When is a company or a close corporation liquidated?
The liquidation or the “winding-up” of a company takes place:
- When a company is unable to pay its debts by application of the creditors; or a voluntary application by shareholders of a company or members of a close corporation (commonly referred to as a creditors’ voluntary liquidation); or
- In the case of a solvent company/close corporation, by an application by shareholders of a company or members of a close corporation.
What does a liquidation entail?
When a company/close corporation undergoes a voluntary or compulsory liquidation (also known as the “winding – up” of a company/close corporation) it involves the process of selling all the assets, paying off creditors, issuing any remaining assets to the shareholders, and closing the company/close corporation.
Who is responsible for the tax affairs of the company or close corporation in liquidation?
The appointed liquidator is acting as the public officer for a company/close corporation in liquidation and is responsible for the tax affairs of such entity as part of the winding-up process. The liquidator is also the representative taxpayer of the company/close corporation in liquidation.
Duties of the liquidator at SARS as the representative taxpayer
- Informing SARS of the liquidation of the entity.
- Engagement with SARS regarding the entity.
- Submission of outstanding tax returns.
- Payment of outstanding tax liabilities.
If a liquidator fails to comply with the requirements of the relevant tax Act and the Tax Administration Act relating to a company/close corporation in liquidation, that person could be held personally liable for any tax payable in representative capacity. Such liability will arise if the liquidator alienates, charges or disposes of the income in respect of which the tax is chargeable, or disposes of any fund or money which is in that person’s possession from which the tax could legally have been paid.
How do I get the process started to make SARS aware of an estate?
A company or close corporation in liquidation is regarded as an estate from a SARS point of view. There are two options at this stage to report a new Estate Case to SARS:
- By sending an email to the SARS email addresses or
- by sending it through the new SARS Online Query System.
In order to report a new Estate Case to SARS, it is important that the correct Supporting Documentation be submitted to SARS. Refer to our FAQ on what is required to report the new Estate to SARS.
Update of the Estate’s Representative Taxpayer details
The nominated representative taxpayer of the estate (the Liquidator(s)) as duly appointed by the Master of the High Court needs to ensure that the necessary official appointment documents are furnished to SARS in order for the details regarding the estate’s representative taxpayer to be updated. This is vitally important, in the course of the estate initiation and finalisation process, as all communication regarding tax enquiries, eFiling matters and estates compliance is sent to the correct email address. As such, all representative taxpayers should ensure that their personal tax profile with SARS is up to date and reflects the correct contact details and email address. No changes and amendments to the representative taxpayer’s profile shall be done at the time of updating the relationship between the estate and the representative taxpayer. Updates to the representative taxpayer’s personal taxpayer profile can be done via the available electronic channels. Corporate stakeholders (Liquidator) who nominate their employees as the appointed Liquidator of an estate by the Master of the High Court, should ensure that these employees’ personal tax profile with SARS is updated and current. Their contact details and email address are critical in ensuring direct communication and smooth facilitation of the SARS Estates processes. These updates and changes, as may be required, cannot be done as part of the estate process. Employees need to follow the generally prescribed channels to effect such updates and changes.
How do I change banking details?
If you need to change banking details, see the supporting documents needed for an Estate (Individual or Sole Proprietor), Corporate Executor, Sequestrated Individual/Trust or Company/CC under liquidation.
For more information on changing banking details, you can also see Guide on changing banking details.