7 Common Tax Return Mistakes to Avoid in South Africa – SARS 2026
7 Common Tax Return Mistakes to Avoid in South Africa | SARS 2026 Quick Answer: What Are the Most Common SARS Tax Return Mistakes? The most common mistakes taxpayers make when submitting their South African income tax returns include incorrect personal information, missing tax deductions or credits, incomplete supporting documents, late filing, undeclared income, incorrectly answering SARS questions and misunderstanding how different income sources should be declared. These mistakes can result in incorrect assessments, delayed refunds, additional tax payable, penalties or SARS verification and audits. For Filing Season 2026, taxpayers are declaring income earned during the 2026 year of assessment, from 1 March 2025 to 28 February 2026. The good news is that many mistakes can be prevented by carefully reviewing your information before submitting your ITR12 tax return. And where a mistake has already occurred, SARS provides correction and dispute procedures, depending on the circumstances. 1. What Happens If Your Personal Information Is Incorrect? One of the simplest mistakes taxpayers make is failing to keep their personal information up to date with SARS. This includes: Banking details. Residential and postal addresses. Contact details. Identification information. Marital status and other relevant registered particulars. Incorrect banking information is particularly problematic when SARS owes you a refund. The law requires the tax payer to update their details within 30 days of change. Example Suppose SARS assesses your 2026 tax return and determines that you are entitled to a refund of R8,000. However, the banking details registered with SARS are outdated. Even though your assessment reflects a refund, payment may be delayed while the banking information is corrected and verified. How to Avoid This Mistake Before submitting your return, check that your personal information is correct on SARS eFiling. If your banking details have changed, follow the SARS process for updating and verifying them. Practical tip: Updating your banking details does not necessarily mean SARS will immediately release a refund. Outstanding returns, tax debts, verification or other compliance matters may also affect payment. 2. Are You Missing Tax Deductions or Tax Credits? Another common mistake is overlooking qualifying deductions and tax credits. This can result in paying more tax than necessary. However, it is important to understand the difference between a tax deduction and a tax credit. A tax deduction generally reduces your taxable income. A tax credit reduces the tax calculated, subject to the applicable rules. Example: Retirement Annuity Contributions Suppose your taxable income before a qualifying retirement fund deduction is R500,000. During the year, you contributed R50,000 to a retirement annuity. Assuming the full contribution qualifies for deduction: Taxable income before deduction: R500,000 Less qualifying retirement contribution: R50,000 Taxable income after deduction: R450,000 SARS calculates the relevant income tax on R450,000 rather than R500,000, assuming no other adjustments. The R50,000 contribution does not mean SARS owes you a R50,000 refund. Any refund depends on your final tax liability compared with PAYE and other tax payments or credits already applied. Common Deductions and Credits to Review Qualifying retirement fund contributions. Medical scheme fees tax credits. Additional medical expenses tax credits, where applicable. Qualifying Section 18A donations. Business expenses where permitted. Qualifying travel expenses supported by the required records. Home-office expenses where the statutory requirements are met. How to Avoid This Mistake Review your tax certificates and supporting documents before submitting your return. Pay particular attention to medical expenses paid out of your own pocket that were not reimbursed by your medical scheme. Remember: Not every expense you personally incur qualifies for a tax deduction. 3. What Happens If You Don’t Keep Supporting Documents? Submitting your tax return is only part of the compliance process. SARS may request supporting documents to verify the information declared. If you cannot substantiate a deduction or credit, SARS may disallow it, which could increase your tax liability. Example: Travel Allowance Without a Logbook Suppose you receive a travel allowance and claim qualifying business travel expenses. SARS requests a logbook showing your business kilometres travelled during the year. If you cannot provide adequate records, your travel expense claim may be disallowed. This could result in additional tax payable. What Records Should You Keep? Depending on your circumstances, these may include: IRP5/IT3(a) certificates. Retirement annuity contribution certificates. Medical scheme tax certificates. Medical invoices and proof of payment. Travel logbooks. Section 18A donation receipts. Rental income and expense schedules. Business expense invoices and supporting records. Investment and capital gains tax records. How Long Should You Keep Tax Records? As a general rule, taxpayers must retain relevant records for at least five years, although longer retention may be required in certain circumstances, including where returns remain outstanding or disputes, audits or investigations are ongoing. How to Avoid This Mistake Keep your supporting documents organised throughout the year. If documents are missing, request copies from the relevant employer, medical scheme, financial institution or supplier. Do not invent amounts or claim expenses that cannot be adequately substantiated. 