South African Revenue Service (SARS) Audit
There has been a lot of audit activity by SARS lately and the activity is expected to increase. Whilst there is a move from SARS to become more client orientated, specialist audit teams comprise of well qualified professionals is focusing on closing the tax compliance gap. Should you be in a position of non-compliance, you can expect to be audited and in time you will be caught. Although many people pride themselves in getting away, the reality is that once specialists in SARS have your number, they will get their dues and being ignorant about their powers are leaving many unprepared and a lot poorer. Remember the following:
- Whether you are an employer or individual subject to audit, remember to always have your paperwork up to date and in order. Starting to think about a defense when you get audited is too late. You need to be strategic and in order to achieve the best outcome you should have evidence to back the positions you take
- Non-disclosure is not planning. When caught you will have 200% penalties and criminal sanction charges to deal with. Thinking how will SARS know? Well, they will where anything can be tracked to a bank account, your estate when it is wounded up, when a family member or unhappy employee or anyone who may not like you decide to call, work permit applications etc. Any professional who knows is now under legal obligation to tell. People get caught in many unique and interesting ways. All that is important is that you know people are caught these days more than often than ever before and non-disclosure does not reduce your tax liability
- Be careful what you tell SARS when they investigate you. Your responses to their innocent questions often turn out to be their best reason for attacking you. Do not prejudice yourself
- When you get a letter of findings be extra careful. Legally you only have rights (other than some very broad ones under administrative law and the Constitution of South Africa) when you get assessed
- Non-disclosure and fraud never prescribes. Assessments prescribe after three years
- Professional help in dealing with SARS is often worth the cost. You should know when to disagree and take them on and when to take a softer approach
When must you pay SARS?
Some SARS officials in South Africa will raise the “pay now argue later” maxim. They rely on the Metcash case handed down by the Constitutional Court. This is not completely correct.
They should only ask for payment when your objection is disallowed. There are certain persons disagreeing with this view but it is widely accepted.
Although thereafter they may collect money, you can still ask for postponement until the matter is finalised. You must give SARS good reasons and so should they. They must also give reasons should they decide to nevertheless collect.
Alternative Dispute Resolution (ADR)
This is a new procedure introduced by SARS to help resolve matters before they go to tax court. Much can be said about ADR, however, what is important is that it is more often than not a good thing. Again, specialists should be roped in should your tax enquiry from the SARS reaches this stage.