Initiation of Verification/Audit Process
When filing their annual tax return, taxpayers may be caught off-guard in that SARS may have initiated the verification process, or an even more burdensome audit over various tax periods. This is especially true in instances where a taxpayer has not fully disclosed their earnings in prior years, especially where the taxpayer now discloses income from an asset that was obtained many years ago with the intention to generate an income, whether through the fault of their own or through the negligence of a tax advisor.
Any non-compliance must immediately be remedied with the revenue authority, by way of application and under the Voluntary Disclosure Programme (“VDP”).
Come forward voluntarily – use the VDP
The VDP offers errant taxpayers the opportunity to avoid paying penalties where they would have been imposed in regular circumstances. SARS therefore encourages taxpayers with undisclosed income to take advantage of the VDP process. Taxpayers are reminded that failure to do so may result in administrative or even criminal action being taken against them. It is unfortunate, whether by lack of awareness or inaction, that despite the VDP being available as a form of relief, some taxpayers choose not to regularise their affairs.
Non-compliance detected by AI
SARS’ approach of late clearly shows we are dealing with a competent revenue authority, which with the implementation of AI system improvements, and the sharing of information, have shown in recent times, just how serious they are in the “zero-tolerance” approach to non-compliance.
Proactive rather than reactive
Taxpayers must thus take the appropriate steps and be proactive rather than reactive. Major benefits of the VDP are that it covers all tax types (income tax, employees’ taxes such as Pay-as-You-Earn, Unemployment Insurance Fund contributions and the Skills Development Levy, as well as Value-Added-Tax). The only taxes that are not covered are customs and excise duties. Further, when a taxpayer is granted relief under the VDP, penalties are waived, and the applicant receives amnesty from criminal prosecution. The taxpayer will only be liable for the outstanding tax liability as well as the interest levied thereon.
Have your ducks in a row
In order to protect yourself from SARS, it remains the best strategy that you always ensure utmost compliance. We advise taxpayers who have become aware of any non-disclosure of income to come forward and apply for relief through the VDP.
Once the taxpayer has satisfied SARS that they have complied with all legislative requirements, the VDP process will be finalised. While the VDP process is underway, a taxpayer is protected from an audit and/or verification.
It must be recollected that the substance of a VDP is tax law, which is well known for its fluidity and intricacies. Thus, the VDP process is the territory of astute tax attorneys who task themselves with understanding the nuances of tax law and know which strategy to employ in order to capitalise on the remedies afforded by the TAA to ensure favourable outcomes, often not foreseen by taxpayers.
It is important for taxpayers to ensure that they have their tax ducks in a row, and not enter into a dangerous and potentially criminal matter with SARS for “tax ducking”.