Neesa Moodley-Isaacs unpacks the Tax Administration Act and its implications
Tax season is in full swing and as you race to get all your documents in order, you should take some time to reflect on the Tax Administration Act and how it affects you:
Sars extended power
1 The South African Revenue Service (Sars) will now have extended powers to collect information from and about taxpayers.
Di Seccombe, the head of tax training at Mazars, says this could potentially be a big issue as there is no “right to privacy” if Sars requests information related to your finances. For example, estate agents and lawyers are now required by law to submit third-party tax reports twice a year, with all details of any financial transactions that have passed through their hands.
Sars can also ask your bank to hand over information related to money moving in and out of your bank account. The Act allows Sars to collect information using six methods:
» Request for information;
» Production of relevant material in person during an interview at a Sars office;
» Field audit or criminal investigation at your home or office;
» Formal inquiry before a presiding officer; and
» Search and seizure.
2 The new penalties as per the act can apply even if you made an unintentional error or misunderstood what was required of you.
The understatement penalty regime requires Sars to levy penalties of between 5% and 200% on the amount by which taxpayers understate the amount of tax payable in respect of a particular return or by which a taxpayer overstates tax losses carried forward.
The percentage penalty levied is determined based on the “behaviour” of the taxpayer giving rise to the understatement, such as the degree of care taken by the taxpayer in completing the return and whether the taxpayer has applied for voluntary disclosure.
Responsible third parties
3 If you have outstanding taxes, Sars has the right to collect the money from your employer or from your retirement fund. If the employer or the fund declines to release the money to Sars, they (the employer or the retirement fund) can then become liable for your tax debt.
Any person who is responsible or is regularly involved in your overall financial affairs and who is negligent or fraudulent in respect of your taxes becomes personally liable for your tax debt – for example, your accountant.
Single tax account
4 The act provides for a single tax account so you will be able to implement a single registration process for all tax types eventually. This will mean less forms and less administration for you.
The maintenance of records
5 You have to keep records of all documents related to your tax returns. Failure to retain records is a criminal offence and can also trigger an administrative noncompliance penalty.
Records also have to be maintained in a prescribed format as per the act and in their original form, in an organised manner and in a safe place.
These records must also be available for inspection, audit or investigation by Sars. You are required to keep records for a period of five years from the date you submit the related tax return.
Burden of proof
6 Previously, the burden of proof related to an assessment rested with you, the taxpayer. But the burden of proof now rests with Sars to prove an assessment based on an estimate is reasonable and the basis for imposing an understatement penalty.
Pay now, argue later
7 Your obligation to pay tax due is not automatically suspended if you lodge an objection or an appeal. You are still required to make the payment and if your appeal or objection is upheld, you are then entitled to interest from the date of payment of the disputed amount to the date on which the money is refunded to you.
Mistakes on returns or incorrect assessments
8 The act makes it easier to fix any mistakes you make on your tax return without the requirement for a formal objection and appeal process. If no original assessment has been made, Sars may request and allow you to submit an amended return.
If an incorrect assessment has been made due to an error when you filed your tax return, then Sars is entitled to issue a reduced assessment after taking the error into account.
9 The act distinguishes between taxpayer information and Sars confidential information. Sars confidential information includes information such as internal policies, legal opinions and memorandums. Only information relevant to tax administration is included in the definition of “confidential information”.
Taxpayer information, on the other hand, includes all information submitted by you and it will be disclosed by Sars, for example, if it is likely to be of value in a criminal investigation. The act also authorises the disclosure of taxpayer information to the Financial Services Board, the SA Reserve Bank, the Financial Intelligence Centre and the National Credit Regulator.
Deferral of payment
10 If you are unable to pay your tax debt in a single amount within the prescribed period, you can apply for a formal instalment payment arrangement or to pay your tax at a later date.
But this is intended as a debt relief mechanism and is available only if your financial position is expected to improve. You will have to prove that a deferral should be granted and submit all information and documentation required.
WHAT YOU SHOULD NOT DO
Sars can impose penalties on you if you fail to:
» Register when you are supposed to;
» Complete a registration form correctly or in full;
» Submit supporting documentation;
» Fail to inform Sars of any changes to your banking details or your contact details;
» File a return at all;
» File a return on time;
» Use the prescribed form;
» Sign your return;
» Maintain records in their original form;
» Maintain records for a minimum of five years;
» Provide material available when requested;
» Cooperate during a field audit or investigation; and
» Give full and accurate information when requesting a deferred or instalment payment arrangement.
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