South Africa Publishes Small Business Amnesty Law

by Robert Lee, Tax-News.com, London

12 May 2006

Draft legislation has been published in South Africa to implement the small business tax amnesty announced by Finance Minister Trevor Manuel in the 2006 budget.

The amnesty is being put in place by the government in an attempt to entice the many small businesses currently operating in the 'informal economy' to regularise their tax affairs without fear of punishment by the tax authorities.

According to the South African Revenue Service (SARS), "walkabouts" in informal business areas have indicated that numerous small businesses are not registered or have not made full disclosure to the tax office. It says that the amnesty will give these business an "opportunity for regularisation without fear of tax liabilities arising out of past noncompliance".

Manuel also hopes that the amnesty will help to broaden South Africa's tax base and encourage more of a compliance culture.

The amnesty will be open to any individual, private company, close corporation, trust, unlisted public company, co-operative, insolvent estate or deceased estate meeting certain conditions. These conditions are that: the individual or entity must carry on a business; the gross income (turnover) of the business during the 2005 tax year must not have been more than R5 million; and in the case of a company or close corporation, all the shares or members’ interests must have been held directly by individuals on the last day of the 2005 tax year.

A levy of 10% will be imposed on the taxable income determined for the 2005 year of assessment relating to amounts which were not declared to SARS before 15 February 2006.

SARS and the National Treasury are inviting comments on the proposals by the end of May.

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