Section 93(1)(d) – Reduced assessment due to undisputed error
Reduced assessment due to undisputed error The South African Revenue Service (SARS) offers taxpayers a streamlined process to correct certain errors in tax assessments without resorting to formal objection and appeal procedures. This process, facilitated through the Request for Reduced Assessment (RRA01) form, allows taxpayers to request amendments to assessments to correct undisputed errors under specific sections of the Tax Administration Act (TAA). What is an Undisputed Error? An undisputed error, as defined under Section 93(1)(d) of the TAA, refers to a clear and obvious mistake in an assessment that both SARS and the taxpayer agree upon. These errors are factual, clerical, or typographical and are identifiable without requiring any legal interpretation or dispute over facts. Correcting these errors can be achieved without the need for a formal objection or appeal. Examples of undisputed errors include: Numerical or data entry mistakes in the taxpayer’s return. Clerical errors in the documentation submitted to SARS. Simple omissions that are not subject to differing interpretations (The correction does not involve any interpretation or legal argument, and there is no dispute over the facts.) When does undisputed error apply? Sections of the TAA Permitting Reduced Assessments SARS may reduce an assessment under the following sections of the TAA: Section 93(1)(d) – When there is a readily apparent undisputed error in: The return submitted by the taxpayer; or The assessment issued by SARS. Section 93(1)(e) – When SARS is satisfied that an assessment was based on: The failure of an employer or third party to submit a return; An incorrect return submitted by an employer or third party; A fraudulent return submitted by an unauthorized person; or A processing error by SARS. Important Considerations: Both sections require that the errors must be undisputed; if there is any contention or disagreement about the error, these provisions cannot be used. The application for these adjustments must be made within the prescribed period, typically three years from the date of the original assessment The Request for Reduced Assessment (RRA01) The RRA01 form provides a less formal mechanism for taxpayers to request SARS to amend an assessment, thereby reducing the assessment amount without going through the objection and appeal process. This option is particularly useful for quickly rectifying straightforward errors that do not involve complex legal disputes. Key Considerations for Using the RRA01 Form Limited Application: The RRA01 form does not replace the formal objection and appeal process but offers a less formal way to resolve errors that are readily apparent. It is only applicable under specific, limited circumstances where all requirements are met. Prescription Period: If an assessment has been prescribed (i.e., it is older than three years), an RRA01 in terms of Section 93(1)(d) will not be allowed. However, a separate RRA01 may be submitted under Section 93(1)(e) if applicable. Cases in Progress: If any of the following cases are in progress for the same assessment, a warning message will display, and the RRA01 form cannot be submitted until resolved: Revised Declaration Estimated Assessment Agreed Estimate Dispute Cases: If a dispute case is in progress for the same assessment, the RRA01 form can only be submitted after the dispute has been finalized. Active Audits or Requests for Relevant Material: If there is an active audit or a request for relevant material for the same year of assessment, the RRA01 form can only be submitted once these cases are finalized. JAWS Compliant: The RRA01 form is JAWS (Job Access with Speech) compliant, making it accessible to blind and visually impaired users. JAWS allows these users to read the screen using text-to-speech output or a refreshable Braille display, ensuring the RRA01 form on eFiling is fully accessible. Conclusion: The RRA01 form provides a valuable tool for taxpayers to correct certain errors in tax assessments without navigating the formal objection and appeal channels. By utilizing this form, taxpayers can address straightforward mistakes efficiently, ensuring that their tax affairs are accurate and up-to-date while minimizing the administrative burden on both themselves and SARS. However, it is crucial to understand the limitations and requirements associated with this process to ensure that the RRA01 is used appropriately. If you’ve identified an error in your tax assessment, don’t delay—utilize the RRA01 form for a quick and efficient correction process. Visit SARS eFiling today to submit your request and ensure your assessments are accurate. For guidance on completing the RRA01 form, or if you’re unsure whether your error qualifies, contact us for expert assistance.
What does finalised with changes from SARS mean?