4. What Happens If You Submit Your SARS Tax Return Late? Missing a SARS filing deadline can result in administrative penalties and other compliance consequences. For the 2026 filing season, the key individual filing dates are: Taxpayer category Filing period Auto-assessments 1–12 July 2026 Non-provisional individuals not auto-assessed 13 July–23 October 2026 Provisional taxpayers not auto-assessed 13 July 2026–22 January 2027 What Happens If You Miss the Deadline? Depending on the circumstances, SARS may impose administrative non-compliance penalties. These penalties can recur while the relevant non-compliance remains unresolved. Late payment of tax can also have separate interest or penalty consequences where applicable. How to Avoid This Mistake Check whether you are required to submit an income tax return and identify the deadline applicable to you. If you have already missed a deadline, address the outstanding return promptly. Where penalties have been imposed, determine whether you qualify to request remission under the applicable rules. Important: Not every taxpayer has the same filing deadline, and receiving an auto-assessment does not necessarily mean that no further action will ever be required. 5. Have You Declared All Your Income
Section 93(1)(d) – Reduced assessment due to undisputed error
SARS Reduced Assessment: How to Correct an Undisputed Error Using RRA01 or RRA02 Quick Answer: Can SARS Reduce an Incorrect Tax Assessment Without an Objection? Yes. Under section 93 of the Tax Administration Act, SARS may reduce a tax assessment in certain circumstances without requiring a taxpayer to follow the formal objection and appeal process. This includes assessments containing readily apparent undisputed errors and certain errors involving third-party information, fraudulent returns or SARS processing. Taxpayers may request a reduced assessment through SARS eFiling using: RRA01 for personal income tax assessments. RRA02 for company, close corporation and trust income tax assessments. However, these procedures apply only when the relevant legal requirements are satisfied. An incorrect assessment does not automatically qualify for a reduced assessment. In some circumstances, a Request for Correction or formal objection may be the appropriate procedure. 1. What Is a Reduced Assessment? A reduced assessment is an amended assessment issued by SARS that reduces an existing assessment in accordance with the Tax Administration Act. Section 93 provides several circumstances in which SARS may reduce an assessment. Two particularly important provisions are: Section 93(1)(d): Readily apparent undisputed errors. Section 93(1)(e): Certain third-party reporting errors, fraudulent returns and SARS processing errors. The Request for Reduced Assessment procedure provides a less formal way to request correction where the statutory conditions are met. It is not a general replacement for the tax dispute process. 2. What Is an Undisputed Error Under Section 93(1)(d)? Section 93(1)(d) allows SARS to reduce an assessment where there is a readily apparent undisputed error in either: A return submitted by the taxpayer; or An assessment issued by SARS. The error must be objectively identifiable and not require the resolution of a substantive disagreement about the facts or interpretation of tax legislation. Examples of Potential Undisputed Errors Examples may include: A clear numerical transposition error. An amount accidentally captured incorrectly in a tax return. A duplicated amount that is readily identifiable. A straightforward processing mistake reflected in an assessment. Whether an error qualifies depends on the facts and supporting documentation. Example: Incorrect Income Captured Suppose a taxpayer’s supporting documents show an amount of R150,000, but the amount was accidentally captured as R510,000 in the return. The difference is: R510,000 − R150,000 = R360,000 If the error is readily apparent and undisputed, the taxpayer may be able to request a reduced assessment under section 93(1)(d). However, SARS must be satisfied that the statutory requirements are met. The R360,000 difference represents the incorrectly recorded amount, not the taxpayer’s tax refund or tax saving. 3. When Does Section 93(1)(e) Apply? Section 93(1)(e) addresses specified circumstances where SARS is satisfied that an assessment was based on: An employer’s or third party’s failure to submit a required return. An incorrect return submitted by an employer or third party. A fraudulent return submitted by an unauthorised person. A processing error by SARS. This provision is particularly relevant where the taxpayer’s assessment is affected by incorrect third-party reporting. Example: Incorrect IRP5 Information Suppose an employer submits an IRP5 reflecting remuneration of R600,000 instead of the correct R500,000. The incorrect information is used in the employee’s income tax assessment. If the employer’s reporting error is established and the relevant legal requirements are met, the taxpayer may qualify for a reduced assessment under section 93(1)(e). Supporting documents may include a corrected IRP5 and relevant payroll records. Important: Section 93(1)(e) is not simply another category of section 93(1)(d). Each provision has its own statutory requirements. 