On 1 August 2024 National Treasury issued the 2024 Draft Tax Administration Laws Amendment Bill. Included in the draft Bill are proposed amendments to section 246 of the Tax Administration Act, 28 of 2011, pertaining to Public Officers.
Section 246 of the Act, in both its current and proposed forms, serves to prescribe the requirement for a South African company to appoint a Public Officer, together with the criteria which must be met by the individual to be appointed as Public Officer.
Practically, the Memorandum on the Objects of the Tax Administration Laws Amendment Bill, 2024, highlights 2 key proposals – the appointment of a Public Officer at the time of company formation, and failing which, a hierarchy of senior officials, to be utilised as the default appointment of Public Officer.
Public Officer Performance – Current Regulations
Under the current regulations, every company conducting business or having an office in the Republic must, at all times, be represented by an individual residing in the Republic. This representative, approved by SARS, must be a person who is a senior official of the company. If no senior official resides in the Republic, another suitable person, duly appointed by the company or by an agent or legal practitioner with authority, can serve as the representative for purposes of a tax act.
This designated individual, known as the Public Officer, under the current legislation, must be appointed within one month after the company begins operations or establishes an office in the Republic.
In cases where a Public Officer is not appointed as required under this section, SARS designates a director, company secretary, or other officer of the company as the Public Officer. Where a company has not appointed a public officer, the company is subject to a tax Act as if a tax Act did not require the public officer to be appointed.
The Public Officer is responsible for ensuring the company complies with all obligations under tax laws and is subject to penalties for any defaults by the company. The company is also regarded as having performed any actions taken by the Public Officer in their representative capacity.
If SARS is of the opinion that a person is no longer suitable to represent the company as public officer SARS may withdraw its approval of such person and the company would have to appoint a new public officer.
Practicalities of Public Officer Appointments
From a perspective of practicality, a number of domestic companies often miss the requirements to appoint a Public Officer as required by the tax laws. In these instances, and as the senior membership of the company are most often all present in South Africa, SARS will designate a senior official as the Public Officer.
For external companies, being branches of a foreign registered company, or even subsidiary offices where all senior executives are not physically present in South Africa, and so not suitable persons, this normally results in several administrative difficulties as their officers rarely meet the requirements to be appointed as the default public officer.
Without a suitable public officer, no tax registrations such at VAT, amendments or filings can be done. Not only is this an administrative burden but can also in some cases result in administrative penalties being imposed.
Proposed Public Officer Appointment Amendments
The Memorandum on the Objects of the Tax Administration Laws Amendment Bill, 2024, proposes the removal of the one-month period within which a Public Officer must currently be appointed, and implement that such appointment takes place immediately on company formation, similarly to the allocation of an income tax number for the company.
To further streamline company compliance, it is proposed that where a company fails in appointing a Public Officer, by default, the Public Officer, will be regarded to be, a suitable individual, following the below hierarchy, and sequentially:
- Managing director or equivalent
- Financial director or equivalent
- Company Secretary
- Director or prescribed officer who has the largest shareholding in the company
- Director of prescribed officer who has the longest period of time
- A senior employee of the company in order of the company’s reporting hierarchy
Should none of the persons in these roles meet the requirements to be appointed as public officer, SARS may appoint any suitable person that SARS designates for that purpose.
Where an individual so appointed as Public Officer, and meeting the requirements of such appointment, is in the opinion of SARS, no longer be suitable to represent the company, or is no longer eligible, SARS may then withdraw its approval of the appointed Public Officer. In such cases the company is regarded as not having appointed a public officer and upon receiving notice from SARS must, within 21 business days, appoint a suitable replacement representative.
How SARS will designate suitable public officers where the company does not have eligible candidates or failed to make a suitable appointment is yet to be determined.
Written by Tax Consulting SA
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