When an olive branch is extended to you, sometimes the best thing is to grasp it with both hands. During his 2006 Budget speech, Trevor Manual announced that SARS was introducing a tax amnesty for small business but since the amnesty opened on 1 August 2006, few businesses have taken advantage of this unique opportunity to make good with the Receiver. This is surprising, given the harsh penalties and possible prosecution business owners face if they are found to be non-compliant after the amnesty has ended.
To recap, a small business with a turnover of less than R10 million for the tax year ending 31 March 2006 can apply for amnesty for the following taxes up to the start of the 2006 tax year:
- Income tax on profits (taxable income),
- Secondary tax on dividends.
You can also get amnesty for the following taxes up to 28 February 2006:
- VAT (Value Added Tax);
- PAYE (Pay As You Earn);
- Contributions on payroll to skills development levies (SDL) and unemployment insurance fund (UIF); and
- Withholding tax on royalties.
Any individual (including the deceased or insolvent estate of the individual), unlisted company, close corporation, trust or co-operative which meets certain requirements may apply for tax amnesty.
These requirements are:
- the individual or entity must have carried on a business;
- in the case of a company or close corporation, all the shares or members’ interests must have been held directly by individuals throughout the 2006 year of assessment; and
- in the case of a trust, all the beneficiaries of that trust throughout the 2006 year of assessment must have been natural persons.
The amnesty covers all fines, interest and penalties and, once granted, means that SARS may not make a criminal case against you – as long as you have been honest about your income. In order to apply for amnesty you need to fill in the small business tax amnesty application form (SBA001). Get it from a SARS office or download it from www.SARS.gov.za. With this form, you will need to submit the relevant income tax return for the 2006 tax year, as required in the case of an individual or business, and a statement of all assets and liabilities as at 28 February 2006. If you don’t have documents to prove what your taxable income is, give a reasonable estimate of these amounts.
The reason so few businesses have taken advantage of this opportunity may be because they will have to pay the income tax due for the 2006 year of assessment, as well as an amnesty levy. Given that they have got away with paying no tax for so long, they don’t see the point of now having to cough up. But this is seriously misguided. As SARS’s systems increase in sophistication, the chances grow ever slimmer that non-compliant businesses and individuals will continue to be able to slip under the radar. And you can be sure that SARS will deal particularly harshly with those who are non-compliant after the amnesty has ended; it pays to make use of the opportunity being offered now to put your tax affairs in order.
Bear in mind that this is a chance to be honest. Your amnesty will be withdrawn if you fail to pay the full amount of the tax amnesty levy within 12 months from the date of approval; if the estimates you make are materially incorrect; and if you do not give full and honest information or amounts, including a statement of assets and liabilities as at 28 February 2006.
Applications close 31 May 2007. Diarise this date and make sure you’re compliant by then. After all, it’s not every day that SARS is lenient with people who haven’t paid their taxes.
You cannot get amnesty:
- For income you received in the form of a salary or wage;
- For taxes you have already paid;
- For taxes that become payable because you submitted a tax return before you applied
- for amnesty; or
- If SARS has already informed you that they want to audit or investigate you.
Rates to be applied in the calculating of the tax amnesty levy are:
FROM TO LEVY (R)
R0 R35 000 No levy payable
R35 000 R100 000 2% of the amount above R35 000
R100 000 R250 000 R1 300 + 3% of the amount above R100 000
R250 000 R500 000 R5 800 + 4% of the amount above R250 000
R500 000 and above R15 800 + 5% of the amount above R500 000