4. What Is the Difference Between Section 93(1)(d) and Section 93(1)(e)? Consideration Section 93(1)(d) Section 93(1)(e) Main purpose Correct a readily apparent undisputed error Correct assessments affected by specified reporting, fraudulent-return or processing errors Source of error Taxpayer’s return or SARS assessment Employer, third party, unauthorised person or SARS processing Type of evidence Clear evidence establishing the undisputed error Evidence supporting one of the specified statutory grounds Older prescribed assessments Generally not available once the assessment has prescribed May remain available where the statutory requirements are satisfied SARS approval Required Required The correct provision must be selected when submitting the request. Choosing the wrong provision can result in rejection or unnecessary delays. 5. Can You Request a Reduced Assessment After Three Years? This is one of the most important distinctions. SARS’s guidance explains that an RRA request under section 93(1)(d) is generally unavailable where the assessment has prescribed. For ordinary income tax assessments, this is commonly associated with a three-year prescription period, subject to the applicable statutory rules. However, section 93(1)(e) may still be available for an older assessment, provided the circumstances satisfy that provision. Example A taxpayer discovers an error in an assessment issued more than three years ago. If the error is simply an incorrect amount captured by the taxpayer, section 93(1)(d) may no longer be available. If the assessment was based on an incorrect employer return or a qualifying SARS processing error, section 93(1)(e) may provide a possible route. This does not mean that every old assessment can be reopened. The nature of the error and the applicable legal provisions remain decisive. 6. What Is the Difference Between RRA01 and RRA02? SARS provides different forms depending on the taxpayer. Form Applicable taxpayer RRA01 Individual taxpayers — personal income tax RRA02 Companies, close corporations and trusts Both forms are designed to facilitate requests for reduced assessments in the applicable circumstances. The relevant SARS eFiling guidance should be followed for the taxpayer concerned. 7. How Do You Submit an RRA01 Through SARS eFiling? For individual taxpayers, the general process is as follows. Step 1: Log In to SARS eFiling Visit SARS eFiling and log in to your profile. Step 2: Select Request for Reduced Assessment Navigate to: Returns → Request for Reduced Assessment → New Step 3: Select the Relevant Tax Year Choose the year of assessment that requires correction. Step 4: Select the Applicable Section Choose either: Section 93(1)(d); or Section 93(1)(e). You will then select the relevant reason for your request. Step 5: Explain the Grounds for the Request
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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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
How to hold SARS accountable
How to hold SARS accountable The office of the Tax Ombud was established to act as a bridging gap between SARS and the taxpayer. But, taxpayers do not always have a direct line to connect with the Tax Ombud. A taxpayer may lodge a complaint with the Tax Ombud after they have exhausted all the SARS complaints mechanisms, unless there are compelling circumstances for not doing so. There are three ways through which one can lodge a complaint with SARS: Via eFiling. See the step-by-step guide on how to lodge a complaint via 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. 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 By calling the SARS Complaints Management office (CMO) on 0860 12 12 16. 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 specific: If you have a complaint, it is better to call the Complaints Management Office (CMO.) If you call SARS contact centre to get a reference number, specify that it is a complaint with a complaint, specify that it is a complaint and not a follow-up. If you keep calling the call centre and saying you are following up, it may remain just that, a follow-up. You need to specify that you have a complaint so that it is treated as one. Some complaints will need case numbers, make sure you call the contact centre to get one. Try again: Sometimes, a complaint lodged on eFiling may be rejected for one reason or the other. If you feel you have a compelling case, pick up the phone and call the CMO so that they may record and lodge the complaints on your behalf. You may also call them if you are not sure how the process works on eFiling or if you are too far from a SARS office. For example, I once lodged a complaint about a delayed refund (because refunds should be paid 7 workings days after verification or audit is finalised) but the system kicked me out and rejected my complaint. The complaint was successfully lodged after calling the CMO. Build a compelling case: The most important thing to do when dealing with SARS is to build a good case, this is whether you are raising a complaint, an appeal or an objection. You will need a system to record your interactions with SARS (at each touchpoint with them). You also need to store documents and supporting documents relevant to the taxpayer’s case. The system of recording your interactions with SARS should allow you to build a timeline of how the case is developed and to ensure that you have all the documents you need for this case. One such system is to make sure each client file/folder contains relevant subfolders that will help you gather the important and necessary information. The other is to build a dashboard that records the timeline and communications with SARS. This can take any form, for example, Word or Google docs, a task management tool like Asana, Trello or Monday.com. NB: You do not do this because something has gone wrong, but because things may go wrong and often they do go wrong. The advantage of doing things this way is that you will save yourself a lot of time when doing the actual complaint, even an appeal or objection. The Tax Ombud form will ask you to summary your case in chronological order. So, if you had been building a case over time, this process will be a breeze. You have all the facts and timeline at your fingertips. Are you frustrated with the way SARS has handled your affairs? How can we help you? Leave a message Subscribe now:
