“Compliance is not a choice. It’s a responsibility.” (Jack Welch, former CEO, General Electric)
In South Africa, business compliance obligations are enforced by several different government bodies, each responsible for a different section of business oversight, and each with its own systems and requirements.
Compliance is a strategic business priority today, not only because it is essential to business success, but also because it is ongoing, extremely expensive, and increasingly complex.
Compliance is essential
Non-compliance with business regulations can trigger financial penalties, audits, being flagged as non-compliant by CIPC, rejected funding applications, and missed commercial opportunities.
Unpaid tax debt can be collected by SARS directly from a company’s bank account or another third party, like a client. Deregistration at CIPC means the company loses legal standing to contract, and this can result in, for example, the company’s bank account being closed by the financial institution.
Compliance is ongoing
Compliance isn’t a once-off exercise. It’s an ongoing responsibility that evolves as your business starts interacting with banks, funders, clients, and regulators, employs staff, and generates more revenue.
Local businesses are subject to ever more regulatory obligations that are not only increasingly complex but also constantly changing, demanding ever more human and financial resources.
Compliance is so expensive
Compliance costs are substantial in South Africa, roughly three to five times higher than in similar countries, according to the Free Market Foundation. “Across an estimated 150,000 SMEs, the aggregate cost of compliance is estimated at R270 – 450 billion annually, equating to roughly 4 – 6% of GDP.”
The report continues: “For a medium-sized enterprise, direct compliance expenditures, including internal compliance staff, external advisors, licencing and filing fees, and reporting systems, range from R1.4 million to R3 million per year. When indirect costs (diversion of management time, lost strategic opportunities, risk mitigation activities) are included, the total annual burden may easily double.”
Compliance is for every business
For almost all businesses, essential compliance includes at the very least the requirements of the Companies and Intellectual Property Commission (CIPC), the South African Revenue Service (SARS) and the Department of Employment and Labour (DEL)
CIPC compliance: Annual returns and Beneficial Owner Registers
- Registration: CIPC registers and maintains records of private companies (Pty Ltds) and close corporations (CCs) in South Africa.
- Legal standing: CIPC compliance gives your business a legal registration number, recognition as a juristic person, the standing to contract with clients and institutions, and the ability to open a business bank account.
- Annual returns: Every registered company must submit annual returns (and other documents) to CIPC within 30 business days of its registration anniversary to confirm the business is active and to disclose annual turnover. Beneficial Owner Registers must also be filed annually or when beneficial ownership changes occur.
Consequences of non-compliance include late filing penalties, being marked as a non-compliant company, and – after two consecutive years of non-submission – possible deregistration. Deregistration can invalidate contracts and result in bank accounts being frozen.
SARS: Tax compliance
- Income tax: Companies are automatically registered for income tax when incorporated with CIPC, but compliance still requires submitting income tax returns annually, as well as provisional tax returns twice a year where applicable, while keeping accurate financial records and paying tax liabilities on time.
- Employee taxes: From the day your first employee starts, and assuming the relevant criteria are met, employee income tax (PAYE), Unemployment Insurance Fund contributions (UIF), and the Skills Development Levy (SDL) must be declared and paid monthly via the EMP201 return.
- VAT: VAT registration is mandatory once annual taxable supplies exceed R2.3 million in any 12-month period. Voluntary registration is allowed when taxable supplies exceed R120,000. VAT compliance typically means bi-monthly or monthly VAT201 submissions, accurate invoicing and strict record-keeping.
Tax non-compliance is one of the most common reasons businesses run into penalties, audits, or rejected funding applications, because many tenders, credit applications, and commercial contracts require proof of tax compliance in the form of a SARS TCS (Tax Compliance Status) PIN (Personal Identification Number).
DEL: Labour law compliance
- Written employment contracts and policies aligned with the Basic Conditions of Employment Act (BCEA), the Labour Relations Act (LRA), the National Minimum Wage Act (NMW) and any applicable sectoral determinations are critical.
- UIF registration is mandatory within 21 days after appointing the first employee who works at least 24 hours a month, using the DEL’s uFiling portal.
- The COIDA (Compensation for Occupational Injuries and Diseases Act) requires registration with the Compensation Fund to provide workplace injury compensation. Businesses must submit an annual Return of Earnings (ROE) to the DEL, declaring employees’ earnings, even in years with no incidents, to keep the crucial Letter of Good Standing valid.
Labour law non-compliance is a common cause of audits, inspections, and penalties. In addition, missing a ROE submission can delay the company’s Letter of Good Standing, holding up tender participation, contracts, and even site access.
Compliance as a strategic strength
Compliance can be a strategic strength. Proactively managed compliance protects organisations from risk, improves access to funding, maintains eligibility for opportunities and partnerships, and enables your business to thrive responsibly.
We can assist you in all company compliance matters. Our expertise and years of experience will not only unlock all these benefits for you but will also save your company a great deal of time, hassle, and costs – now and in the long run.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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