A taxpayer was sequestrated and the court order date is 7 August 2014. The taxpayer understands that a new income tax number should be obtained by her, from the date of insolvency. Please advise on the following : 1. How does the taxpayer apply for a new income tax number and what supporting documents would she need? 2. What does she do with the current e-filing profile and tax number as it is not inactive? 3. Is the taxpayer correct in saying that she would have to file her income tax in two parts for 2015, on the old income tax number up to date of insolvency and on the new income tax number from date of insolvency up to 28 February 2015. If so, how would she do this?
Important:
This answer is based on tax law year ending 28 February 2021.
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: · The insolvent person for the period before insolvency (that is, up to the date preceding the date of sequestration); · The insolvent estate (a new entity for tax purposes from the date of sequestration); and · The insolvent person for the period on and after the date of sequestration.” The trustee would be responsible for the insolvent estate.
The insolvent, being a new taxpayer will have to register as a taxpayer. This is done by using the RAV1 form. We suggest that you do the following (on efiling under ‘organisation tax type’ for the individual): “Click Here to activate/deactivate individual Income Tax activation for insolvent estate purposes.” The process follows from that (the RAV1). SARS states the following, on their website: “From 25 January 2019, individual taxpayers that are voluntarily or mandatorily sequestrated must submit income tax returns in the following manner: · Insolvent individual – the tax reference number that was used before sequestration will be closed and can no longer be used going forward. Any income tax returns that are outstanding before the date of sequestration must be submitted using the income tax reference number used before you were declared insolvent. · Insolvent estate – the trustee of an insolvent estate must apply for a tax reference number for the insolvent estate. The new tax reference number will then be used for any interactions with SARS from the date of sequestration until the end of the last day, of that year of assessment. This second tax reference number is not compulsory, and is only applicable where the whole or part of any business undertaking of the insolvent person is transferred to the trustee of the insolvent estate. · Individual post insolvency – you must apply for a new income tax reference number once you have been declared insolvent in order to interact with SARS in respect of tax you may be liable for and returns you need to submit.”