How to avoid or reduce the risk of a SARS audit
How to avoid or reduce the risk of a SARS audit By now we all know that SARS is looking to raise more tax revenue to make up for revenue collection shortfalls. This means SARS may and will do all they can to increase revenue collections. It will not be surprising to find that SARS audit teams will target taxpayers in order to raise additional income. Besides, their systems are designed to pick up “discrepancies” on a taxpayers’ return and these can easily trigger an audit. So do not be surprised if, a few days after submitting, you get a notification from SARS saying you’ve been selected to submit your supporting documentation for inspection or even that you have been selected for a full audit. At Eva Financial Solutions, we have a team of dedicated and diligent tax practitioners working around the clock to ensure that you do not pay a single cent more that what you should legally pay over to SARS. We have designed our internal processes, checks and balances to ensure that, even if the audit comes, our clients can avoid an audit or the process goes smoothly without causing them unnecessary emotional stress. Here are a few tips: Always ensure that your tax affairs are up to date and that you have filed all tax returns as they fall due. SARS has now made it easy to check your tax compliance status online. You should always check that your tax status is green (compliant). Once you have picked up that you are not compliant seek to address the issues sooner rather than later or consult your tax practitioner for help. You should always come clean with the taxman before being audited. Once the audit has started, you are prevented from claiming the relief under section 227 of the TAA for coming clean. Before you submit your return, ensure that you have all supporting documents for every income and deductions on your return. If you kept a personal data room, by the time your return is due you would have gathered all the necessary supporting documents for your tax return (Medical aid, Travel logbooks, Interest and Dividends certificates etc.). Be warned, do not convince yourself that if you ignore SARS’ requests for documents long enough, it will just go away. Always have your house in order. If you own and run a business as a sole proprietor or have a rental property, ensure that you do not include and deduct your personal expenses. Chances are that an ordinary taxpayer will struggle to interpret various tax laws or will misinterpret certain SARS requests or requirements. Therefore, always use the services of a reputable tax practitioner or accounting firm. Eva Financial Solutions can assist you in this regard, contact them if you cannot get your own personal tax practitioner. After submitting your return log into (or at least ask your tax practitioner to do so) SARS at least a few more time to check if SARS hasn’t issued any sneaky notifications that require your attention. If your email address and not that of your tax practitioner is linked to your profile, alert your tax practitioner if and when you receive any kind of notification from SARS. When it comes to VAT, these tips might be helpful: When you get VAT registered ensure that you have sent your VAT number to all your suppliers so that they may update their databases and add your VAT numbers onto your invoices. Insist on getting a valid tax invoice from all your suppliers. When you receive a tax invoice, check that it meets all the requirements of a valid tax invoice Check that the new VAT rate of 15%, and that the total price (including VAT) is correctly calculated before accepting the invoice/quote. Before you submit your VAT return: Check that you have claimed only where you are supposed to claim VAT (for example, you may not claim on motor car (passenger vehicle) rental or entertainment expenses as defined and other zero-rated or tax-exempt supplies. Check that you have applied the correct tax types/rates to each transaction, for example, Zero-rated sales cannot be classified as tax-exempt. Ensure that each tax type is correctly populated on the VAT201 return. Check that you have declared all standard rated sales (Sales VAT at 15%) that you should have declared and have done so using the correct VAT tax rate. Perform turnover VAT reconciliation at each VAT return submission. This will always ensure that your income statement turnover matches your VAT return submission. This will also reduce the risk of an IT14SD and the time it may have to take you if you did this only because SARS asked you to do an IT14SD. Remember, SARS systems are designed to pick up discrepancies between your VAT return submissions and your annual income tax return turnover. Before you hit submit, ensure that the VAT201 is correctly populated and the amounts contained are correct and matches your now correct VAT reports. Remember, once submitted you can only increase not reduce the amount payable. Take care that cash register slips and tax invoices issued from 1 April 2018 reflect the correct VAT rate. This will generally be 15% unless a specific time of supply rule or a rate specific rule applies. VAT vendors issuing debit or credit notes from 1 April 2018 must ascertain that the correct VAT rate is reflected and applied when determining the VAT amount. Debit or credit notes will generally reflect the old VAT rate of 14% where it relates to supplies of goods or services before 1 April 2018, subject to certain exceptions. Similarly, debit or credit notes relating to supplies made after 1 April 2018 must reflect the new rate of 15%. If your accounting systems allow, ensure that you immediately lock the submitted periods so that no further changes are effected to a closed VAT period. Ask a question or leave a message for us below: Leave a message Subscribe now:
How to guard yourself against being sued by SARS
Since April 2018, SARS has been cracking down on non-complying taxpayers in filing their tax return. Since April, SARS has successfully prosecuted and convicted 10 taxpayers for failing to submit their outstanding tax return. Among these people is prominent soccer player, Teko Modise. Most of you would have also read about the socialite Bonang being dragged to court by SARS over non-compliance. In terms of the Tax Administration Act, the following are viewed as criminal offences: Avoiding paying taxes Not submitting tax returns Failure to submit information to SARS Submitting false information to SARS Giving an incorrect answer to SARS, whether in writing or orally Failing or neglecting to register or failure to notify SARS of changes in registered particulars Issuing an erroneous, incomplete or false document required under a tax Act Here are a few tips to guard against being sued by SARS: Appoint a tax practitioner: Tax laws and requirements are constantly changing. Each year new laws are introduced. It is hard to keep up to date with these changes if you are non-tax experts. It is advisable to appoint tax practitioners to always advise you on tax-related matters and to submit the tax return for you in terms of the relevant laws. This will save you the costs of objections and “fighting” with SARS. Always check your tax compliance status and inbox: One should regularly check their tax compliance status, which is a platform that gives an indication of whether one’s tax affairs are in order. Your tax compliance profile should be green in all aspects as per the above image. The minute any of those tabs turn red, something has gone wrong with your tax affairs. You should immediately investigate and address these issues. SARS will also often send you a notification when your tax compliance status changes. When you receive this, immediately investigate and resolve it. If you hired a tax practitioner, you must also immediately notify them so that they can investigate and help you to resolve these identified issues. Do not miss a return submission: You must always submit all your tax return where you are required to do so. Missing a tax return is a criminal offence and may land you in trouble. There are few instances where one may not be required to submit a tax return. If in doubt about whether or not you need to submit one, consult with your tax practitioner/professional. Generally, only people who meet the four below criteria do not have to submit an income tax: – Your total employment income/salary for the year is not more than R350 000 – You only received employment income/salary for the full year of assessment from one employer. – You have no car allowance/company car/ travel allowance or other income (e.g. interest or rental income). – You are not claiming tax related deductions/rebates (e.g. medical expenses, retirement annuity contributions other than pension contributions made by your employer, travel). Keep and submit supporting documents: One must always ensure that for everything on their tax return, there is a valid supporting document. Constantly check your inbox to ensure that you respond to request for supporting documents by SARS. SARS is becoming quite strict with these. So, ensure that you have proper and valid supporting documents for your tax return. Be truthful and honest: Remember, there is a difference between tax avoidance and tax optimisation. Tax avoidance is a criminal offence in terms of the Tax Administration Act and can land you in big trouble. When submitting your tax return, ensure that you have honestly done so. Declare all income that accrued to you in that tax year (salaries, rental income, commission and other incomes). In terms of expenses, you must take care not to include personal or expenses of a capital nature. As an example, personal groceries or drawings will not be allowed as deductions and should not form part of your deductions. Similarly, if you are in the business or renting cars or accommodation, the capital repayments on the car or property cannot be deducted as business expenses. If you have a home office, you may not claim your entire house’s rental expense. For home office expenses, one would need to work out the total square meterage of the home office in relation to the total square meterage of the house, and then convert this to a percentage. One then applies this percentage to the home office expenditure in order to calculate the portion, which is deductible. Conclusion: It is a criminal offence not to submit a tax return. Late submission of a tax return also has huge consequences. Submitting late can attract penalties, interests and administrative penalties, which can range from R250 to R16 000 per month. If you have a couple of outstanding returns, this is when SARS can get the NPA involved leading to an individual’s case being heard before the court. Do you or your business need help to comply with tax laws or SARS? Leave a message Subscribe now:
What happens if you do not pay VAT on time?
