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We like to keep our clients abreast of the latest developments in fields of law that concern them most. The new Small Business Tax Amnesty which is effective as from the 1st August, 2006 and until 31st May is just such a development.
The process of applying for amnesty can be daunting, so we have provided a guide in a question-and-answer format. To view the answer to one of the questions listed below, click on the question itself. When you wish to return to the list of questions, simply click on one of the links labeled "Top". The answers are summaries only and are not intended as a full guide to the Act.
We have also provided the correct forms to use when applying for amnesty. For the courageous, the "Small Business Tax Amnesty and Amendment of Taxation Laws Act" is also available.
If you would like assistance in bringing your application, or for further information, please contact:
Denis Lloyd at - tel: 021 464 1485 email:
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OR
Dean Malherbe - tel 021 464 1497 email:
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OR
Andrew Duncan - tel: 021 464 1410 email:
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To view a more comprehensive guide with commentary, click here.
Tax Amnesty Documents
(Right click and select "Save Target As" to download these documents to your computer)
Contents
Who will it help?
What is a "Business"?
Who can apply?
What period does it relate to?
How does it work?
How much will I have to pay?
What else do I have to do?
Will the Application be approved?
Who cannot apply?
What areas does the Amnesty not cover?
Will the information furnished be kept confidential?
Can I appeal if the Application is turned down?
Can I carry forward any losses/deductions/allowances?
Do I still have to pay normal tax for the 2006 tax year?
Does it make sense to apply?
Does FICA apply?
What should I do next?
Who will it help?
Small businesses which are unregistered for tax purposes at the end of the 2006 year of assessment or which are registered taxpayers but whose income, VAT or employment taxes due have not been declared or have been understated during any year of assessment preceding the 2006 year of assessment will benefit from the amnesty.
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What is a "Business"?
A "Business" is not defined other than by reference to the fact that it "includes the earning of investment income incidental to the regular carrying on of a business". It will include any kind of trading selling or manufacturing operations or providing of any kind of service ; ie as a tax consultant or taxi operator, but not someone who receives passive income only such as interest or dividends.
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Who can apply?
Any individual, unlisted company, close corporation, trust, co-operative or insolvent or deceased estate of an individual provided the the gross income (turnover) of the business(es) was not more than R10 million during the 2006 year of assessment. For a company or close corporation only natural persons can be members throughout the 2006 year and for a trust all the beneficiaries must have been natural persons.
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What period does it relate to?
The "2006 year of assessment" is defined as the year of assessment which ended during the period of 12 months from 1 April 2005 to 31 March 2006. Thus for individuals it will be their normal year of assessment ending 28th February, 2006.
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How does it work?
If the applicant "owns up" to taxable income earned for the 2006 tax year and pays an amnesty levy based that amount, he/she will be exempted from paying:
- Income Tax in respect of any amounts preceding the 2006 yearofassessment
- Employees’ tax up until 28th February, 2006
- VAT in respect any supplyor importation of goods or services up and until 28th February, 2006;
- Withholding tax on royalties paid to a non-resident preceding the 2006 year of assessment;
- STC in terms of the Income Tax Act, in respect of any dividend declared in all years of assessment preceding the 2006 year of assessment;
- contributions payable in terms of the Unemployment Insurance Contributions Act up and until 28th February, 2006, and
- Levies payable in terms of the Skills Development Levies Act, up and until 28th February, 2006.
The applicant will also not be liable for the payment of any additional taxes, interest and penalties which relate to the amounts for which relief has been granted. relates to the extent that relief has been granted to that applicant.
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How much will I have to pay?
The rates to be applied in the calculating of the tax amnesty levy are -
- 0% of so much of the taxable income as does not exceed R35 000;
- 2% of so much of the taxable income as exceeds R35 000 but does not exceed R100 000;
- 3% of so much of the taxable income as exceeds R100 000 but does not exceed R250 000;
- 4% of so much of the taxable income as exceeds R250 000 but does not exceed R500 000;
- 5% of so much of the taxable income as exceeds R500 000.
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What else do I have to do?
Applications can be submitted as from1 August 2006 to 31 May 2007 together with an income tax return for the 2006 year of assessment and a statement of all assets (at cost) and liabilities of that applicant as at the end of the 2006 year of assessment. If it is not possible to provide full particulars of any actual amounts in the application, the applicant may provide a reasonable estimate of those amounts.
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Will the Application be approved?
The Application must be approved provided full disclosure of any information or amounts required in the application, the income tax return and the statement of assets and liabilities for the the 2006 year of assessment and any estimates made by the applicant are not materially incorrect. In addition the full amount of the tax amnesty levy must be paid within 12 months from the date of approval.
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Who cannot apply?
Tax amnesty will not apply if SARS has, before the submission of the application, formally notified the applicant of an audit, investigation or other enforcement action relating to any failure by that applicant to comply with any Act in respect of which application for tax amnesty is made. This exclusion falls away if SARS has, before the submission of the application notified the applicant that the notice of audit, investigation or other enforcement action has been withdrawn or the audit or investigation has been concluded.
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What areas does the Amnesty not cover?
The tax amnesty does not apply in respect of any tax, levy, contribution, interest, penalty or additional tax which -
- had already been paid by the applicant before the submission of the application;
- becomes payable as a result of any return, declaration or information submitted to SARS
- before the submission of the application; or
- is payable by the applicant in terms of an assessment issued by SARS before the submission of the application;
- relates to value-added tax not paid as a result of a false declaration of the acquisition, import or export of goods or services that did not actually occur.
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Will the information furnished be kept confidential?
Yes, the secrecy provisions of the Income Tax Act will apply but this is subject to the exchange of information that is allowed between SARS and the Reserve Bank.
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Can I appeal if the Application is turned down?
Yes, in terms of the normal dispute resolution procedures of the Income Tax Act, 1962.
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Can I carry forward any losses/deductions/allowances?
No! If tax amnesty is granted that applicant may not -
- utilise any assessed loss or assessed capital loss arising during the qualifying period;
- set off the excess of any dividends which accrued to the applicant during any dividend
- cycle ending during the qualifying period against any dividends declared by the applicant in any dividend cycle ending after the qualifying period;
- claim a deduction of any VAT input which relates to any supply to that applicant during any tax period ending during the qualifying period.
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Do I still have to pay normal tax for the 2006 tax year?
Yes, once the return submitted with the Application has been assessed by SARS.
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Does it make sense to apply.
Yes. Anyone who has committed any irregularity whether intentionally or otherwise will be excused all payments that would otherwise have been required for the pre 2006 period for the various taxes and levies referred to above. It also means that all directors or members of a CC are off the hook as they would otherwise be personally liable for payment of VAT. In addition a successful applicant will not be subjected to criminal prosecution in consequence of any offence committed in terms of any Act to which the tax amnesty relates to the extent that relief has been granted to that applicant.
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Does FICA apply?
No, your Financial Advisor has been exempted from the provisions of section 29(1)(b)(iv) of FICA and does not have to report what is advised to him/her in seeking advice as the operation of the Amnesty in relation to the business in question. A copy of the Exemption is available on our website. See the icon at the head of the section on the left.
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What should I do next?
Complete the Application form on the Walker’s Website or ask us to help you.
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