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.

[tagfan]

Time is running out for the Tax Amnesty window. I have been advised by the person who does my books that we are compliant, and that she feels an amnesty application would not be necessary.

My dilemna is whether to apply or not anyway, because how can one be certain that everything has been declared in respect of submitted returns?

Please help - The hourglass is running...

[Dave A]

It really depends just how confident you are that you've done everything by the book, and just what your taxable earnings were in 2006 tax year. If your earrnings are high (which would attract a fairly high amnesty levy), and you've been pretty disciplined in terms of your record keeping, applying for the amnesty might not make sense.

But I have heard of people applying and paying the levy "just in case." It may well be worth it if your amnesty levy works out to be a pretty trivial sum.

It is definitely worth it if you recently shut a business down - especially if the earnings were nil in the 2006 tax year. A neat way to tidy up any loose ends

[Dave A]

About 220 000 businesses have already registered for the government's small-business tax amnesty, more than twice as many as expected, Finance Minister Trevor Manuel said on Wednesday.

The amnesty, for businesses with a turnover of less than R10-million, was launched in August last year and was to have closed on May 31.

However, in the face of an avalanche of last-minute calls from businesses, including taxi operators, and long queues, offices of the South African Revenue Service (Sars) remained open until lunchtime last Saturday.

"We had an idea somewhere that about 100 000 businesses would register," Manuel told a World Editors' Forum lunch in Cape Town.
full story from M&G here

[duncan drennan]

including taxi operators

Whoohoo!! I think it is really great news that they are drawing more people into the tax system. I wonder what the impact will be on the economic numbers?