SARS is coming after these companies in South Africa
The South African Revenue Service (SARS) is proposing changes to the country’s tax laws to come down on companies who fail to set up public officers in the country—which often results in a major administrative headache for the taxman when it comes time for these companies to pay their dues.
Under the current laws, when a company or business is established in South Africa, it has a 30-day window to appoint a public officer who becomes SARS’ point of contact to handle that company’s tax affairs.
Every company conducting business or having an office in the Republic must, at all times, be represented by an individual residing in the Republic.
The officer must be approved by SARS and must be a senior official of the company.
If no senior official resides in the Republic, another suitable person, duly appointed by the company or by an agent or legal practitioner with authority, can serve as the representative for purposes of a tax act.
The public officer is responsible for ensuring the company complies with all obligations under tax laws and is subject to penalties for any defaults by the company. The company is also regarded as having performed any actions taken by the public officer in their representative capacity.
In cases where a public officer is not appointed as required under this section, SARS designates a director, company secretary, or other officer of the company as the Public Officer.
Where a company has not appointed a public officer, the company is subject to a tax Act as if a tax Act did not require the public officer to be appointed.
According to tax experts at Tax Consulting SA, however, the current laws have practical complications—particularly for foreign companies operating in South Africa, but not exclusively.
“Domestic companies often miss the requirements to appoint a public officer as required by the tax laws. In these instances, and as the senior membership of the company are most often all present in South Africa, SARS will designate a senior official as the Public Officer,” the group said.
“For external companies, being branches of a foreign registered company or even subsidiary offices where all senior executives are not physically present in South Africa and so are not suitable persons, this normally results in several administrative difficulties as their officers rarely meet the requirements to be appointed as the default public officer.”
Without a suitable public officer, no tax registrations such as VAT, amendments or filings can be done. Not only is this an administrative burden, but it can also, in some cases, result in administrative penalties being imposed, Tax Consulting said.
Coming changes
On 1 August 2024 National Treasury issued the 2024 Draft Tax Administration Laws Amendment Bill, which included proposed amendments to section 246 of the Tax Administration Act, 28 of 2011, pertaining to public officers.
The main changes being introduced in the proposals is eliminating a way for companies to shirk the responsibility of appointing a public officer.
SARS wants to remove the 30-window to appoint one and instead make it that a public officer is appointed at the same time the company is formed—in a way similar to how income tax numbers are allocated.
The proposals also aim to streamling any uhming and ahhing over who should be appointed by setting a more rigid hierarchy.
Where a company fails in appointing a public officer, by default, the public officer will be regarded to be a suitable individual in this order:
- Managing director or equivalent
- Financial director or equivalent
- Company Secretary
- Director or prescribed officer who has the largest shareholding in the company
- Director of prescribed officer who has the longest period of time
- A senior employee of the company in order of the company’s reporting hierarchy
“Should none of the persons in these roles meet the requirements to be appointed as public officer, SARS may appoint any suitable person that SARS designates for that purpose,” Tax Consulting said.
Where an individual appointed as public officer is no longer be suitable to represent the company, or is no longer eligible, SARS may then withdraw its approval of the appointed Public Officer.
“In such cases, the company is regarded as not having appointed a public officer and upon receiving notice from SARS, must, within 21 business days, appoint a suitable replacement representative,” Tax Consulting said.
However, while the taxman is moving to limit room to shirk this duty, some questions remain.
“How SARS will designate suitable public officers where the company does not have eligible candidates or failed to make a suitable appointment is yet to be determined,” Tax Consulting said.
Read: SARS proposes tax changes – including dealing with disputes
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