SARS is coming after company directors

 ·6 Jun 2024

SARS is targeting the directors of companies who fail to submit their tax returns.

According to Tax Consulting SA, the move forms part of SARS’s broader strategy to combat tax evasion and ensure that all corporate entities and their directors meet their tax obligations.

The agency previously relied heavily on administrative penalties and audits to encourage compliance.

“However, the persistence of intentional non-compliance among some company directors has necessitated more drastic measures be implemented,” said Tax Consulting SA.

“This new enforcement strategy aims to hold individuals vicariously accountable for the financial management of their companies, as directors have a fiduciary duty to ensure that their companies comply with tax laws.”

“Failure to do so not only undermines a healthy tax ecosystem but also places an unfair burden on compliant taxpayers.”

Under South African law, it is a criminal offence for company directors to not submit their corporate income tax returns and those pertaining to payroll taxes and VAT.

The Tax Administration Act means that directors who fail to ensure the timely submission of their companies’ returns will face major penalties, such as fines and, in some instances, imprisonment.

The criminal summonses issued by SARS indicate the beginning of legal proceedings that could lead to prosecution.

If found guilty, directors could face imprisonment of up to two years per successful conviction of any criminal offence related to non-compliance.

Several high-profile cases involving directors have already occurred.

“Public reaction to SARS’ compliance crusade has been mixed, however, many taxpayers and advocacy groups have welcomed the move, viewing it as a necessary step to ensure just and equitable treatment within the framework of our tax system,” said Tax Consulting SA.

“They argue that stringent enforcement against non-compliant directors will deter others from similar misconduct and ultimately enhance the integrity of the tax regime.”

“However, some business leaders have expressed concerns about the potential for overreach and the impact on business operations. They urge SARS to balance enforcement with support, providing more guidance and resources to help companies in voluntarily meeting their tax obligations.”

SARS’s issuance of criminal summonses is part of a broader initiative to strengthen tax compliance in South Africa, with the agency deploying its data analytics capabilities to identify non-compliant taxpayers efficiently and deploying more resources to audits

SARS’s issuance of criminal summonses is part of a broader initiative to strengthen tax compliance in South Africa.

The agency has also been enhancing its data analytics capabilities to more effectively identify non-compliant taxpayers and deploy more resources to its audit and investigation teams.

That said, Commissioner Kieswetter has reiterated that while enforcement is necessary, SARS will engage with the business community to promote voluntary compliance.

SARS has indicated on many occasions that it aims to make compliance easy and cost-effective while making non-compliance difficult and costly.

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