With the coming into effect of the Tax Administration Act, 28 of 2011 (“the Tax Admin Act”) on 1 October 2012, substantial changes were introduced to the administrative provisions and powers of the South African Revenue Service (“SARS” or the “Commissioner”).
Under the now repealed provisions of the Income Tax Act, 58 of 1962 (“Income Tax Act”), a public officer was required to be appointed by every company that was carrying on business or having an office in South Africa. The public officer was required to be an individual residing in South Africa, appointed by the company and approved by the Commissioner. In the event of the failure by the company to appoint a public officer, the Commissioner was empowered under section 101(4) of the Income Tax Act to designate the managing director, director, secretary or other officer of the company as the public officer of the company.
On the basis that one of the main requirements of section 101, for a person to be appointed as the public officer, was that they had to be an individual and resident in South Africa and since there was no requirement that such a person had to be an employee or director of the company, a number of foreign entities setting up subsidiaries or external companies in South Africa appointed third parties, such as independent bookkeepers or other agents to act as public officers for their South African companies in compliance with the Income Tax Act.
However, with the coming into effect of the Tax Admin Act, the requirements applicable to appointment of public officers have changed. One of the more notable changes found in section 246 of the Tax Admin Act is the requirement that a public officer must be a senior official of the company.
It should however be noted that those persons that were appointed as public officers prior to the coming into effect of the Tax Admin Act, and that would not qualify as such under section 246 due to the changes in the requirements for appointment, should remain public officers as this is provided for in section 261 of the transitional provisions of the Tax Admin Act.
Further changes are now proposed by the Taxation Administration Laws Amendment Bill, B-2013 released on 5 July 2013 (“the Bill”), to section 246 of the Tax Administration. The Bill proposes to introduce an alternative to appointing a senior official of the company as the public officer, in cases where no senior official of the company resides in South Africa. In particular, it is proposed that subject to the approval of SARS “another person” may be appointed as the public officer. Therefore, it would appear that once the provisions of the Bill are enacted, companies would be able to appoint persons that are not senior officials of such companies as public officers provided that SARS approves the appointment. These changes would result in the Tax Admin Act being very similar to the repealed provisions of the Income Tax Act on this issue.
In addition and unlike the repealed provisions of the Income Tax Act, the Bill proposes to amend section 246(3) of the Tax Admin Act to remove SARS’ power to designate the managing director of a company as its public officer and to also clarify that only a company secretary (and not any other kind of secretary that is employed by a company) may be designated as a public officer by SARS in the event that a company fails to appoint a public officer. It is proposed that the changes contained in the Bill would be deemed to have come into effect on 1 October 2012.