What does finalised with changes from SARS mean? A SARS “Verification Finalised with Changes” letter typically means that SARS has completed the verification process of your tax return and found discrepancies or issues that required adjustments. Here’s a breakdown of what this could mean for you: Verification Process Complete: SARS has reviewed the information and documentation you submitted to verify the accuracy of your tax return. Changes Made: During this review, SARS identified errors, omissions, or discrepancies in your return. They have made adjustments to correct these issues. Impact on Tax Liability: The changes may affect your tax liability or reduce your refund. This means you might owe additional taxes, be entitled to a refund, or have a change in the amount of the refund you were expecting. Next Steps: The letter should outline the specific changes made and any actions you need to take. This might include paying additional taxes, receiving a refund, or providing further documentation. Appeal Process: If you disagree with the changes, the letter will usually provide information on how to dispute the findings or request a review. What does finalised without changes mean from SARS? A SARS “Verification Finalised without Changes” letter typically means that SARS has completed the verification process of your tax return and found no discrepancies or issues that required adjustments. In other words, this means all went well and SARS is happy with the documents you submitted. if you have a refund due, it should be processed within 72 hours. Sometimes, it takes up to 10 business days for it to reflect in your account What to expect when verification is completed: You will receive a completion letter notifying you of the verification outcome. If all goes well, this letter will normally notify you that no adjustments have been made. In that case, SARS will not be making adjustments to their assessments. If you are due for a refund, it should be paid out in 10 working days (provided you have no tax debt due or outstanding tax returns from prior years). If you were the one owing SARS, the amount due will remain payable. What does a completion letter from SARS mean? This means that SARS has completed the verification process and is happy with the supporting documents you have provided them with. If you have a refund it should be processed within 72 hours or 10 business days. You will need to ensure that your bank details are correct and updated for the refund to be processed without delay. You can contact us for: Tax submission Help with Objection to assessments Help with the interpretation of your assessment Help with the interpretation of your statement of account Tax return submission (corrections or new submissions) Leave a message/get a quote Subscribe now:
Should I Submit a Tax Return in 2024? Essential Tips for All South Africans
Should I Submit a Tax Return in 2024? In this article, we look at whether you should submit a tax return. At the end of the article, we will post a form that can assist you in deciding whether you need to submit a tax return. Not everyone should submit a tax return. Here are some guidelines: Who should not submit a tax return: A natural person or a deceased estate is not required to submit a return if their gross income consists solely of one or more of the following: Remuneration (other than retirement lumpsum) not exceeding R500 000 and this is from a single source and where PAYE has already been deducted Interest income from a South African Source (not including Interest from Tax-Free Investment vehicles) and this interest does not exceed: R23 800 for a person younger than 65 years 34 500 for a person who is 65 years or older or 23 800 for a deceased estate Tax-exempt dividends where the individual was a non-resident throughout the year of assessment; Amounts received or accrued from tax-free investments; and A lump sum received from a retirement fund with tax deducted according to a tax directive. Non-residents are required to submit a tax return if: The non-resident carried on a trade (business) in South Africa The non-resident disposed of an asset in respect of which the Eith Schedule applies The non resident’s gross income included interest from a source in the Republic to which provisions of section 10(1)(h) of the income tax Act doe snot apply The above scenarios do not apply where: You are paid or granted certain allowances relating to business travel, accommodation or subsistence You are granted table benefits or advantages derived by reason of employment or the holding of any office You received or accrued any amount in respect of services rendered outside South Africa. Commonly asked questions: What do I need to know concerning the 2024 tax season We have created a guide for you here. Am I supposed to submit a tax return? You need to submit a tax return if you meet specific criteria such as earning above a certain threshold, having multiple sources of income, or wanting to claim tax refunds and rebates. Criteria include: Earning above the tax threshold. Having more than one employer or income source. Earning rental income, capital gains, or foreign income. Wanting to claim deductions for medical expenses, retirement annuities, or other tax credits? Do I need to file a tax return with SARS? If you meet the criteria above. Filing a tax return ensures that you comply with tax laws, potentially receive refunds, and accurately report all sources of income to SARS. Why is it important to submit tax returns? Submitting your tax returns is crucial for several reasons: Compliance with legal obligations. To claim refunds or rebates due to overpaid taxes. Avoiding penalties and interest charges for non-submission. Ensuring accurate records with SARS, which can be beneficial for future financial planning. Ensuring you have a complete record of filing tax returns and avoiding penalties for non-submission of tax returns What happens if you don’t submit a tax return in South Africa? Not submitting a tax return can lead to: Penalties for late submission or non-submission. Interest charges on unpaid taxes. Possible legal action by SARS. Missed opportunities for tax refunds or rebates. How much tax will I pay if I earn R6000? If you earn R6000 per month (R72,000 per year), you are below the tax threshold and typically will not pay income tax. For the 