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10 Questions About The Tax Amnesty For Small Businesses

28 February 2006   (0 Comments)
Posted by: TaxFind™
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10 Questions About The Tax Amnesty For Small Businesses
 
The tax amnesty offered to small businesses as from 1 August 2006 allows small business owners to become tax compliant without being punished for the past.There are, however, crucial questions that the small business owner needs to ask to come to grips with the amnesty.The SARS web site offers insightful answers to these questions:
 
Q 1: What benefits are there for me to join the tax system?
Becoming tax compliant has a number of benefits to businesses.They do no longer have to live in fear of SARS’s enforcement actions and possible criminal prosecution.And they can now access additional business (including tendering for government tenders) and finance because they will have a tax clearance certificate.Taxi operators can participate in the taxi recapitalisation programme.Finally, you will be contributing your fair share to the growth and development of South Africa.

Q 2: Who may apply for amnesty?
Any individual, close corporation (CC), unlisted company, trust, body corporate,association of persons, co-operative,insolvent estate or deceased estate meeting certain requirements may apply for amnesty.The requirements are that –
• the individual or entity must have carried out a business;
• the gross income (turnover) of the business during the 2006 tax year was not more than R10 million;
•and in the case of a company or CC, all the shares or members’ interests were held directly by individuals throughout the 2006 tax year.

Q 3: What does the 2006 tax year mean?
The 2006 tax year for individuals and trusts is the period from 1 March 2005 to 28 February 2006.For other entities such as companies and close corporations the 2006 tax year is the financial year which ends on 31 March 2006.

Q 4: I am already registered for tax. Do I qualify for the amnesty?
Taxpayers who are already registered can also make use of the amnesty window.If you have not been completely honest about your business income in previous returns you can use this opportunity to come clean.If you don’t, you can be prosecuted for previous non-compliance.

Q 5: What are the implications if you were fully compliant for income tax but never registered for VAT or the payroll taxes?
You may apply for amnesty in respect of VAT, PAYE, skills development levies (SDLand unemployment insurance contributions (UIF). You will have to pay the amnesty levy of between two and five per cent on your taxable business income for 2006.You will further forfeit an assessed loss and assessed capital losses brought forward from the 2005 tax year. You will have to submit returns for VAT, PAYE, SDL and UIF contributions as from 1 March 2006.

Q 6: Can I apply for amnesty for only one tax?
The tax amnesty application covers all the qualifying taxes.If you wish to obtain tax amnesty in respect of any one of these taxes their application will also include all the other taxes, even if you have been fully compliant in respect of those other taxes.You will still have to pay the amnesty levy on the taxable income of your business for the 2006 tax year.

Q 7: Does the amnesty cover all offences and potential prosecution under any law of South Africa?
No.A person with approval under the tax amnesty is only deemed not to have committed any offence in terms of any act to which the tax amnesty relates, hence it only covers tax offences committed in respect of income tax, STC, PAYE, withholding tax on royalties, VAT, SDL and UIF. Customs and excise and indirect taxes, such as transfer duties, are not covered.

Q 8: What is excluded from the tax amnesty relief?
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 date of the application or becomes payable as a result of any return, declaration or information submitted to SARS before the date of the application.

Q 9: What information is required in the application?
The applicant must:
•disclose the taxable income of all amounts received from carrying on business during the 2006 tax  year;
•furnish an income tax return for the 2006 tax year and a statement of all assets(at cost) and liabilities as at 28 February 2006; and
•provide reasonable estimates of income if it is not possible to provide full particulars of any actual amounts.
 
Q 10: Will there be another amnesty?
There are no plans for any further tax amnesties.This is a once-off chance for small businesses to come clean without fear of heavy penalties.
 
Source:  www.sars.gov.za (TaxTALK)

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