Legal experts at Cliffe Dekker Hofmeyr (CDH) have warned taxpayers that the South African Revenue Service (SARS) is on the offensive when it comes to those who don’t have their tax affairs in order.<\/p>\n
Following the launch of the revenue service’s auto-assessment system a few years ago, the law firm has noted an increase in penalty notices – and bills – being sent out to taxpayers.<\/p>\n
“The filing season for non-provisional taxpayers for the 2022 tax period closed on 24 October 2022, and it seems like SARS is taking the late and non-filing of tax returns by taxpayers very seriously this time around,” the firm said.<\/p>\n
CHD said that auto-assessments are generated on the basis that all the income that accrued to or was received by an individual taxpayer during a particular tax year is reflected in third-party data provided to SARS by – for example, banks, fund administrators, insurers, medical aid schemes and employers.<\/p>\n
“From a more technical legal point of view, it appears that SARS\u2019 legal basis for the issuing of an auto-assessment is section 95 of the Tax Administration Act 28 of 2011 (TAA), which states that SARS may make an original assessment based in whole or partly on an estimate if a taxpayer does not submit a return,” it said.<\/p>\n
The legal experts said it was important to note that the auto-assessment generated may only be objected to or appealed against if there is compliance with section 95 of the TAA.<\/p>\n
Read together, sections 95(5) and (6) of the TAA state that only if a taxpayer has requested SARS to issue a reduced assessment within 40 business days of the date of the estimated assessment, and SARS decides not to make a reduced assessment, can the objection or appeal be lodged.<\/p>\n
“As such, in the auto assessment context, SARS\u2019 stated intention before the start of the tax season was that once an auto assessment was issued and the taxpayer was notified of it, the taxpayer would be given 40 business days from the date of the issuing of the assessment to verify its correctness and make any changes, if necessary.<\/p>\n
“It is therefore critical for taxpayers who receive auto assessments to verify the correctness of the assessment as soon as possible after receiving notification thereof,” CHD said.<\/p>\n
The period of 40 business days can be extended, and the taxpayer\u2019s request must comprise the submission of a full and true return or relevant material. SARS will exercise its discretion to grant an extension only if there are \u201creasonable grounds\u201d that exist for an extension to be granted.<\/p>\n
The warning to taxpayers is that failing to submit a return that is due or failing to submit one on time constitutes \u201cnon-compliance\u201d – and if SARS is satisfied that non-compliance exists, it must impose the appropriate penalty in accordance with the table in section 211 of the TAA.<\/p>\n
The penalty that is imposed by SARS will depend on the assessed loss or the taxable income of the taxpayer for the preceding year and works on a sliding scale.<\/p>\n
“Therefore, a taxpayer can find themselves paying anything from R250 upwards per month for at least 35 months for failing to submit their tax return on time,” CDH said.<\/p>\n
The law firm warned that SARS is likely to keep its foot on the pedal when it comes to handling taxes in 2023 – and first in line for the new year are provisional taxpayers who have a looming deadline to submit their tax returns.<\/p>\n
“If you are a provisional taxpayer, make sure you do not miss the deadline of 23 January 2023 to submit your return, and prevent the imposition of penalties completely – because SARS is handing out those bills like it\u2019s Christmas in July,” CHD said.<\/p>\n