2023/2024 tax year, the tax threshold for individuals below age 65 is R95,750 per annum. What does IRP5 mean? An IRP5 is a tax certificate issued by employers to employees. It details the income earned and taxes deducted during the tax year, which is necessary for filing your tax return. Where do I get my IRP5? Your employer should provide your IRP5. It can also be accessed on your eFiling profile if your employer has uploaded it to SARS. But, it is important to request it from your employer as it forms part of supporting documents for your tax return. When can I submit my SARS tax return in 2024? The 2024 tax season opens on July 15, 2024. Auto assessment will start on 1 July 2024. How to reduce taxes in South Africa? You can reduce your taxes by claiming allowable deductions such as: Medical aid contributions and expenses. Retirement annuity contributions. Donations to registered charities. Home office expenses. Tax-free savings accounts. Ensuring all allowable business expenses are claimed if you are self-employed. Keeping detailed records and documentation to support your claims. You can read more about basic tax deductions here What if I am aggrieved by SARS? Review the Assessment: Carefully examine the assessment details and gather all supporting documentation. Request Reasons (Optional): Seek detailed reasons from SARS within 30 days of receiving the assessment to understand its basis, if unclear. File an Objection: Submit a formal objection, including necessary documents and legal arguments, within 80 business days of the assessment date or the date SARS issues the reasons. Appeal: If dissatisfied with the objection outcome, lodge an appeal within 30 business days of the notice. This may involve Alternative Dispute Resolution proceedings if elected. Still unsure if you need to submit a tax return? Click here to find out if you should file a tax return. How can we assist you? We can help you with: Filing a tax return and tax return preparation Interpretation SARS missed assessments Filing an objection Tax planning and advisory Bookkeeping and accounting Payroll services VAT registration VAT return preparation and submission Tax training and workshops Retirement and estate planning Leave a message/get a quote Subscribe now:
Can SARS see all my bank accounts? Crucial Tips for the Tax Season
Can SARS see all my bank accounts? Stay Out of Trouble with SARS, Know how SARS Bank Account Access It is important to be vigilant and honest on your tax return. SARS has access to your bank accounts through third parties such as banks. SARS may raise additional assessments if they detect undeclared income, which can also attract penalties and fines. Take the time to ensure that your tax return is accurate and complete and that you have documents and records to support your claims. Respond promptly to SARS with any required explanations and documents. Utilize the dispute mechanism if you do not agree with additional or estimated assessments. Request a compromise or repayment plan if you cannot immediately settle your account with SARS. The 2024 tax season opens on the 15th of July 2024. From 1 July, SARS will start issuing auto assessments for non-provisional taxpayers. Here are a few things you need to know: Criminal Offences: The following actions or inactions relating to non-compliance may constitute a criminal offence and may attract criminal charges, penalties, and interest: Failing to register or notify SARS of a change in registered details. Failing or neglecting to register as a tax practitioner. Failing or neglecting to submit a tax return or document to SARS. Failing or neglecting to retain documents/records required by SARS under the Tax Administration Act. Submitting or making a false statement. Issuing an erroneous, incomplete, or false document. Pretending to be a SARS official. Steps to Stay Compliant: To avoid getting into trouble with SARS and the law, take the following steps: Check and ensure that your details (such as addresses, personal details, etc.) are recent and up-to-date on eFiling. If you provide tax services, ensure that you are registered as a tax practitioner and are compliant with the requirements of SARS and your controlling body. If you are a taxpayer, ensure you are using the services of a registered tax practitioner. Submit your tax returns on time. Keep records and documents that support your tax return and always ensure that your tax return is a true reflection of your income and deductions for the tax year under review. Common Questions: Does SARS have access to all my bank accounts? Yes, SARS can access your bank account information through third-party data providers like banks. Do banks report deposits to SARS? Banks are required to report certain deposits to SARS, which helps them verify your declared income. How does SARS verify your bank account? SARS verifies bank accounts by cross-referencing data from your tax return with information provided by banks. Who can see my bank account? Besides you and your bank, SARS can access your bank account details for tax compliance purposes. SARS Knows What’s in Your Bank Account: Some people believe they can hide information from SARS. However, it is in your best interest to declare all income you received during the year of assessment, as it is highly likely that SARS knows more about your finances than your spouse or family members do. In some developed countries, a taxpayer’s tax return is linked to their bank account. This way, the taxpayer is obliged to account for everything that happens in their bank account on their tax return. SARS is developing a similar system. SARS now requires certain taxpayers to explain why the revenue declared on their tax return does not match the deposits in their bank accounts. Unsatisfactory answers have led to additional estimated assessments and, in some cases, heavy penalties being imposed. For example, if a taxpayer declares R1.5 million on their tax return but the deposits in their bank accounts suggest a revenue of R5 million, the taxpayer must explain to SARS why the revenue collector should not raise additional assessments for the “under-declared income.” If you do not respond or do not supply adequate reasons as to why the deposits were not declared, or that they relate to loans and inter-account transfers, or potentially from other non-taxable income, then SARS