Small business plays a vital role in stimulating growth in the economy, fostering job creation and creating wealth. There are, however, many small businesses that are not fully tax compliant and even though many of them would like to become compliant, to do so would mean risking tax payments and penalties.
In his 2006/2007 budget speech, Finance Minister Trevor Manual announced that SARS would offer a tax amnesty to small businesses with a turnover not exceeding R5 million who have previously not been compliant with the tax system. If you have a friend who knows someone who has a friend in this position, then read on.
Tax amnesties are SARS’ way of offering an olive branch to taxpayers who they would otherwise fine and prosecute for non-compliance. It’s a golden opportunity and one you should not hesitate to take.
As SARS states in a document posted on its website: “It should be noted that revenue collection is not the immediate goal of registering small businesses for tax purposes. Bringing people into the taxnet is not always about immediate gains – it is also about future contributions and general improvement in the culture of compliance. This amnesty enables compliance and regularisation.
“As businesses grow, they can see the benefits of moving into the formal economy. One part of this growth is about regularising their relationship with government, including SARS as a revenue administration. It will also enable small businesses who are partially compliant to eliminate any uncertainties that may exist in respect of taxation.”
In this particular case, taxes, penalties and interest will be waived for years of assessment ending on or before 31 March 2004, subject to a non-disclosure penalty of 10% based on taxable income for 2005. This applies to small businesses that have been totally non-compliant as well as those that have been only partially compliant; that is, those that are registered but that have under-declared their tax position.
The amnesty will be rolled out in two phases. Phase one pertains to taxi operators, and the amnesty window period for this will run from 1 August 2006 to 31 May 2007. Phase two will include other qualifying small businesses and will commence later in the year.
All persons (natural persons, trusts, companies and co-operatives) who operate one or more businesses, the collective turnover of which does not exceed R5 million for the 2005 year of assessment, qualify to apply for amnesty. This includes persons unregistered for tax purposes at 31March 2004 and those who are registered taxpayers and whose income from small business activities has not been declared or has been understated.
Income from salary and investment is excluded from this amnesty, as are those people who are the subject of enforcement action and who have received a letter from SARS stating that they are the subject of a tax audit or investigation. In addition, the amnesty excludes any person who has already submitted a return to the extent of the amount already disclosed.
Amnesty will be refused or revoked in those cases where a person fails to make full disclosure of all income received inthe 2005 year of assessment, as well as a full disclosure of such person’s assets and liabilities as at the end of that year.
|How to Apply
You need to apply for amnesty in writing to SARS during the window period for the phase that applies to you. If you qualify, you will be required to pay a levy of 10% based on taxable income from small business operations for the 2005 year of assessment. No refunds will be made for taxes paid in respect of years of assessment for which amnesty has been granted.
A separate unit within SARS will be established to process all applications on a confidential basis.
Contact your regional SARS office for more information, or visit www.sars.gov.za.