SARS double blow for taxpayers in South Africa

Resident taxpayers in South Africa with secondary income streams have to tell the South African Revenue Service (SARS) or potentially face major consequences, like criminal prosecution.

Tax Consulting SA said that section 234 of the Tax Administration Act (TAA) contains a list of criminal offences under the tax act, and taxpayers could find themselves behind bars for anything from submitting a false statement to issuing an erroneous or incomplete document to SARS.

As a South African resident taxpayer, all primary or secondary income must be disclosed to SARS.

“This transparency ensures that taxpayers meet their legal obligations and contribute fairly to the country’s revenue collections,” said Tax Consulting SA.

“When taxpayers fail to disclose secondary income, they not only breach legal requirements but also risk severe penalties and criminal prosecution.”

These under-declarations are now more focused on South Africa’s commitment to meeting the Financial Action Task Force (FATF) standards to get off the grey list.

The FATF added South Africa to the greylist in 2023 due to its lacklustre Anti-Money Laundering and Combating the Financing of Terrorism regime. This makes it harder for financial institutions to conduct international business.

Government officials are confident that South Africa will exit the greylist in 2025, with SARS pushing for greater compliance.

This includes escalating investigations and prosecutions of serious and complex money laundering cases, as per Immediate Outcome 7.

Immediate outcome 7 states: “South Africa should demonstrate a sustained increase in investigations and prosecution of serious and complex money laundering, in particular involving professional money laundering networks/enables and third-party ML in line with its risk profile.”

What to do

Tax Consulting SA said that it is crucial for taxpayers to address their tax obligations promptly. Delays can potentially lead to severe penalties, such as criminal prosecution.

“For taxpayers who have historically not disclosed all their income, the Voluntary Disclosure Programme (VDP) offers a reprieve for errant taxpayers.”

“The VDP allows taxpayers to rectify their tax affairs voluntarily before SARS initiates any action and is critical where taxpayers have historically submitted their tax returns but have undisclosed income that remains undetected by SARS.”

“The VDP is available only to taxpayers where SARS is unaware of the tax default. It provides an opportunity to regularise tax affairs with reduced penalties and without the risk of criminal prosecution, as long as the disclosure is made before SARS begins an investigation.

Failure to utilise the VDP can result in major consequences, as per the growing focus on Immediate Outcome 7.

The TAA contains relief measures for those who fail to file their tax returns and are apprehensive about meeting their legal obligations stemming from their tax debt.

“Where a taxpayer does not have legal merits to pursue an objection or does not meet the voluntariness or compliance requirements of a VDP but has difficulty in settling their tax debt, a Compromise of Tax Debt application may be available.”

“The Compromise is aimed at aiding taxpayers in reducing their tax liability by means of a Compromise Agreement, which is entered into with SARS.”

“Where SARS is approached correctly, and the taxpayer’s financial circumstances warrant it, a tax debt can be reduced, and the balance paid off in terms of the Compromise.”

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