may raise these assessments. How Does SARS Know What’s on Your Bank Statements? When you submit your tax return, SARS may request you to submit your bank statements as part of the supporting documents. Additionally, SARS has had access to taxpayers’ information from third-party data providers such as banks and other financial institutions since 2012. What Happens if You Do Not Agree with SARS Assessments? The burden of proof lies with the taxpayer. SARS has dispute mechanisms that can be used to challenge these assessments. These procedures often take time and may require supporting documents to support your claims. But SARS may require the taxpayer to reconcile amounts line by line and to explain each line with evidence. For example, why a deposit stands out, why it was made, and why it was not included in the taxpayer’s income. What if SARS is Correct but I Cannot Pay Them? It is important to note that SARS can instruct the taxpayer’s bank to deduct monies from an account and pay it over to SARS. Therefore, it is important for a taxpayer to approach SARS and request a compromise or a repayment plan if they feel they are not in a position to settle the amounts due. Ensure Your Compliance: Stay proactive and ensure your tax affairs are in order. Contact us today for expert guidance and support to ensure you stay compliant and avoid unnecessary penalties and stress. Let us help you navigate SARS requirements with ease. 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How to get a SARS refund quickly; Essential Preparation Guide for Faster Tax Refunds
How to get a SARS refund quickly? We are reaching out early to ensure you’re fully prepared for the upcoming tax season. Once it opens, you’ll be ready to submit your tax return and potentially receive your refund sooner. Why wait? What do you need to get ready? You will need: Necessary documentation for submission. To address any administrative issues. Information on auto-assessments. Knowledge of basic deductions you can utilize. Documentation: The responsibility for proving entries on a tax return lies with the taxpayer. It’s crucial to compile documents throughout the year as you receive them. If you haven’t started, now’s the time to gather: IRP5s issued by your employer. If not received, request them politely. Medical aid and retirement annuity tax certificates are typically available via provider apps. Profit and loss statements if you run a business or are a sole proprietor. Details of rental income and expenses. Invoices supporting business and rental expenses. Home office expense details and corresponding invoices. Investment certificates for interest, dividends, and capital gains. Section 18A certificates for any donations made. Travel logbook for business travel claims. Details of non-personal use assets sold during the tax year. Any additional documents supporting your tax return. Admin Issues: Ensure your eFiling login details are handy and functional. Verify and update your bank details with SARS to avoid delays in receiving refunds. Auto-Assessments: SARS may issue an auto-assessment using data from third parties like medical aids or retirement funds. If you agree with the assessment, no action is needed. If you disagree, you have 40 working days to file a correction. If you miss the deadline, you can request an extension within 21 additional working days. Basic Deductions You Can Claim: Understand the deductions available to legally reduce your tax liability, such as: Medical aid tax credits. Retirement annuity contributions. Donations. Home office expenses. Tax-free savings. Foreign income exemption. Interest exemption. Travel expenses. Wear and tear. Business expenses. Capital gains exclusion. Frequently Asked Questions: How to get a SARS refund quickly? To get a SARS refund quickly, ensure you submit a complete and accurate tax return as soon as the tax season opens. Gather all necessary documentation beforehand, resolve any administrative issues, and verify that your bank details are up to date with SARS. Not having the correct and updated bank details may unnecessarily delay your refund. How quickly does SARS pay a refund? SARS typically processes refunds within 21 business days after a tax return has been submitted and assessed. However, this can vary depending on the accuracy of your submission and if any additional reviews are needed. Can you get your refund instantly? In some instances, SARS refunds within a few days, even a few hours especially where all is in order and there are no audits or verifications needed. While you cannot get your SARS refund instantly, ensuring that your tax return is accurate, complete, and submitted early can help expedite the process. Make sure all your documentation is in order to avoid delays. How to get a SARS refund quickly? You can speed up your SARS refund by promptly submitting a complete and accurate tax return with all required documentation. Regularly check your SARS eFiling profile for any updates or additional requests for information and respond quickly to any additional requests from SARS. What’s the fastest I can get my tax refund? The fastest way to get your tax refund from SARS is to file your return as early as possible, ensure all details are correct, and have all supporting documents ready. Typically, refunds are processed within 21 business days, but early and accurate submissions can help avoid delays. We encourage you to submit your tax return as soon as the tax season opens and to do so accurately and completely. Additionally, do not delay sending supporting documents to SARS as may be required. Why was my tax refund reversed by SARS? I do not understand why the refund that was due to me disappeared from my Sars statement. The refund was reversed for the following most likely reasons: – There is a special stopper on your account; – You have two valid bank accounts reflecting on your registered details and/or – You do not have valid bank details registered with SARS – Also, check if they issued a “verification completed with changes letter” How we may help: We are eager to assist you with your tax affairs, including tax return submission, interpreting assessments, and objections to issued assessments. Feel free to reach out for any help or information. Leave a message/get a quote Subscribe now:
What are the tax implications of trading or buying shares?
