Are you confused about whether your company should file a dormant return or a normal ITR14 for companies? It's understandable - dormancy can be a tricky concept to navigate. It's important to understand that the type of tax return you need to file depends on when your company became dormant. But don't worry, we're here to help you figure it out!
First things first, what is a dormant company?
A dormant company is a company which is registered with the CIPC (The Companies and Intellectual Property Commission) but it is not actively trading.
What is a dormant return?
This is a very short tax return with no fields for income and expenses.
When to file a dormant return?
The answer here depends on when the company became dormant. If the company was dormant for the entire tax year year (i.e there was no trading activity for the full 12 months) then the company must file a dormant return. This could happen if you started a company, but never actually did anything with it.
If a company traded for a few months during the tax year and then became dormant, it would not be considered as dormant for the full tax year. This could happen if you started trading with your company but then stopped 8 months into the tax year due to personal reasons, such as changes in your focus or priorities. So, your company would only be considered dormant for the last 4 months of the tax year, rather than the full 12 month period.
In such a case, you will be required to submit a normal ITR14 for actively trading companies. This tax return must declare the income your company earned and the expenses it incurred during its active period.
However, if your company remains dormant, you can file a dormant return for the next tax year. If you are never going to trade through your company, it may be best to de-register it. You can follow the de-registration steps in our blog here.