You might assume that if your company hasn’t traded during the year, it’s essentially invisible to SARS. Unfortunately, that’s not quite how things work. Even a business that’s been completely inactive can still face administrative penalties, and many owners only realise this once a fine lands in their inbox. Understanding why this happens, and how to avoid it, can save you a lot of stress and unnecessary costs.
According to data from the Companies and Intellectual Property Commission (CIPC), roughly 72% of South Africa’s 3.1 million registered companies fail to submit their annual returns.
1. SARS Still Expects Annual Returns
Under the Tax Administration Act, every registered company is legally required to file a tax return each year, whether or not it has traded. If your business didn’t earn or spend anything, you’re still expected to submit what’s called a nil return. A nil return is essentially a declaration that there was no financial activity for that period. When this isn’t done, SARS automatically marks the entity as non-compliant, and once that flag goes up, monthly penalties begin to accumulate until the return is filed.
2. What Administrative Penalties Actually Mean
Administrative penalties are not once-off fines. They are recurring monthly charges ranging from R250 up to R16 000, depending on your company’s taxable income bracket. The longer you delay, the more they add up. Even companies that haven’t traded for years can be fined simply because they remain registered with SARS.
3. How Dormant Companies Get Caught
It often surprises business owners when SARS penalises a company that hasn’t been active for ages. But SARS’s systems are largely automated, and they detect missing information instantly. A few common reasons dormant entities get flagged include:
- Remaining registered with CIPC long after the business has stopped operating.
- Forgetting to file nil returns for income tax, VAT, or PAYE.
- Not having an accountant or bookkeeper keeping track of compliance deadlines.
- Automatic non-compliance alerts generated when returns are overdue.
4. How to Fix the Problem
If you’ve already received an admin penalty notice, don’t panic, it can be sorted out, but time is important.
- Submit all outstanding returns, even if they’re nil.
- Pay the penalties or, if you have a valid reason such as illness, technical difficulties, or evidence that the business was genuinely inactive, apply for remission through SARS.
- If the company is permanently closed, deregister it properly with both CIPC and SARS to stop future penalties from building up.
5. Preventing Future Penalties
Once your company is back in good standing, maintaining compliance is much easier than fixing it later. Here are a few practical steps:
- Keep your SARS and CIPC contact details up to date.
- File every return on time, even if there’s nothing to report.
- Ask your accountant to perform an annual compliance review.
- If the business will remain dormant for the long term, consider voluntary deregistration. It’s usually cheaper and less hassle in the long run.
Final Thought
A dormant company may be quiet, but to SARS, it’s still alive and accountable. Their systems don’t look at how active your business is, they only look at whether you’ve met your filing obligations. Staying on top of returns, even when there’s no income, protects your company’s record and saves you from avoidable penalties.
At TLOK Accountants, we help business owners get back on track and stay compliant — whether your company is active, dormant, or somewhere in between.
If you have any questions or would like to find out more, call us on (011) 794-5582 or email us on info@tlok.co.za