Penalties for Non-submission of Corporate Income Tax Returns

This penalty is not a new thing for individual taxpayers, as SARS had been imposing penalties for non-submission of their income tax returns since 1 January 2009.  Companies with outstanding income tax returns have recently received notifications from SARS that this penalty will now be imposed on companies as well.

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It is not surprising that SARS decided to also impose the penalty on companies who fail to submit their income tax returns.  What is surprising is that SARS issued this notice in September, while the public notice referred to in section 210(2) was still only in draft form and open for public comment until the 31st of October 2018.

The “failure to comply with an obligation that is imposed by or under a tax Act” is defined in the draft public notice as follows:

Failure by a company to submit an income tax return as and when required under the Income Tax Act for years of assessment ending during the 2009 and subsequent calendar years, where SARS has issued that company with a final demand, referring to this notice and requiring the submission of the outstanding income tax return, and the company failed to submit the return within 21 business days of the date of issue of the final demand.

Compare this to the public notice issued in respect of natural persons:

Failure by a natural person to submit an income tax return as and when required under the Income Tax Act for years of assessment commencing on or after 1 March 2006 where that person has two or more outstanding income tax returns for such years of assessment.

Companies have not been afforded the “one return grace” enjoyed by natural persons.  Once the draft notice has been accepted and SARS issues the public notice, a company that is not up to date with its returns will be liable for the administrative penalty.

The penalties range from R250 to R16 000 per month that non-compliance continues, depending on a company’s assessed loss or taxable income.  It is compulsory for registered companies to submit their income tax returns. If a company is dormant, it is still required to submit any outstanding returns prior to 2018.

A company must submit its income tax return within 12 months from the date on which its financial year ends.  A “year of assessment” is defined as the financial year ending in any particular calendar year.  So, while natural persons have to submit their 2018 income tax returns by 31 October 2018 and provisional taxpayers by 31 January 2019, a company with a financial year ending on 28 February 2018, will have a full year to submit its income tax return.

It will be interesting to see if SARS treats the notices issued in September as “final demands” for purposes of the imposition of the penalty.  In the interest of fairness and reasonableness, the demands should only be issued after the public notice has been published in the Government Gazette.

Annalize Duvenage – Specialist Tax Consultant

Petro van Deventer – Senior Manager

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