For purposes of ensuring proper tax administration in South Africa, SARS may select any taxpayer for an audit.
Following the submission of a taxpayer’s tax return, formal correspondence, in the form of a notice, is issued by SARS to the taxpayer, notifying the taxpayer of SARS’ decision to select them for audit. This notice is usually accompanied by a request for relevant material.
Types of Audits
There are 2 types of audits recognised in terms of the Tax Administration Act No. 28 of 2011 (“TAA”), namely:
a field audit (which is governed by section 48 of the TAA); and
a desk audit (which is governed by section 46 of the TAA).
The extent of SARS’ powers during an audit is limited. There are checks and balances in place to protect the rights of the taxpayers that have been selected for an audit. One of these limits is contained in section 42 of the TAA which places an obligation on SARS to keep the taxpayer informed as to the process of the audit.
Outcome of the Audit
SARS is required to inform the taxpayer of the outcome of the audit or investigation, within 21 business days of the audit being concluded. This outcome needs to be provided to the taxpayer prior to SARS raising an additional assessment.
The outcome of the audit must include the following:
the grounds upon which SARS has confirmed that the amount subject to the audit, is taxable; and
summary of its findings in determining that the proposed assessment will be raised.
If a SARS auditor confirms that proper grounds exist and that the audit was successful, the auditor will raise an additional assessment for the amount.
After the Outcome and/or Additional Assessment
The Taxpayer is entitled to respond to the outcome issued by the SARS auditor, in writing, within 21 business days after receiving the outcome. This mechanism is in place to provide the taxpayer with an opportunity to ensure that any misunderstanding or error in the analysis of the SARS auditor in his/her audit findings is eliminated.
If SARS has raised an additional assessment, the taxpayer is afforded the following rights under the TAA:
request reasons for the additional assessment;
object and appeal; and
make application for alternative dispute resolution.
Avoid the Audit
Taxpayers who fail to provide information following the selection for an audit, face the serious possibility an additional assessment being raised by SARS. Taxpayers are advised to be proactive and urgently contact a tax professional to ensure that they are aware of the information that could be requested by SARS in order to show adherence to the legislative requirements on the type of information that should be retained.
Speak to one of our SARS audit specialists:
Tenielle Panther – Admitted Attorney of the High Court
Tenielle obtained her LLB degree as well as her LLM degree from the University of Johannesburg. Her specialisations include drafting tax compliant Commercial Agreements and dealing with complex SARS Audits.
Darren Britz – Admitted Attorney of the High Court
Darren obtained his BA and LLB Degrees from the University of the Witwatersrand. His focus areas include commercial and tax law, with particular interest in effective trust tax planning, SARS dispute resolution and SARS voluntary disclosure.