SMMEs beware: Tax evasion could lead to criminal prosecution in South Africa

Small and medium-sized businesses (SMMEs) could face criminal prosecution if they break the law and attempt to defraud the government of any revenue owed to the state, according to Lenichea Carelse, Accounting Manager, Tax Consulting SA. 

This on the back of the South African Revenue Service (Sars) urging SMMEs to get their financial records in order for Corporate Income Tax filing.

Carelse said that if found guilty of a tax-related crime, the taxpayer will likely face a hefty fine and could be sentenced to up to two years in prison as the maximum penalty.

All SMME’s who are actively trading are eligible to pay taxes to Sars and it is vital that these business owners stick to their tax filing deadlines. 

Expanding on tax deadlines, Carelse said: "For incorporated SMME’s, within 12 months from the date on which their financial year ends. Provisional tax filing and payment by companies of provisional tax (IRP6’s) is 6 months after year end (1st period), at financial year end (2nd period) and six months after financial year end (3rd period).

"For SMME’s operating as sole proprietors and partnerships, the filing season for individuals normally runs from July to November (for non-provisional taxpayers), with provisional taxpayers having until January to file via eFiling."

Getting taxes right is crucial when running a small business, but it can also be challenging.

Many business owners aren’t fully aware of all the tax obligations that come with managing a business, according to Carelse. 

However, with the right information, handling your business taxes can be a straightforward process.

According to Sars, to file their tax returns, SMMEs will need the following documents:

- financial statement (income statement, balance sheet, cash flow statement)

- tax computation and note

- supporting documents for deductions and creditors.

"Make sure you have these documents ready to ensure a smooth filing process," Sars said.

Side hustles

According to Carelse, South Africans that are earning money from side hustles need to keep in mind that their income is fully taxable.

"It’s important to note that your total income, including freelance and salary income, is subject to tax," Carelse said. 

"If you earn above the tax threshold, you are required to register as a provisional taxpayer. This means paying tax twice a year based on your estimated income, with a final payment due after filing your tax return."

The consequences of evading tax are criminal investigation and stiff penalties, plus Sars can penalise you for failing to register for tax and submitting a tax return.

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