What are the tax implications of trading or buying shares? The tax implication for having shares boil down to two things, whether your gain is income in nature or capital (gain) in nature. Let’s start by defining these two things: Income: Shares held as trading stock are bought mainly for resale at a profit. In other words, any shares held for speculative purposes normally fall under this category. The profits or any gain or loss made on the disposal of such shares (held for-profit/speculative) purposes will be of a revenue nature and will not be subject to capital gains. Gains of a revenue nature are subject to tax at marginal tax rates that vary between 18% and 45% depending on the circumstances of the taxpayer after taking into account all his/her other income (such as salary, rent, business income e.t.c.) The taxpayer can also deduct expenses directly related to the trading of these shares such as broker fees, transaction fees, subscription to broker news, tools and platforms and any such costs directly related to the trading of these shares. Capital: On the other end of the spectrum, for shares held as a capital asset (that is as a long-term dividend producing investment,) any gains or losses arising from such shares (held for investment/dividend earning) upon disposal will be of a capital nature. Gains that are of a capital nature are subject to capital gains and at a lower tax rate than gains of a revenue nature. Firstly, you get an exclusion of R40 000 as an individual on your gains. This means that you start paying capital gains tax if your gains exceed R40 000 for a tax year (year of assessment.) This is known as the annual exclusion. For natural persons dying during or after the 2020 tax year of assessment, the exclusion is R300 000. In addition to the annual exclusion, 40% of the gains are included in taxable income and then taxed as the normal marginal tax rates that apply to your salaries or other income. This 40% is known as the inclusion rate. Assuming that your marginal tax rate is 45% (the highest tax bracket,) the maximum you pay on capital gains is 18% (0.4 x 0.45 = 0.18.) Yes, you guessed it right, there can be 0% tax on your capital gains when: The sum of capital gain and losses does not exceed the annual exclusion; The sum of capital gain is less than or equal to the sum of capital losses (which means your gains set off against your gains); or Taxable income falls below the level at which normal tax becomes payable, that is if your combined income plus gains fall under the tax-free threshold. The effective rate (of 18%) we spoke about earlier applies if you fall in the highest tax bracket as an individual taxpayer. The rate is different from that which applies to companies or trusts. Companies and trusts, other than special trusts, pay a higher CGT than natural persons. They do not qualify for the annual exclusion and must include the capital gain at 80% of the gain into their taxable income. These are the effective tax rates: Companies are at an effective rate of 22.4% which is derived from the 80% inclusion rate and the 28% normal taxes for companies (0.28 x 0.8.) A trust that is not a special trust si at 36% effective tax rate for capital gains (0.45 x 0.8) What we have done above is the simplest way to look at share-holding. Are things that simple? Not always. The line between gains/losses of a revenue nature or gains of a capital nature can be a bit blurry. Capital vs revenue: When computing your tax liability, the first step is to determine if your gains are capital or revenue in nature. Apart from the three-year rule according to Section 9C (that basically says you must own a share for at least 3 years for your gains to be treated as capital in nature,) the Tax Act itself does not provide objective rules to distinguish between gains of revenue and capital nature. This task has always been left to the courts, which over the years have established some rules for this distinction. So, the onus is on you as the taxpayer to prove that your gains are of a capital or revenue nature. The most important factor in establishing the nature of your gains is the intention. This is not always an easy task since you can have more than one intention at a time and since intention can change over time. But, the courts have established that the taxpayer evidence as to intention must be tested against the surrounding circumstances of the case. These may include, the frequency of transactions, method of funding and reasons for selling. These may help establish your intention when you bought or sold the shares (Elandsheuwel Farming (Edms) Bpk v SBI.) “If they (the shares) were bought as a long-term investment to produce dividend income, the profit is likely to be of a capital nature. But if the shares were bought for resale at a profit, the profit will be of a revenue nature.” In SIR v The Trust Bank of Africa Ltd it was established that for a profit to be of a capital nature, “the slightest contemplation of a profitable resale need not be excluded. Where there were mixed intentions, the dominating intention is the one that establishes intention (COT v Levy.) Some general guidelines/Principles (source, the SARS guide on tax implications on shares:) Any profit or loss on disposal of shares will be of a revenue nature if they were purchased for resale as part of a scheme of profit-making (Californian Copper Syndicate (Limited and Reduced) v Harris (Surveyor of Taxes) A profit on the sale of shares is more likely to be of a revenue nature if it was not fortuitous, but designedly sought for and worked for (CIR v Pick ’n Pay Employee Share Purchase
What if there is no response from SARS?
