Insolvent (when a company cannot pay its debt) and solvent (no outstanding debt) companies can liquidate. Once liquidated, a liquidator is appointed to wind up the insolvent estate of the company or close corporation. After liquidation the South African Revenue Service must be informed of the liquidation and the tax affairs of the company finalised with the South African Revenue Service. Liquidations in South Africa write of all debt of the company, including South African Revenue Debt. (Take note though that taxes owed in terms of the Customs and Excise Act 91 of 1964 are not written off by a Liquidation.) But the profile of the company or close corporation still exists with the South African Revenue Service and the tax affairs with the South African Revenue Service must still be finalised after liquidation.
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While a company or close corporation exists, the director or member is responsible for the tax affairs of the company or close corporation with the South African Revenue service. Once the company is liquidated, the director or member loses locus standi and cannot act on behalf of the company or close corporation any longer. The appointed liquidator is then responsible for overseeing the winding-up process of a company or close corporation in liquidation. In this capacity, the liquidator assumes the role of a public officer and is tasked with managing the company or close corporation’s tax affairs. Additionally, the liquidator acts as the representative taxpayer for the company or close corporation in liquidation
The duties of the liquidator with regards to tax affairs of a company after liquidation
The liquidator must Inform SARS of the liquidation of the company. The liquidator must file his certificate of appointment with SARS and engage with SARS regarding the tax and revenue affairs of the liquidated company. The insolvent estate of the company is regarded as an estate by SARS and will be reported as such.
If there are any funds available, the liquidator will pay SARS as a preferred creditor (first secured creditors are paid). If there are no funds available to pay SARS, the debt will be written off.
Should a liquidator fail to comply with the requirements of the relevant tax Act and the Tax Administration Act 28 of 2011, the liquidator could be held personally liable for any tax payable by the insolvent company. The liquidator will be liable because he acts in a representative capacity on behalf of the insolvent company or close corporation. An example of when such a liability will arise is if the lqiuidator dispos of income which could have been paid to the tax revenue of the company or close corporation if those monies were in possession of the liquidator.
The Liquidator must update the insolvent company's details with South Africa Revenue Service
The liquidator (who is the nominated representative taxpayer of the estate (SARS regards the company as an “estate” after liquidation) must supply his certificate of appointment as liquidator of the insolvent company as it was issued by the Master of the High Court to SARS. The records of the company is then updated at SARS. Until the records of the liquidated company are updated at SARS, the latter will continue with collection against the company.
Once the certificate of appointment of the liquidator is lodged with SARS, SARS must update the eFiling matters and their records so that the communication can be sent to the liquidator and not the company.
All the tax affairs of the liquidator must also be up to date otherwise SARS will not update the records of the liquidated entity and the directors will still receive communications from SARS.
After the liquidator filed the required documentation
In the light of the fact that the liquidator becomes the tax representative of the company or close corporation, SARS should communicate with the liquidator and not the company or close corporation. If you still receive communications from SARS after liquidation, you should bring that under the attention of the liquidator so that he can ensure that the records of the tax and revenue of the liquidated company or close corporation is updated by the South African Revenue Service.