PODCAST | Keep the taxman in mind when liquidating
Evan Pickworth speaks to tax executive at ENSafrica Ntebaleng Sekabate
22 September 2021 - 12:38
byEvan Pickworth
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
The total number of liquidations increased 18.9% in the first quarter of 2021 compared with the same period in 2020. Picture: 123RF/VADIM GUZHVA
In terms of the Statistical Release on liquidations and insolvencies published by Stat SA in July 2021, there has been a 21.5% increase in the number of liquidations in the first seven months of 2021 compared to the first seven months of 2020. This has not deterred the SA Revenue Service from collecting outstanding tax debts from defaulting taxpayers.
In this edition of Business Law Focus, host Evan Pickworth speaks to tax executive at ENSafrica, Ntebaleng Sekabate, aboutthe key tax considerations to keep in mind when a company is in financial distress.
Join the discussion:
Business Day law and tax editor Evan Pickworth. Picture: REBECCA HEARFIELD
Generally, when a business is in financial distress, it is not uncommon that the first financial obligations that fall by the wayside are the business’ tax obligations. This is unsurprising as business owners are likely to prioritise payments to employees, suppliers and other creditors to keep their operations afloat. However, this is not an advisable strategy, as debts to Sars accumulate interest, and where applicable, administrative noncompliance penalties that accumulate monthly. In addition, where a taxpayer understates its tax liabilities, Sars may impose understatement penalties, that range from 10% of the tax debt in a standard case, and up to 200% where there is intentional tax evasion on the part of the taxpayer.
There are, however, several tax considerations that need to be kept in mind by taxpayers where the business is in financial distress and is no longer able to operate, or once liquidation proceedings have commenced and compromises are entered into with creditors.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Business Law Focus
PODCAST | Keep the taxman in mind when liquidating
Evan Pickworth speaks to tax executive at ENSafrica Ntebaleng Sekabate
In terms of the Statistical Release on liquidations and insolvencies published by Stat SA in July 2021, there has been a 21.5% increase in the number of liquidations in the first seven months of 2021 compared to the first seven months of 2020. This has not deterred the SA Revenue Service from collecting outstanding tax debts from defaulting taxpayers.
In this edition of Business Law Focus, host Evan Pickworth speaks to tax executive at ENSafrica, Ntebaleng Sekabate, about the key tax considerations to keep in mind when a company is in financial distress.
Join the discussion:
Generally, when a business is in financial distress, it is not uncommon that the first financial obligations that fall by the wayside are the business’ tax obligations. This is unsurprising as business owners are likely to prioritise payments to employees, suppliers and other creditors to keep their operations afloat. However, this is not an advisable strategy, as debts to Sars accumulate interest, and where applicable, administrative noncompliance penalties that accumulate monthly. In addition, where a taxpayer understates its tax liabilities, Sars may impose understatement penalties, that range from 10% of the tax debt in a standard case, and up to 200% where there is intentional tax evasion on the part of the taxpayer.
There are, however, several tax considerations that need to be kept in mind by taxpayers where the business is in financial distress and is no longer able to operate, or once liquidation proceedings have commenced and compromises are entered into with creditors.
PODCAST | The stick or the carrot - which vaccination strategy should SA be using?
PODCAST | The tug of war over VAT refunds
PODCAST | 'Stablecoins' and the move to decentralised finance
PODCAST | How Sars plans to improve its collection capabilities
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.