Small Firms May Qualify For Additional Tax Waivers Under SA Amnesty
South Africa's Minister of Finance, Trevor Manuel, has announced the publication
of draft regulations that prescribe the circumstances under which the South African
Revenue Service (SARS) may waive additional taxes, penalties and interest for
qualifying small businesses.
The measures, which have been released for public comment, are part of the
SARS Small Business Tax Amnesty process. They are applicable to small businesses
that have already provided returns to SARS or have been assessed by SARS for
taxes, since full amnesty is not available for these taxes. Additional tax,
penalties and interest may have been levied on these taxes, thereby increasing
the outstanding amount of the small businesses’ tax debt. Since an objective of the amnesty process is to facilitate the normalisation
of the tax affairs of small businesses, a partial waiver of outstanding tax
debts has been proposed as part of the amnesty process. However, Manuel emphasised
that the waiver applies only to additional tax, penalties and interest and excludes
the underlying tax portion of the tax debt owed to SARS. Applicants have until 31 May 2007 to submit an application for a waiver. The
application will not be considered by SARS if a business has pending sequestration
or liquidation proceedings against it; the Sheriff of the High Court has attached
assets of the applicant in execution of a writ of execution obtained on behalf
of SARS; or if notice has been issued by SARS that an audit or investigation
is to be conducted on the applicant. The amount of the additional tax, penalty and interest that will be waived
is the amount that relates to the qualifying period covered by the amnesty legislation
and is still outstanding as at the close of business on 31 July 2006, the day
before the amnesty window period opened. The maximum amount of additional tax,
penalties and interest that may be waived by SARS is R1 million (US$138,000),
which covers the situation of the vast majority of small businesses. In return
the applicant must settle any outstanding balance within six months or such
longer period as SARS may allow, failing which the additional tax, penalty and
interest waived will be reinstated. The Small Business Tax Amnesty and Amendment of Taxation Laws Bill, which was
passed by parliament in mid-2006, imposes an incremental levy on newly-declared
income, up to a maximum level of 5%, based on declarations of income
for the 2005/6 tax year. The amnesty began on August 1, 2006 and will remain in place until May 31,
2007. Companies with an annual turnover of less than R10 million are permitted
to participate in the scheme. The amnesty is designed to entice the substantial number of small businesses
currently operating in the 'informal economy' to regularise their tax affairs,
while encouraging a compliance culture and broadening the tax base. .
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