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Section 13 - Lucky for some

Monday, 01 May 2006   (0 Comments)
Posted by: Author: Peter O'Halloran
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Section 13 - Lucky for some

Section 13 of the Small Business Tax Amnesty and Taxation Amendment Act, 9 of 2006 reads as follows:13 Waiver of additional tax, penalty and interest 

(1)The Minister may by regulation prescribe the circumstances upon which  the Commissioner  may waive, in whole or in part, any amount of additional tax, penalty or interest payable in respect of any year of assessment, dividend cycle, tax period or month ending during the qualifying period, by a person who satisfies the requirements as set out in section 2 but to whom the tax amnesty relief will not apply as a result of the circumstances contemplated in section 10 (b) and (c), where that waiver would facilitate the purpose and objective of the tax amnesty as contemplated in section 1 (b) of the Second   Small  Business Tax Amnesty and Amendment of Taxation Laws Act, 2006.

(2)The Minister must, in the regulations contemplated in subsection (1), prescribe- (a) the procedures to be followed by the Commissioner   in waiving any amount; and (b) the requirements for reporting by the Commissioner of any amounts which have been waived.

(3)The Minister  must  publish draft  regulations in the Gazette for public comment and submit the draft regulations to Parliament for parliamentary scrutiny at least 30 days before any regulations contemplated in this section are  published.This section is of great interest to tax advisors as it provides for the waiver by the Commissioner of additional tax, penalties or interest owed by an applicant who is already known to SARS and who, but for that fact, should have qualified for amnesty. Successful applicants under section 13 will be those to whom section 2 applies.(Close Corporations, Companies, Trusts and Natural Persons who have earned active business income of up to R 10Million or less).

In terms of section 10(b) and (c), these applicants' amnesty applications cannot be successful due to an assessment having been issued prior to the application for amnesty,or if the applicants or their representatives have already disclosed information in a return to the commissioner.The above applicants will qualify for section 13 relief in circumstances where the waiver will facilitate the purpose and objective of the tax amnesty  as  contemplated in section 1(b) of the Second Small Business Tax Amnesty and Amendment of Taxation Laws Act, which is the normalisation of the taxation affairs of small businesses.The effect of section 13 is that applicants who are already stuck in the quagmire of penalties, interest and additional taxes, will obtain welcome relief from such penalties, interest and additional taxes.Such applicants will not be in as  advantageous a position as those business people whose amnesty applications have been entirely successful, as they will still be expected to pay the normal tax outstanding, but I submit that the relief will be welcomed nonetheless.

In an attempt to obtain some clarity on the above (section 13), I made inquiries at the SARS amnesty unit. The consultant informed me that:

1.The regulations that are referred to in section 13 have not yet be en published.(Should the regulations not be published at all during the amnesty period, then, quite obviously, section 13 applications will not be entertained by the SARS amnesty unit at all!)

2.It is not certain that such regulations will be published, but it is believed that such regulations are still to be published.

3.An email to the amnesty section in which the SARS official states that there might be some developments re the regulations referred to in the section, by the end of February.The wording ran along the lines of "... the regulations are not yet ready, please check the progress by the end of February”. 

4.As the amnesty time period is nearing its end, it is thought that it might be extended in order for the section to be effective.  Note that Section 13(3) makes provision for the draft published regulations to be gazetted for public comment and placed before parliament at least 30 days before they are published. Parliament has just started in its first term at present (17 January to 30 March 2007) and the second term only begins on the 02 of May.Thus, unless such regulations are tabled before Parliament before the 01 of March, there seems to be no chance that the regulations will be promulgated at all within the amnesty period. Such regulations have not even been published for public comment.

5.In light of the above, either   the regulations mentioned in the section will simply not be promulgated, and the amnesty will run  its  course,or  the amnesty will be extended once such regulations are in force, to allow for their application.

6.The amnesty unit has received many more applications of late.The amount of businesses that are   applying has increased dramatically in the past few weeks.

7 .The intention of  the Act was to regularize the tax affairs of small  businesses and in that light, most of the applications  have been  successful .

8.Even established businesses that have applied for amnesty in terms of the Act have been successful,so the amnesty is not simply for start-up businesses,but is for older,established businesses as well.

Source: By  Peter H O'Halloran ( TaxTALK)



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