Introduction
Whenever an organisation is established, be it a company, partnership, sole proprietorship, trust, NPO etc. it will have to comply with a plethora of statutory requirements.
Unfortunately, many organisations choose to ignore these requirements, either by design or ignorance.
And indeed there are statutory requirements for employers of domestic workers that so many employers either choose to ignore or are ignorant of.
Statutory compliance depends on an organisation’s activities and may include for example, the requirements of:
- The South African Revenue Service (SARS)
- Companies and Intellectual Property Commission
- Labour Law
- Unemployment Insurance
- Skills development levy
- Compensation for Occupational Injuries and Disease Act of 1993
- Health and Safety
- Labour law
- Protection of Personal Information
- The Companies Act 2008
- International Financial Reporting Standards
- Black economic empowerment
All of the above entail statutory mandatory compliance which cannot be ignored as there are consequences of varying degrees which vary from penalties, criminal prosecution and de-registrations.
Given the number and complexity of compliance in South Africa, it is no wonder that investors think twice about investing large sums in South Africa. Yet, paradoxically, for political expedience there are some organisations that can be operated which are apparently exempt from any compliance. But that is politics and I am an accountant and not a politician and will avoid that hornet’s nest.
Some compliance issues
In this article only a few the more common statutory obligations are highlighted to demonstrate that compliance with them is mandatory and is not as simple as it seems and consequently does require in depth knowledge of the relevant underlying statutes.
- South African Revenue Service (SARS)
First of all, typically it will be necessary to register for income tax, as an employer and as a value added tax vendor. These registrations are not straight forward and require the collation of quite a number of documents. Some documents have to be certified and one has to verify exactly what documents are required with SARS. These requirements are in reality a moving target as SARS continually moving the goal posts as it develops its systems.
It is the writer’s view that the income tax software is one area where the government has done a great deal to develop and improve its effectiveness. The reason is obvious, as it has prioritised the collection of revenue. Compliance with SARS is however much more than the obvious regular submission of income tax returns.
Try to get a compliance certificate on e-filing and you will soon know whether you are near compliancy or not. I say “Near” compliance because there is more detail that must be attended to which may sooner or later haunt the taxpayer when least expected:
SARS “registered details” within e-filing for example is an area that is often neglected. Often SARS’s information about organisations dates back to the date of its original registration with SARS. Individuals originally registered may have either passed on, or no longer have any association with the organisation and consequently cannot be traced to assist with changes required to update information to transfer tax types etc. The registration and activation of representative taxpayers and tax practitioner require inter alia, certified documents, signed letters. So what do you do if registered individuals are untraceable?
Ever seen a letter from SARS stating “the identity of the NO RELATIONSHIP could not be validated”? Seems a weird statement but it is just an example of what the process of understanding compliance involves.
The Tax administration Act of 2011, promulgated in July 2012 makes provisional for a number of non-compliance matters and has given SARS “teeth” to charge administrative penalties. Consequently, SARS have become much more thorough updating their records in their quest to recover taxes due to them.
- Companies and Intellectual Property Commission
The Companies and Intellectual Property Commission, commonly referred to as CIPC, is the depository for the registration of companies and their subsequent history. Like SARS, they have also become much more diligent and do charge penalties for non-compliance matters.
Failure to file annual returns with CIPC can lead to de-registration of an organisation. Annual returns must be filed with either annual financial statements or a financial accountability statement depending on the organisation’s public interest score.
- Companies Act 2008
The Companies Act was promulgated in 2009, which means it has been in force for some time already but there are still organisation that are ignorant of, for example the public interest score concept and how to calculate it. Are you aware that some provisions of the “old” Companies Act 1973 can still be relied for certain aspects of liquidations?
- Unemployment insurance
Apart from the statutory obligation to provide for employees through unemployment insurance there is a moral obligation too.
Many employers discovered to their chagrin that they were excluded from relief during the COVID19 pandemic.
UIF contributions are generally collected through payrolls by SARS and are also subject to penalties for non- compliance.
- Compensation for Occupational Injuries and Disease
Previously commonly known as “WCA” now “COIDA”, it is quite commonly overlooked when it comes to compliance.
Almost all South African employers are required by law to contribute to the COIDA find. In turn, the fund offers financial assistance and/or compensation for occupational injuries, diseases or deaths to employees or their dependents.
Non-compliance is very risky – employers may face huge fines or even prosecution for not complying with the Compensation for Occupational Injuries and Disease Act. Employers can also be held responsible for huge amounts of money due to claims relating to injury on duty, diseases or death from an employee.
Conclusion
It is perhaps human nature to pretend that matters considered as nuisances do not exist – much like the myth of an ostrich sticking its head in the sand to avoid danger.
But to borrow another analogy from our feathered friends – compliance matters left unattended either intentionally or through ignorance or apathy, will sooner or later come home to roost.
So often compliance issues are considered a nuisance and spending time and effort to maintain compliance is never regarded as adding any value to any organisation. Obviously it will not add value, but what it will do, is obviate material costs in the form of penalties and interest and in extreme cases criminal prosecution and organisation de-registration.
It can be expensive to become compliant and even to maintain it, but be sure that it can be much more expensive not to!
To end on a positive note – it is better to achieve compliance voluntarily, as soon as possible rather than to incur the wrath of the authorities. This way prosecution can be avoided and in many cases even penalties will be waived.