Tax Amnesty for Small Business

[I Robot]

SARS has provided a tax amnesty for small business. Applications to take advantage of this amnesty must be made between 1st August 2006 and 31st May 2007.

The Forum SA encourages all persons who qualify to take advantage of the relief offered by this amnesty and has set up a forum to discuss the issues and help answer any questions. However, to provide some level of privacy, particularly from internet search engines, this forum has been set up in the members area and will not be viewable by unregistered visitors.

[Dave A]

This seems to be a golden opportunity for business folk to get their tax affairs in order.

However, I'm sure there are a few folk who are a bit nervous of "inviting trouble" with SARS. Probably the biggest concern is if you go to SARS confessing an issue, and it turns out not to be covered by the amnesty.

If there are specific questions/scenarios you need answers on, please post them in the Tax Amnesty forum. I'll then go to SARS for answers.

[I Robot]

I've been asked to post a link to the SARS info.

This page on The Forum SA front end has got all the SARS info and links loaded.

[I Robot]

This enquiry has been received through the contact us link:

DEAR SIR/MADAM......................WHO CAN I CONTACT ABOUT VAT AMNESTY FOR 2006 IN CAPE TOWN.

THIS IS FOR A COMPANY I WORK FOR WHO WOULD LIKE TO SORT OUT ALL THEIR TAX PROBLEMS......

PLEASE EMAIL ME ON WHAT THIS INTAIL AND WHAT IS THE BEST WAY OF DEALING WITH SARS

REGARDS

Suggestions...

[Dave A]

Three options come to mind.

You can contact SARS directly. A list of SARS offices can be found here. The Cape Town office appears to be at 17 Lower Long Street, Cape Town.

You can contact an accounting firm. Being up to speed on tax issues is part of how they earn their living.

You can register with The Forum SA and access the Tax Amnesty discussion forum

There's also quite a lot of information, including FAQ's and links to SARS application forms on this site here.

[Dave A]

I heard a quick excerpt about how things were going on the tax amnesty this morning. So far about 45 000 inquiries with SARS and about 10 000 filed applications. I got the idea that SARS felt those numbers were a bit lower than they should be, so with about 100 days to go with this amnesty, I though it might be an idea to cover some quick points that might just seal the deal for the hesitant. Unfortunately, I also raise a few questions, but I'll try to get them cleared up shortly.

Regardless, if you/your business qualifies, it's hard to think of a good reason not to take advantage of the opportunity.

First, the amnesty is for businesses, not for personal income tax. Close corporations, companies and other incorporated enterprises clearly qualify, but so do sole proprietorships and partnerships.

Second, turnover for the business must be below R10 million for the 2006 tax year.

Third, the amnesty is only applicable to stuff where there has been no return filed. If you've filed a return but not paid, this amnesty is not going to help. Rumour has it though that some form of relief is being considered in this regard.

To some extent, being a sole proprietor is something of an advantage here - your taxable income as a sole proprietor is basically the profit of your enterprise, so what you took as drawings is covered. Wave goodbye to any outstanding tax returns prior to the 2006 tax year.

For incorporated enterprises, tax on salaries awarded to working shareholders / members / directors may not be covered (see next paragraph), but dividends definitely are.
So did you get a salary, or a really nice dividend prior to the 2006 tax year?

This particular aspect of personal tax, to me, raises an interesting scenario:
What happens to staff with taxable income?
The amnesty clearly lets the company off the hook for PAYE due (remember, you can't have filed a return) for periods before 1st March 2006 - so if the company deducted PAYE from salaries, does this mean the employees are off the hook too?

The application process itself is not complicated. A fairly simple form.
There are basically two pieces of work which you'll have to do:

• Prepare financial statements for the 2006 tax year - 1st March 2005 to 28th February 2006, and
• Prepare a balance sheet for 28th February 2006.

If you don't have hard numbers to work with, estimates will suffice, but make sure they're as accurate as possible - amnesty will be lost if SARS establishes the numbers presented are way off base.

This might seem like a pain, but get used to it. As a fine, upstanding taxpaying business from now into the future you're going to be doing this every year from now on in. If you are struggling with the thought of this, just imagine a five year audit by SARS....

After that, get a tax consultant to help you with your 2006 tax year annual return and submit 2006 return with your amnesty application.

Cost wise, you'll be liable for:

• the tax on taxable income (profit) for the 2006 year,
• STC on any dividends for the 2006 tax year and,
• the amnesty levy based on the table found here.

Liabilities in respect of PAYE, UIF, SDL and Withholding tax on royalties to non-residents start accruing from 1st March 2006.

