Compliance is not a very easy task and the regulatory bodies in South Africa have very stringent rules and requirements concerning compliance for companies operating within their territory. These requirements apply to both foreign and local companies. There are two major agencies, the Companies and Intellectual Property Commission (CIPC) and South Africa Revenue Services (SARS) are responsible for compliance. This write-up explores some of the items on the regulatory compliance checklist for South African companies.
Regulatory Checklist for South African Companies
1. Annual returns to CIPC
Recently, the CIPC introduced a new requirement for all companies incorporated in South Africa to declare their compliance with specific sections of the Companies Act 2008 by completing and submitting a compliance checklist online. This checklist is a questionnaire containing 24 questions, and companies are required to complete and submit this checklist before they can file their annual returns.
Annual returns are used by CIPC to determine a company’s current information for taxable income. While the annual return report is not a financial document, it is a public record to confirm a company’s compliance. All companies are compelled to file their annual returns within 30 commercial enterprise days after the anniversary date of its incorporation.
The annual return is a requirement for maintaining your company’s registration with CIPC. The fee is calculated primarily based on the company’s annual turnover. Late filing of annual returns attracts a penalty. If you fail to file the annual returns, CIPC can deregister your company. Trading under the name of a deregistered company has serious consequences. To have the deregistration reversed takes some extra effort and costs. So, make sure you file your annual returns on time – you can contact Norebase to assist you with the process.
2. Appointment of Public Officer
This is an important regulatory compliance requirement set out by the Tax Administration Act 2011 (TAA) that every company operating in South Africa must have a registered public officer. This is a resident of South Africa and a registered taxpayer with the South Africa Revenue Service (SARS). The representative who has to be approved by SARS must be a senior official of the company, in the event that the company doesn’t have a senior official residing in South Africa, then any suitable person can fulfill this role.
The person has to be appointed by the directors of the company within one month after incorporation or acquiring an office address in South Africa.
The public officer’s duties include:
- attending to different tax registrations and submissions such as VAT, employees’ tax, income tax, and provisional taxes;
- prompt payment of taxes due to SARS; and
- notifying SARS of any change with registered documents such as a registered address, year-end change, name change, and bank details.
Failure to appoint a public officer qualifies as non-compliance, and any company that neglects this or any other related duties required in terms of the TAA incurs a penalty for every day during which the default continues.
The role played by the Public Officer is clearly an important one and should not be neglected. With Norebase, potential non-compliances with regulatory checklists for foreign companies in South Africa are avoided because we can recommend public officers who can make tax documentation and submission seamless.
3. Value-Added Tax (VAT)
VAT is an indirect tax levied on the consumption of goods and services in the economy. It is currently levied at the standard rate of 15% on most products and services, however, there are some goods and services which are subject to VAT at the zero rate (0%). Examples of goods taxed at 0% VAT includes; goods exported from South Africa, some services provided to non-residents, services physically rendered outside South Africa, and some basic foodstuffs.
Every company registered in South Africa has to register with SARS and at the completion of a tax year companies must report the VAT to SARS by submitting a VAT return form.
There is currently no penalty imposed on the late submission of a VAT return, however, for late payment, a 10% penalty is imposed.
4. Pay As You Earn (PAYE)
This is an employee’s tax that refers to the amount required to be deducted by an employer from the employee’s wages paid or payable. The process of deducting the tax from remuneration as it is earned is commonly referred to as PAYE. All employers are required to register with SARS for this taxation, and the amounts deducted must be paid to SARS by the employer every month, by completing the Monthly Employer Return (EMP201) form.
It must be paid within seven days after the deduction of the money at the end of the month. If the last day for payment falls on a public holiday or weekend, the payment must then be made on the last business day before the holiday or weekend. Failure to complete a return on time will attract a penalty for each month of non-compliance.
5. Unemployment Insurance Fund (UIF)
The Unemployment Insurance Fund (UIF) was established to give short-term relief to workers when they become either unemployed or unable to work due to maternity, adoption and parental leave, or illness reasons. It also aimed at providing relief to the dependents of a deceased employee.
Employers, as well as all employees, are subject to the UIF contribution; some employees are however excluded from contributing to the UIF if, for example, they are employed for less than 24 hours a month. The amount due by an employee should be 1% of the wage paid by the employer, while the employer pays a total of 2% to SARS (1% from the employee’s wage and the other 1% contributed by the employer) within the prescribed period.
Failure to do this within the prescribed period attracts a penalty and is considered an offense that can attract a sentence.
Any employer, who is registered with SARS for Employees’ Tax, also needs to register to pay UIF contributions, this can be done at once by registering for all different tax types using the client information system on the SARS website.
6. Skills Development Levy (SDL)
This is an amount levied on employers to promote and encourage learning and development in South Africa, it is determined by an employer’s salary bill. The funds are to be used to develop and improve the skills of employees. A company that is expected to pay over R500,000 in a year becomes liable to pay SDL, however, there are some exceptions.
The levy is 1% of the total amount paid in salaries to employees and this includes bonuses, overtime payments, commissions, leave pay, and lump sum payments. The amounts must be paid to SARS on a monthly basis, by completing the EMP201, it must be paid within seven days after the end of the month during which the amount was deducted.
7. Maintenance of Record
The Companies Act of the CIPC requires that all companies preserve their company records, at all times, a company must have a copy of its Memorandum of Incorporation (MOI) which includes any corrections or changes made to it. The company is also expected to keep a register of its shares and of its auditor and secretary, to the extent that the company is required to make such appointments. Any shareholder of the company is entitled to view and obtain copies of the record. Any other person may inspect such records at a cost.
It is compulsory for the records to be kept in their original form, in an orderly manner, in a safe place, and easily accessible for inspection, audit, or investigation by SARS. The retention of records will help a company to fulfill the requirements of the TAA and SARS. Failure to keep the record constitutes an offense and attracts penalties.
8. Annual financial statement
Submission of a company’s annual financial statements is important for regulatory compliance for South African companies. The CIPC requires a company to prepare annual financial statements within six months after the end of its financial year. Before submission, the company is also required to have its annual financial statements audited, and the audited statements must also be filed.
Failure to comply can lead to the CIPC conducting a formal investigation and issuing an administrative fine where a Compliance Notice has been issued for continuous non-compliance with the requirements of the Companies Act. The administrative fine to be paid is equal to 10% of the company’s annual turnover during the period in which the companies were found to be non-compliant.
The compliance checklist for South African companies constantly has new requirements added, with Norebase you are sure to stay on top of these changes. Our team works tirelessly to ensure that all requirements such as the provision of a public officer, tax computations, annual returns, and reporting are dealt with promptly and that you are kept fully appraised throughout the process. What are you waiting for? Click here to get started!