Many companies that have to liquidate have SARS problems. The obvious answer to get rid of SARS debt is liquidate the company. This in itself raises more questions which we will address in this article.
When a company owes Income Tax and it liquidates, the debt is written off in the liquidation. It is not necessary for income tax submissions to be up to date to be able to liquidate. Keep in mind though that, if SARS insists that the submissions must be lodged even after liquidation, then the director must do so. In our experience SARS does not usually ask for the tax submissions to be brought up to date. We do not know the reason for this, but it could be that it is because to hand in tax submissions before or after liquidation is academic. Whether the company owes SARS an amount before liquidation it will not matter if the amount changes after liquidation (after tax submissions were lodged).
VAT is also written off in a liquidation. Again, it is not a requirement for liquidation purposes to bring VAT returns or the financial statements up to date. Also, if SARS insists after liquidation that the returns are lodged, then the director should lodge them. This will not affect the liquidation because all the lodging of tax returns will do is it will change the amount owing to SARS. The debt will still fall within the insolvent estate of the company, so whether the tax returns are up to date or not, for liquidation purposes, is not relevant.
If a company owes PAYE, this also forms part of the liquidation and will be written off.
SITE tax will also be written off.
The only taxes that fall outside a liquidation is taxes owed in terms of the Customs and Excise Act. This Act holds the manager of the premises personally liable for these taxes, which means these taxes must still be paid by the director personally after liquidation. If one has the funds for litigation, one can attack this clause of the Customs and Excise Act in Court as we are of the opinion it is not legally correct to hold the manager of the premises personally liable for a tax that is owed by a separate legal entity (the company). However, until this clause is tested, it is important to note that customs and excise taxes will remain payable by the director(s) after liquidation. This is the only tax that is treated in this manner.
For a free 15-minute consultation on the liquidation of your company, call our attorney Nanika Prinsloo on 072 8558 106 or visit us on www.empowerlaw.co.za