In South Africa, the Tax Administration Act 28 of 2011 (TA Act) outlines the regulatory framework for the registration and deregistration of tax practitioners. Section 240(3)(d) is particularly significant as it addresses the implications of tax non-compliance on both prospective and current tax practitioners. This article aims to clarify the conditions for eligibility and deregistration under this section and provide practical guidance for managing compliance to avoid registration issues.
The Law: Section 240(3)(d) of the TA Act
Effective from January 17, 2019, Section 240(3)(d) of the TA Act establishes the criteria for non-registration and deregistration of tax practitioners based on tax compliance. For detailed legal text, refer to Annexure A.
Key Provisions of Section 240(3)(d):
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Non-Registration Condition: Prohibits SARS from registering an individual as a tax practitioner if they have been tax non-compliant.
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Deregistration Condition: Requires SARS to deregister a tax practitioner who fails to meet their tax obligations.
Conditions for Non-Registration or Deregistration
Section 240(3)(d) specifies two essential conditions that must both be met:
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Condition One: Non-Compliance
- The individual must have been non-compliant with their tax obligations for an aggregate period of at least six months within the preceding 12-month period. This "aggregate" period means the total months of non-compliance must sum to at least six months. For instance, if an individual had two separate non-compliance periods of three months each within the past year, they meet this condition.
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Condition Two: Failure to Remedy Non-Compliance
- The individual must have failed to address their non-compliance within the period specified in a notice issued by SARS. SARS provides a reasonable period for the individual to rectify their non-compliance. Failure to do so within this time frame will result in the individual being either denied registration or deregistered.
Interrelationship Between Conditions
Both conditions must be satisfied simultaneously for Section 240(3)(d) to apply:
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If an individual meets Condition One (i.e., six months of non-compliance), then Condition Two (failure to remedy the non-compliance within the specified notice period) becomes relevant.
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If an individual addresses their non-compliance within the notice period, they can avoid deregistration or be eligible for registration. Conversely, failing to remedy non-compliance will fulfill the criteria for deregistration or non-registration.
Examples of Application
To illustrate the application of Section 240(3)(d), consider the following scenarios:
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Example 1: An individual was non-compliant for three months in the first half of the year and another three months in the second half. If they have not rectified their non-compliance within the notice period provided by SARS, they will be ineligible for registration or subject to deregistration.
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Example 2: A prospective tax practitioner who has been compliant for seven out of the past 12 months and only non-compliant for five months will not meet Condition One. Therefore, they should be eligible for registration unless other conditions apply.
Conclusion
Section 240(3)(d) of the Tax Administration Act 28 of 2011 sets forth strict criteria regarding tax compliance for tax practitioners in South Africa. To ensure successful registration and maintain good standing, practitioners must remain vigilant about their tax obligations and promptly address any non-compliance issues raised by SARS.
Tax practitioners should regularly review their compliance status, respond promptly to any notices from SARS, and seek guidance from professional bodies or SARS to navigate these requirements effectively.
For more information, consult the full text of the Tax Administration Act and engage with relevant professional advisors or SARS for tailored advice.