The big winners are sole proprietors who sold or closed their business before 1st March 2005. In this case 2006 taxable income on the business is 0. Amnesty level is 0 and wave goodbye to all unsubmitted tax returns from 2005 back. Businesses which closed / shareholder or member sold off the assets and goodwill (the best way to sell a business) are also in a similar position.

I'm also hearing that businesses with very low taxable income for the 2006 tax year are applying for amnesty anyway, just in case they slipped up somewhere in the past.

[Dave A]

If you are running a small business and haven't been paying any tax on your income - or haven't being paying all of it - now is the time to wipe the slate clean.

There are just three months left if you want to take advantage of the government's tax amnesty, as the offer closes on May 31.

If you are running a small business and have been declaring your income but have fallen behind with what you owe the taxman, there is some good news too.

The South African Revenue Service (SARS) is offering small business owners the opportunity to come clean about the past. In return for an amnesty levy, the tax you owe and any interest and penalties on that outstanding tax will be wiped off SARS's books and your affairs will be legal again as long as you continue to pay your taxes.

Small businesses that have been declaring their tax but have outstanding debts and, as a result, have been charged penalties for late payments and interest on the outstanding amounts are also likely to benefit from draft regulations under the Small Business Tax Amnesty and Amendment of Taxation Laws Act of 2006, which is due to go before Parliament shortly.
full story from Personal Finance here

[Dave A]

The South African Revenue Service (Sars) announced on Friday it would be intensifying its campaign to encourage small-business owners to apply for amnesty, and as a result, a number of Sars officials will visit various business premises in Hatfield, Pretoria.

The amnesty period took effect in August 2006 and is available to businesses with a turnover of less than R10-million. It expires on May 31 this year.

To date Sars has received 15 383 application forms, up strongly from the 11 301 they had received by February 13.

"Sars is aware of the fact that there are many more businesses that may require amnesty," it said in a statement.

SARS also said that the intensified Sars Amnesty Campaign in Pretoria on Friday will extend to other parts of the metropole over the weekend and will continue on Monday.

"Sars has identified areas where small-business activity is concentrated and has grown exponentially in recent times," they added.

Sars said similar visits to business areas will take place in other regions of the country over the next few weeks.

"The visits will establish whether these businesses -- operating mostly on the formal side of the economy -- are registered for tax, have any outstanding issues with Sars, and are aware of the small-business tax amnesty or whether they had applied for the amnesty," Sars explained.

"During today's initiative in Hatfield, businesses operating outside the tax net will be firmly cautioned that they are breaking the law," they added.

The team of about 40 Sars officials will be led by the Sars executive and will leave amnesty application forms with each business that qualifies for the amnesty and, furthermore, will offer assistance to business owners on how to apply, the revenue service said.

"Business owners will be given a timeframe during which to complete the amnesty form. Sars will record their details and will conduct follow-up visits to each business premises that are found to be non-compliant. Sars will consider whether or not to commence with audit activities and possible prosecution in the case of non-compliance," SARS said.

"Today's [Friday] action is in line with the commitment the Minister of Finance made to Parliament and the public in this year's budget speech in respect of the small business tax amnesty. Sars will continue to intensify its efforts to ensure that all businesses are afforded the opportunity to apply for amnesty," they added.
full story from M&G here

[duncan drennan]

Matthew Lester's column in the Sunday Times raises some points to consider,

But when the taxpayer is unable to settle with SARS, there is permanent loss to the fiscus. So the case can change from a civil proceeding to a criminal proceeding . And this is where I predict things are going to get frightening.

Imagine a state prosecutor after May 31 2007. He must argue that the taxpayer has been given the chance of a lifetime to come clean and has squandered the opportunity. Surely that means there will be grounds for criminal law to take its course, with no evidence in mitigation of sentence. I’m no lawyer, but I don’t think one has to be to realise the consequences for the taxpayer.
___________

Three years from now we are getting social security tax. That means all the staff of any business will insist the business is registered or they will miss out on being able to claim social security benefits.

So, just imagine the chaos three years from now when a business tries to register for social security and SARS asks: “Where have you been all this time?�

I raised the point of the impact of social security on taxes elsewhere.

Most important to note here, if you are even considering trying to fly under the radar, then expect to take a beating from SARS when the cotton on to you. So take the chance to have the slate wiped clean and apply for the amnesty if you are behind on your taxes.

[entoserv]

It looks like they want as many people as possible use the chance if they are going to people that they know should be getting the amnesty.

Sometimes I get cross because I think some people are getting away with it. But if everyone pays their taxes from now on the way they should, our taxes will be less.

Anyone who does not use this chance to come clean is a fool. I think SARS will be really ruthless after this if you had the chance and did not use it.