In this month’s edition of Government Connect, we share information on various tax matters that may be relevant to you, including the criteria for extension of the period for lodging and objection or appeal; the two-pot retirement system that came into effect on 1 September; verification turn-around times and the prescribed limit for retirement contributions within a 12-month period. We also remind government institutions that VAT Recovery Consultants must not be contracted if the contracting or payment of the services is based on the payment of contingency fees or a percentage of the refund.
Interpretation Note 15 (IN15) — Exercise of Discretion to Extend the Period to Lodge an Objection or Appeal
SARS issued IN15 on 30 August 2024. This important publication explains the aspects that a senior SARS official will take into account when deciding to extend the period for lodging an objection or an appeal. An objection can be submitted within 80 days after the date of an assessment or a SARS decision. Under section 104(4) of the Tax Administration Act, a SARS official can extend the period for lodging an objection. IN15 helps taxpayers who want to ask for extension to lodge an objection to SARS. Click here for the interpretation note.
Two-pot Retirement and Tax
What does the two-pot retirement system mean for your tax? Watch SARS’s tutorial YouTube videos (@sarstax on YouTube) and read our updated guides: https://www.sars.gov.za/latest-news/tax-directives-enhancements-and-tax-implications-of-the-two-pot-retirement-system/.
SARS Turnaround Times for Verifications
If your tax assessment was not selected for verification, you can expect a refund (if due) within three days. SARS can choose to review and verify a taxpayer’s return. When this happens, SARS will send you a letter on eFiling asking you to submit all supporting documentation for your tax return. Verification is normally concluded within 21 business days from the date all required supporting documents are received. Once SARS completes the verification, you will receive a completion notification and can expect the refund within three days.
Retirement Contributions
Section 11F(2)(a) of the Income Tax Act was amended with effect from 1 March 2024. If a person’s year of assessment is shorter than 12 months, the maximum deduction for a retirement-fund contribution cannot be more than the prescribed limit (currently R350 000). This limit applies for the year of assessment within the 12-month period from 1 March of that calendar year to the last day of February in the following year. See page 97 of the Comprehensive Guide to the ITR12 Income Tax Return for details.
Contingency Fees
In light of the Auditor-General’s 2022–23 Audit Outcomes report, and the MFMA Circular No. 2 (Cost Containment Measures), government institutions must not contract VAT Recovery Consultants if the contracting or payment of the services is based on the payment of contingency fees or a percentage of the refund.
For tax practitioners contracted, SARS has issued these criteria for contingency fees:
Tax practitioners’ fees for work they undertake on behalf of a client must be proportional to the nature and complexity of the task. In consultation with Recognised Controlling Bodies (RCBs), SARS has updated the criteria for the recognition of controlling bodies and the registration of tax practitioners. These criteria include rules on charging contingency fees. A contingency fee is a fee that a tax practitioner charges a taxpayer based on the percentage of a refund the taxpayer will receive or the percentage of a reduction of the taxpayer’s tax liability. To protect the interests of taxpayers and prevent revenue loss to fiscus, SARS wishes to clarify that:
- The charging of a contingency fee for completing or correcting tax returns is not an acceptable form of remuneration for tax practitioners.
- The charging of a contingency fee is acceptable
- when there is a dispute between the taxpayer and SARS under Chapter 9 of the TA Act, and
- when the taxpayer brings an application for SARS to review its decisions under section 9 of the TA Act.
Note:
- Charging of contingency fees for submission of tax returns has been forbidden since 2013.
- Charging of contingency fees is not allowed for correcting tax returns from 14 September 2023.
Where contingency fees are allowed, the tax practitioner must enter into a written agreement with his/her client. The agreement should contain sufficient information on:
- The details of the tax practitioner and the taxpayer,
- The outcome upon which the contingency fees are based and its percentage,
- The consequences if the outcome is not achieved, and
- When the contingency fees are charged.
The agreement should also contain a clause that gives:
- The taxpayer client has the right to refer the agreement to the relevant RCB for review, and
- The RCB has the authority to set aside any provision of the agreement or any fees claimable in terms of the agreement if the RCB finds such provision or fees unreasonable or unjust.
Legal Counsel — Preparation of Legislation — Draft Documents for Public Comment
SARS issued the Draft Interpretation Note for comment. It deals with the meaning of “reserve fund” under section 23(e). The due date for comment is 30 September 2024.
SARS Online Query System (SOQS)
Additional functionality has been added to SOQS. You can now register for Income Tax on SOQS and use the Two-pot Retirement System Calculator.