What happens if you do not pay VAT on time? The VAT Act (section 39) and the Tax Administration Act (TAA, Section 187 and Section 4) provide for the interest application and treatment where a taxpayer fails to submit or pay a VAT return. If you are unable to submit, SARS immediately levies a 10% penalty on the amount that was due. If you are able to submit, but unable to pay, SARS will levy interest on the outstanding amount from the date the tax debt was due until the date the debt is paid off. So, if you failed to submit and pay the punishment is two-fold. A 10% penalty and interest that is charged on a daily basis at the prescribed interest rate until the debt is paid off. A question that arises is what happens should a vendor fail to submit a VAT return and have a “valid” reason for failing to submit and pay a VAT return? Introduction: The past few months and weeks have been difficult for businesses in terms of cash flow management. This is due to the COVID-19, the lockdown and the uncertainty around the whole thing. When does the lockdown end, will it be extended again? How long will the COVID-19 pandemic last and what is the impact on a business’ cash reserves? As month-end approaches, some businesses are wondering if they should pay their VAT obligations or if they should delay these a bit until their businesses have recovered cash wise. In terms of the VAT Act, a registered vendor is required to submit their VAT returns and to pay their VAT taxes by the 25th of the month if they are submitting manually or the last day of the month if they are submitting online on eFiling. If these dates fall on a weekend or public holiday, the submission and payment have to be made on a day before the weekend. As far as we all know, the government has not introduced any relief measures as far as VAT is concerned. This means that SARS is expecting your VAT returns at the end of the month. What happens if you fail to submit? At the onset, we must point out that in terms of Section 234(d) of the Tax Administration Act, it is a criminal offence to fail or neglect to submit a return. So, if a taxpayer is to fail to submit a VAT return, there it has to be proven that there were circumstances beyond the vendor’s control that resulted in him/her not being able to submit or pay a VAT return. In terms of TAA section 187(7) these circumstances are limited to: a natural or human-made disaster; a civil disturbance or disruption in services; or a serious illness or accident. So, unless you can prove these things your return and payment remains due and payable at the end of the month. Can the penalty and interest ever be waived? Section 187(6) provides that the interest can be waived (directed that so much of the interest as is attributable to the circumstances is not payable by the taxpayer) if a senior SARS official is satisfied that interest payable by a taxpayer is payable as a result of circumstances beyond the taxpayer’s control. The circumstances are covered above. What are your options if you cannot pay your VAT taxes when they fall due? If your business is in a situation where you do not know if you should pay your VAT or not due to COVID-19 or lockdown, do some scenario planning before your VAT payments become due bearing in mind the penalties and interest that may hit you if you do not submit or pay in time. The three scenarios you can look at are: What happens to your business’s cash flow for the next three months if you pay the 100% VAt due without delay What happens if you pay a portion of it when the payment becomes due What happens if you delay the payment completely and pay in a month or two. The second option is to submit your return and apply for a repayment plan with SARS. The third option is to apply for business continuity relief plans the government has unveiled for SMMEs. The fourth option is to get a VAT payment loan. How to avoid a similar problem in the future: It is in your best interests to avoid repeat late submission and payment of VAT. Continually failing to pay your VAT may lead to your business going under. You act as an agent for SARS in collecting the 15% VAT. If your clients are paying you, there is no reason why you should not be able to pay VAT because technically that money does not belong to you. If your clients are paying you late, then you need to be looking at your debtor management systems and processes. You do not want to make late payment a recurring problem. You may want to consider some of the following general measures: Open a separate business VAT savings account. Whenever an invoice is paid, put aside the 15% into this savings account. Implement cash flow management tools and means that ensure you are always paid on time. If you have retainer clients, switch them over to debit orders instead of waiting for them to do EFT. Include a payment method when sending out invoices. Invoices that have a payment method tend to be paid much quicker. Do you have any asset that you no longer use or that you are under-utilising? Do you think these can be sold if there is a market for them? How can we help? You can reach out to us for: VAT registrations Online VAT registrations Cash flow management SARS debt repayment plans VAT audits VAT submissions Ask a question or leave a message for us below: Leave a message Subscribe now: