Maintaining a tax compliance status when utilising the COVID-19 tax relief measures
13 August 2020
The impact of COVID-19 on our economy is at the point that has forced South Africa and the rest of the world to a grinding halt. Most of the small and medium enterprises affected by COVID-19 have to consider the livelihood of their staff members, which would mean that the deferment of an income tax liability could ensure that the job of a staff member could be saved.
In order to alleviate the financial impact of COVID-19, SARS has initiated the approval of debt deferral applications for financially distressed taxpayers without incurring penalties and interest.
In cases where the taxpayer’s debt in question is R 5 million or less and the period of deferment is not more than 6 months, SARS requires a letter detailing how the taxpayer has suffered financial hardship at the hands of COVID-19. Where the taxpayer’s debt in question exceeds R 5 million and the period of deferment sought is more than 6 months the following documentary requirements are sought by SARS:
- A letter requesting deferred arrangements, stating the reasons for the request and the specific tax periods;
- Latest Annual Financial statements and latest management accounts;
- A list of debtors and creditors; and
- Cash flow projections for the next three months.
The importance of maintaining a compliant tax status in these uncertain times is paramount, especially for taxpayers seeking new business opportunities. Many taxpayers have attempted to obtain tax clearance pin certificates once a deferral payment arrangement has been approved by SARS, to which such request has been declined, despite all other tax types reflecting as compliant.
The reference by SARS to a deferred payment arrangement is in fact an instalment payment agreement in terms of the Tax Administration Act (“TAA”). Section 167 (1) of the TAA, provides that an instalment payment arrangement is an arrangement where a senior SARS official enters into an agreement with a taxpayer in the prescribed form under which the taxpayer is allowed to settle a tax debt in instalments.
In terms of section 256(3)(a) of the TAA, a senior SARS official may provide a taxpayer with a tax clearance pin certificate only if satisfied that the taxpayer is registered for tax and does not have any tax debt outstanding, excluding a tax debt contemplated in section 167 of the TAA. This means that if all of the tax debt outstanding is subject to an instalment payment agreement, SARS must issue a tax clearance pin certificate.
The COVID-19 tax relief offered by SARS must be utilised by taxpayers without fear of not being able to obtain a tax clearance pin certificate. In the event that taxpayers struggle to obtain a tax clearance pin certificate after entering into a deferral payment arrangement with SARS it is suggested that the matter be referred to a registered tax practitioner for assistance.
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