I have a customer who applied for sequestration through attorneys. another tax practitioner did his income tax and he has to pay in R10208.53, asked me to have a look upon investigation I noticed the his primary rebate was R1344.82, reason is he applied f
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
In terms of the current practice generally prevailing, which we agree with, “three separate taxpayers will be liable for tax (on the remuneration), namely:
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The insolvent person for the period before insolvency (that is, up to the date preceding the date of sequestration);
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The insolvent estate (a new entity for tax purposes from the date of sequestration); and
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The insolvent person for the period on and after the date of sequestration.”
The trustee would be responsible for the insolvent estate, but the insolvent, being a new taxpayer will have to register as a taxpayer. This is done by using the RAV1 form.
The insolvent person will be assessed as a natural person for the period before insolvency, as well as for the period subsequent to insolvency, should any income accrue to that person in his or her personal capacity.
Under section 6(4) of the Act, where the period assessed is less than 12 months, the amount to be allowed by way of a rebate under section 6(2) shall be such amount as bears to the full amount of such rebate, the same ratio as the period assessed bears to 12 months. SARS was therefore correct to apportion the primary rebate. The insolvent is not penalised and will get the balance of the rebate in the period after sequestration. It may require a request to the employer to amend the IRP5’s.