for those outstanding years or not) should complete and submit these returns as soon as possible in order to avoid the administrative non-compliance penalties being imposed.
No. 28 of 2011