AKHONA MATSHOBA: Remember that company you started a few years ago to formalise your side gig that you had great ambitions for, but that you eventually ran out of fuel to sustain and forgot about – until this very moment at least? Or that time you signed on as a director of a company your friend or a family member started, to help them fulfil registration requirements, but which is no longer really active...
So you give an instruction to your accountants and they form a company and the company is then registered for tax. The project never comes off, you forget about it, or it runs out of steam at some point in time, and it kind of drops off your radar that you formed this company in 2014 and you haven’t really thought about it since then.
NEILL HOBBS: A ‘dormant company’ is really a kind of generic phrase we use. It’s not something that’s defined as such. So it’s a company that you’re not paying attention to, and that generally is not trading. But what they’ve said [is that] from December 1, 2022, guys, this is in the law and we will be applying it from December 1, 2022 onwards. So not a new law, and it’s revenue practice now to apply this law that’s been there for some time.
And I think that’s been the trigger that has led Sars to say: ‘We’re going to apply these penalties from 1 December 2022 onwards. You [the taxpayer] may be happy that you haven’t put in 10 years’ tax returns, but we’re not happy. It’s going to cost you if you don’t do it.’ If we accumulate that, we end up with R18 000 in fact as the penalty I have to pay for my three outstanding tax returns. So suddenly it’s a lot of money [that is due if] the company’s going to do nothing.
In terms of gross income earnings for [AngloGold Ashanti] and so forth, it’s fractional, but it still is going to be a significant amount of money. I don’t know what it amounts to in billions, but certainly billions would be the potential for this penalty. If we pick something a little bit closer to reasonability, if we had a company that made, for example, a R1 million taxable income three years ago, the penalty is a R1 000 per month, accumulating for each month outstanding.
NEIL HOBBS: In the first instance, it’s the company itself. If the company has no resources, then Sars would look to the directors of the company and say, ‘You have the duty of governance over this company, and there will be a public officer’. NEILL HOBBS: Okay, the first thing to do is to absolutely be proactive. For example what I’ve done – and you can do this quite easily – is go to CIPC [the Companies and Intellectual Property Commission], the companies registration office, and you could draw what they call a ‘spider report’ of every company of which [you are] a director.
So it’s my observation – it may not be right in terms of what’s going on within Sars – but my observation is that they’re applying the penalties at the moment fairly lightly, and not with the heavy hand that they’re entitled to in terms of the Tax Administration Act. If I can digress slightly, I’ve had exposure to revenue officials in other countries. We’re actually very blessed with the people we have working at Sars because, by and large, we are dealing with people who want to cooperate with us, and at this stage getting tax compliance up to date is without doubt one of the major drives within Sars.
HobbsSinclair Matshoba_A To avoid tax penalties on your dormant company, download the podcast below to learn about the correct process of deregistering a company with Christa Klokow from theCIPC on SmallBusinessConversations with Matshoba_A. Moneyweb SmallBusinessOwner