SARS gives final warning to taxpayers
The South African Revenue Service (SARS) has issued final letters of demand to trusts that did not submit annual tax returns for the 2024 and 2025 years of assessment.
The group warned that its next step will be to issue the necessary public notices to impose administrative penalties and fines on these taxpayers.
SARS said that receiving a final demand requires urgent action from the recipients, as ignoring them will lead to an escalation of penalties.
“Several trusts have already taken steps towards improving their tax compliance. SARS supports and appreciates these efforts,” it said.
The revenue service said that all trusts, whether economically active or passive, are required to submit annual income tax returns.
This obligation is an operation of law and is applicable to every registered resident trust, without exception, and certain qualifying non-resident trusts.
Further, trustees are solely responsible for obtaining, maintaining, and updating accurate trust information.
This includes initiating de-registration processes for trusts that meet the applicable criteria.
“Trustees bear sole responsibility for ensuring that all trust information reflected on the SARS Registration, Amendments and Verification (RAV) system is up to date and properly maintained,” the taxman said.
The rapid escalation of SARS action reflects the revenue services’ years-long push to ‘aggressively encourage’ tax compliance in the country.
Trusts are a relatively new target for the taxman. While they have always had tax obligations, in 2023, SARS expanded its third-party reporting standards to include trusts.
At that point, all trusts, and some foreign trusts, were required to submit returns containing third-party information as specified by SARS.
Critically, while this was part of SARS’ wider mandate to collect more revenue for the state—and make it costly for any tax dodgers—it was also an important factor in getting South Africa off the FATF grey list.
As part of the requirements of getting off the list, the country was tasked with paying closer attention to financial flows and scrutinising trusts and their beneficiaries.
Mission accomplished
President Cyril Ramaphosa has sung the praises of SARS and its contribution to getting South Africa off the grey list.
Not only did SARS play an important role in South Africa’s exit from the grey list, but it also had a big role in the sovereign credit ratings upgrade from S&P last year, he said.
In his letter to the nation this week, the president said that the revenue service had staged a significant turnaround after being gutted during the state capture era.
During those years, the organisation was crippled by political interference, leadership purges were commonplace, and specialist enforcement capacity had been substantially dismantled.
“Morale at the tax authority was at an all-time low, and revenue collection had been significantly weakened. Levels of compliance were steadily declining, with both corporate income tax and personal tax collections down,” the president said.
However, seven years later, the tax authority achieved its highest-ever revenue collection, R2.3 trillion.
“Just five years ago, public trust in SARS stood at 48%. It is now around 75%. Attitudes towards tax compliance also continue to improve,” Ramaphosa said.
The president said SARS was a prime example of an effective state entity and “what can be done when institutional integrity is restored”.
An effective and stable SARS means everyone benefits, he said.
“Certainty in tax policy and honesty and efficiency in tax administration is a key consideration for investors looking to bring their business to our country.”
“For citizens, an efficient tax administration translates into a more reliable revenue stream for grants, infrastructure and basic services. For businesses, this means fairness and predictability,” he said.
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