What if there is no response from SARS? KEY TAKEAWAY POINTS: SARS has 21 business days to complete a verification They may finalise it with or without changes If they take more than 21 business days, you have a right to lodge a complaint If nothing happens, you may take the matter up with the office of the tax ombud Remember to keep a proper track record of the matter and/or any follow-ups you make on the matter In this article, we discuss what verification is, what to do when you are selected for verification and if SARS does not bother to get back to you on time. INTRODUCTION: SARS has capacity issues that they are working hard to resolve, But, it seems this 2021 tax season they took more than what they can handle. We have observed many taxpayers who have been selected for verification but who have not heard back from SARS many days after the verification was initiated. Under normal circumstances, SARS has up to 21 working days to finalise a verification and issue a finalisation letter and/or final or adjusted assessment. In one case we have looked at, for example, the taxpayer who was selected for verification on 29 July 2021 has not heard back from SARS even at the time of writing this article. We are certain, she is not alone in this. Let’s look at some important definitions before we can consider what one must do if SARS takes their time on the verifications. What is verification? Being selected for an audit and verification are two different processes. With a verification, SARS is doing a face value verification of the information declared by the taxpayer on the declaration or in a return. This involves the comparison of the information on the return against the financial and accounting records and/or other supporting documents. All this is to ensure that the declaration/return is a fair and accurate representation of the taxpayer’s tax position. (Remember, in terms of the Tax Administration Act, the onus is on the taxpayer to provide supporting documentation to prove that the deductions and information on their declaration are reasonable, fair and accurate.) Who can be selected for verification? Any taxpayers can be selected for a verification process for the proper administration of tax. The selection can also be done on a risk basis. What should you do if you are selected for verification? What should you do if I am selected for verification? SARS will notify the taxpayer if they have selected them for verification. The letter issued will state what the taxpayer must do or provide to SARS. The letter will also notify the taxpayer to check their tax return and to make any corrections if there are any discrepancies on their tax return. The taxpayer will be given 21 business days from the date of the letter in which to provide the supporting documents and schedules. These documents and schedules can be submitted via eFiling or SARS support documents portals. During the verification, you can expect to get another letter requesting additional information if the relevant material initially supplied was not sufficient to finalize the verification. If you are due for a refund, you may not get this until the verification process is finalised. What happens if you do not respond to the verification? It is always important to keep an eye out for SARS correspondences on your email or eFiling. Normally SARS sends you a message and email when they have issued important notices. If you choose not to respond SARS may: Issue a second letter reminding you to submit relevant information Issue a final request for relevant information If you still do not respond, a SARS official will contact you telephonically and request that you submit the necessary relevant material within 5 business days. Should you still not respond, SARS may raise an assessment based on information readily available or obtain from a third party. Now let’s consider what your options are if SARS ghosts you. What if you have complied/responded but SARS takes all the time in the world on the verification? There is the office of the tax ombud that can help with operational issues. But, it does not get involved before you have exhausted all internal SARS complaints mechanisms. You can only go directly to the office of the tax ombud only if there are compelling reasons to do so. So, the first step to take is to complain to the SARS complaints office. To do so, you must be sure that the matter is now outside the normal service period, as in the example we have earlier about the taxpayer who was selected for verification on 20 July and has not yet back from SARS ever since. There are three ways through which one can complain about SARS: Via eFiling. See the step-by-step guide on how to complain about eFiling. Please note that you have to be registered on eFiling to be able to do this. You may not download or print the form to send it by any other means. You must also have a valid case number to which your complaint relates. By visiting the branch. If you do, you may need to ensure that you have spoken to all relevant higher people before you leave the branch. Due to COVID, you may need to make an online appointment. By calling the SARS Complaints Management Office (CMO) on 0860 12 12 16. Do not call the call normal call centre and say you are following up on an unresolved matter, the call centre agents may “escalate” your case and normally that achieves very little. If your complaint is not resolved after 21 working days, you may take the matter to the office of the tax ombud. Here are a few tips on winning the battle against SARS poor service/administrative issues and making sure you have a winnable case when you approach them or the Tax Ombud: Be
Tax season deductions: Basic deductions you can use to save on tax (how to get a tax refund)
Tax season deductions – what you should know The tax season is offically coming to an end for non-provisional taxpayers in the next few days. But, even if you are planning for the next tax season, this article is for you as it will consider a few options/deductions that you can use to reduce your tax liability. Let’s consider these: Medical aid credits: Taxpayers can claim deductions (or tax credits) for medical aid schemes they contribute to. This can be applied where you contribute as a principal member or where you are not a principal member but pay for and on behalf of someone like a close family member. The credits depend on the number of beneficiaries of the medical aid. The more the beneficiaries the more the credits one can get. For the taxpayer or the first beneficiary, the tax credit is R332 for the 2022 tax year (R319 – 2021), R664 for the taxpayer and one dependant (2022 or 638 for the 2021 tax year and R224 for any additional beneficiary (215 for the 2021 tax year.) Retirement annuity: If you make contributions towards a pension, provident fund or retirement annuity, you can also claim deductions on taxable income. Taxpayers are allowed to deduct up to, from their taxable income, 27.5% of their remuneration of taxable income, whichever is greater, up to a maximum of R350 000 per tax year if they contributed to a retirement annuity fund, pension or provident fund. Therefore, it is important that the taxpayer examines and calculate their annual contribution in order to fully take advantage of this tax benefit. However, there is no tax benefit once you withdraw from this fund (we will talk about withdrawals in another publication.) Donations: The taxpayer can also claim donations against his/her taxable income. There is a catch though. The deduction is limited to 10% of the taxpayer’s taxable income before claiming donations as a deduction (so, if the taxable income is R300 000, the claim cannot be more than R30 000.) The charitable organisation the taxpayer gives a donation to must also furnish the taxpayer with a Section 18A certificate, not just a receipt. Home office expenses. We have previously written about home expenses here. So, if you need a more detailed guide, please refer to that article. However, let’s cover a few things here too. Certain expenses that a taxpayer incur as a result of working from home can be claimed as a deduction against taxable income provided certain conditions are met: The employer must allow the taxpayer to work from home. So, you can’t just work from home because you want to. Your employer must give you express permission to work from home. The taxpayer must spend more than half (50%) of their total working hours working from their home office. The part of the home in respect of which a claim is submitted must be occupied for purposes of a “trade”, as defined in section 1. So, in essence, there should be a specific part of the home that is used exclusively for this purpose. As an example, a specific set aside office must be kept aside for the trade. A taxpayer meeting with a client in the bar area of their home may not qualify for these deductions. Building from the point above, the part that is so occupied must be specifically equipped for purposes of the trade. So, it is important that the space/office must be specially fitted with the relevant instruments, tools and equipment required for the taxpayer to perform their work. The part must be regularly and exclusively used for purposes of the trade. As an example, taxpayers who earn a commission but who spend the majority of their time on the road visiting clients and performing their work at the client’s premises do not qualify for home office expense deduction. Refer to our previous article on home office expenses for further details and examples of expenses that a taxpayer can get as a deduction for working from home. Tax-free investments: These accounts are offered by various financial institutions. The tax benefit is that any income (interest, dividends, REIT payments and capital gains) accrued or received from these funds are exempt from tax. For example, interest income earned is fully exempt from tax as opposed to interest earned elsewhere, which can be exempt only up to certain amounts as per the Act. Though the income is exempt, this must still be included on the taxpayer’s tax return. Contributions to these funds should not exceed R33 000 annually and a lifetime agreement of R500 000. Any contribution above these amounts triggers a tax on the income earned. Foreign income: Ever heard f the 183 days rule? Individuals working overseas for a 183-day term could claim back tax deductions on income earned for the period there were outside the Republic. After 1 March 2020, the exemption is the first R1.25 million of foreign employment income earned by a resident will qualify for an exemption for tax years commencing on or after 1 March 2020. Travel claim: If you use your vehicle for work purposes and you are able to prove to SARS that you used your vehicle for work purposes, then you can claim a deduction on it. The catch, keep a travel logbook. Do not “manufacture one!” Wear and tear: The world is changing and often employees will use their own tools and equipment to carry out their work. If you are using goods/tools that you bought with your money for work purposes you are entitled to claim depreciation on these tools/assets. These can be computers or laptops. The catch, the cost of the assets must be written off over a time stipulated by SARS and you must be able to prove that the asset/tool was used for work purposes. For example, computers are written off over a period of 3 years. Assets that cost less than R7000 can be written off in full in the
Effective Steps to Successfully Close a Business in South Africa (Guide)
Effective Steps to Successfully Close a Business in South Africa Who should be reading this article? Anyone whose business is no longer trading and wishes to wind it down Anyone who wants to liquidate their business Anyone who has lost interest in their registered business and now wishes to discontinue it KEY TAKE AWAY POINTS: Pay all outstanding creditors Collect from all debtors if any Cancel all contracts (ensuring that all the conditions and terms of doing so are understood and taken care of) Inform all employees and customers of the intention to close down the business Sell your business assets (including the cars) and stock (if any) or write off any assets or inventory no longer – S0, basically liquidate the business The last step would be to distribute any cash or assets that remain in the business Deregistering at the CIPC Deregistering with SARS (all tax numbers) Why may you consider closing a business? There are many reasons for this. But, you may consider closing off your business because of any of the following reasons (not limited to this list:) The business was negatively affected by COVID and there is no possibility of the business doing well again in the future The business has become unprofitable and it no longer makes sense to continue operating Your focus or passion has changed and you would like to focus on something else The project for which the business was designed has ended and will not be resuming again in the future The most profitable clients of the business have left and you do not see the business attracting any new clients Changes in technology that drive your product or business out of the market You no longer have the cash flow or working capital to keep the business going If you are considering closing down your business, the following steps and considerations are important: 1. Have an exit strategy: Truly speaking, this should happen before there is a need to close down a business. This is because we will all exit from our business one way or the other. Some of the exit reasons are what we have already highlighted above. But, it could also be due to health reasons, death, new investors, a merger or sale of the business or part of the business. Whatever the reason, every business should have an exit and succession plan in place. Your goal here is to formulate a plan of how you will close down the business or exit from the business. Without a plan, things usually go wrong and you may be caught unaware along the way. 2. Notify your employees: After your customers, your employees are an important asset to the business. Besides, they have families to feed and lives to live. Leaving it until late may place an unnecessary mental burden on them and leave them with little time to look for alternative employment. As an alternative, use your relationships to find then alternative employment. But, the important point here is to keep the employees in the loop, not in the dark, about what is going on. Also, decide on who will handle the communications with the employees. It is also important to decide and communicate their terminal benefits and how these will be paid. 3. Notify your clients It is important to notify your clients in time so that they have time to look for alternative suppliers. Also, you may need to collect anything that they still owe you. It is important that you decide how you will collect and how they will be notified. 4. Collect your outstanding debts Plan your business closure around your existing collection policies and avoid giving new credit lines to existing or new clients. You also want to collect any outstanding debts before you close the business because it may become difficult to get payments once you have already closed off the business. Some businesses’ financial policies do not allow payments to individuals. Avoid announcing that you want to close off your business before you collect outstanding debts because some clients may just stall on payments hoping it will all go away. You can offer settlement discounts to encourage customers to settle their accounts. An alternative is selling these accounts to a collecting agency. 5. Notify your creditors and pay outstanding debts Inform your creditors of your decision to close and ensure you have a plan to handle the outstanding debts. SARS may be one of those creditors. Ensure that you have filed all your returns and that every return is paid for. If you are unable to pay them, there are processes you can follow to ask for a compromise or a repayment plan (Click here to read more about compromises and repayment plans here.) There may be specific laws on how you may pay your creditors. Ensure you are familiar with these and follow them in settling your creditors. If you are not sure, enlist the services of a lawyer. 6. Sell your business and operating assets If you can, package some of the cash-generating units that are still functional and profitable and sell these to interested parties. If this is not possible, you may want to sell the assets in the business including all the inventory, vehicles and other operating assets you may still have if there is a market available for them. 7. Deregister the business Once you are satisfied that all processes are complete, it is now time to deregister your business with the CIPC. This is to inform the CIPC that your business is no longer in existence. After this is done, inform SARS that you have deregistered the business. Also, apply to have all tax types (numbers) deregistered. This is to clear you of future tax compliance burden since your business is no longer in existence. Frequently asked questions: How do I shut down a business in South Africa? Start by submitting all outstanding SARS tax returns Obtain a tax
Credit notes under scrutiny, are you complying?
What we have seen now is increased scrutiny of credit notes for compliance with the VAT Act. The main challenge is that in most instances accounting packages being used by businesses do not contain all the information required on a credit note by the VAT Act. It is therefore important that businesses and accountants ensure that credit notes comply with the Act before they are issued and before VAT claims are submitted. Otherwise, it will be difficult for businesses to get back their legitimate VAT claims. Key elements that must be found on the credit note are the following: Vendor details (names and addresses, VAT registration numbers for both the issuing and receiving party) The words “credit note” must be clearly stated on the document being issued A brief description of the circumstances that gave rise to the credit note. Now this one is critical and what you may find is that some accounting systems do not allow for this. We would encourage you to add this narration to the description part of the credit note. Information sufficient to identify the original transaction to which the credit note relates, that is the original invoice that is being credited. In other words, if someone else who is not familiar with your records comes to check the credit notes, they should be able to trace its origins with ease. It would also be very important to make sure that the correct VAT rate is applied. If the original invoice was issued before the VAT rate changes to 15%, then the credit note should also be at 14%. One cannot claim back more than what they declared. In more detail and in terms of Section 21(3), of the VAT Act, a credit note must contain the following particulars: (i) The words “credit note” in a prominent place; (ii) the name, address and VAT registration number of the vendor; (iii) the name, address of the recipient. And where the recipient is a registered vendor, the VAT registration number of the recipient; (iv) the date on which the credit note was issued; (v) either— (aa) the amount by which the value of the said supply shown on the tax invoice has been reduced and the amount of the excess tax; or (bb) where the tax charged in respect of the supply is calculated by applying the tax fraction to the consideration, the amount by which the consideration has been reduced and either the amount of the excess tax or a statement that the reduction includes an amount of tax and the rate of the tax included; (vi) a brief explanation of the circumstances giving rise to the issuing of the credit note; (vii) information sufficient to identify the transaction to which the credit note refers; (b) the actual tax charged in respect of the supply concerned exceeds the tax shown on the tax invoice as charged, the supplier shall provide the recipient with a debit note, containing the following particulars: (i) The words “debit note” in a prominent place; (ii) the name, address and VAT registration number of the vendor; (iii) the name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient, except where the debit note relates to a supply of goods in respect of which a tax invoice contemplated in section 20 (5) was issued; (iv) the date on which the debit note was issued; (v) either— (aa) the amount by which the value of the said supply shown on the tax invoice has been increased and the amount of the additional tax; or (bb) where the tax charged in respect of the supply is calculated by applying the tax fraction to the consideration, the amount by which the consideration has been increased and either the amount of the additional tax or a statement that the increase includes an amount of tax and the rate of the tax included; (vi) a brief explanation of the circumstances giving rise to the issuing of the debit note; (vii) information sufficient to identify the transaction to which the debit note refers: Provided that— (A) it shall not be lawful to issue more than one credit note or debit note for the amount of the excess; (B) if any registered vendor claims to have lost the original credit note or debit note, the supplier or recipient, as the case may be, may provide a copy clearly marked “copy”; (C) a supplier shall not be required to provide a recipient with a credit note contemplated in paragraph (a) of this subsection in any case where and to the extent that the amount of the excess referred to in that paragraph arises as a result of the recipient taking up a prompt payment discount offered by the supplier if the terms of the prompt payment discount offer are clearly stated on the face of the tax invoice. Did you just get VAT registered and you need someone to configure your accounting system for VAT? Leave a message Subscribe now: