Government Tax Education programme
SARS sees government as the country’s first fiscal citizen and as such, there is an expectation for government institutions to have high levels of tax compliance. SARS also understands that there are challenges in being compliant and we are in the process of rolling out tax education initiatives to assist government to meet its tax obligations.
In the last two months, SARS has provided training on:
- VAT on imported services that clarifies and describes how a government institution should be fulfilling their tax obligations when acquiring electronic services (e.g. software) from suppliers based out of the country
- What needs to take place after SARS has concluded a PAYE Audit (pertaining to recovery of taxes from employees, amendment of IRP5s etc).
Audit Queries
SARS has observed that municipalities experience challenges in understanding what information is required when they are subjected to a VAT audit. In general, the following documents are required:
- Input Schedule
- Output Schedule
- Exempt Income Schedule
- Zero Rated Schedule
- Largest Tax Invoices for Capital Expenditure (where relevant) with proof of payment
- Largest Tax Invoices for normal expenditure with proof of payment
- If adjustments have been claimed on the VAT Return, an explanation is to be provided for these adjustments together with supporting documents, and
- Schedule reflecting apportionments if applicable.
Please Note:
All of the above schedules must balance with the figures on the VAT Return. If it does not balance, please provide an explanation for any difference.
Regarding proof of payment, as municipalities are on the payments basis, bank statements must be provided showing proof of payment, and the invoices must be cross referenced to the bank statements. In addition, the payment advice for the payment must be provided.
SARS will then review these documents and may issue further queries. These types of queries will be specific to the documents that have been submitted by the municipality. SARS may for example require an explanation for documents submitted / adjustments made.
Tax Clearance Certificate (TCC) required when acquiring goods and services from foreign suppliers
In 2016, SARS introduced an enhanced Tax Compliance Status (TCS) system on eFiling to improve tax compliance and make it easier for taxpayers to manage their tax affairs. This meant that SARS would no longer issue a paper-based Tax Compliance Certificate (TCC) to confirm a taxpayer’s tax compliance status, but a Tax Compliance Status (TCS) PIN would be issued on eFiling to verify the taxpayer’s tax compliance status. To ensure that suppliers conducting business in South Africa are tax compliant, the National Treasury (NT) issued Instruction Note 7 of 2017/2018, to communicate the use of the Tax Compliance Status (TCS) PIN, as well as the Central Supplier Database.
After the NT Instruction was issued, SARS received queries from government institutions procuring goods and services from foreign entities, about how SARS would confirm the tax compliance status of foreign entities conducting business in South Africa, as the requirements for a TCC for foreign entities were not clearly differentiated in the NT instruction note. NT, in consultation with SARS on possible options available, reviewed the NT Instruction Note 7 of 2017/2018, to clarify provisions for foreign entities that conduct business in South Africa and have no tax base in South Africa.
SARS then introduced an interim process to issue a paper-based Tax Compliance Certificate while the amendment process was underway. The amendment process was concluded, and it was agreed that SARS will, going forward, issue a letter to confirm that, at a specific point in time, and based on the information provided in the Standard Bidding Document (SBD) 1 Form, or Municipal Bid Document (MBD) 1 Form, the foreign entity is not liable for tax in South Arica.
The NT Instruction Note 7 of 2017/2018 was repealed and replaced with NT Instruction Note 9 of 2017/2018; and a Municipal MFMA Circular No 90 was issued together with the revised (SBD) 1 Form and (MBD) 1 Form respectively. The new process for Tax Compliance Status Verification of foreign suppliers is that the relevant government institution procuring the goods or services from the foreign entity, must submit the completed SBD 1 Form, or MBD 1 form of the recommended bidder to the SARS branch in their region. After reviewing the submitted SBD1 or MBD1 form, and depending on the result, a letter will be issued by SARS to the government institution, and not to the foreign entity. The letter will confirm that, based on the information provided, the foreign entity is not liable to be registered for tax in South Africa, at that specific point in time.
Auto Assessments
For Filing Season 2022, SARS will again raise auto assessments for a selected group of individual taxpayers. Unlike last year, this year auto assessments will be original assessments. An auto assessment is raised based on data (we refer to this as third-party data) that SARS receives from third-party data providers like employers, financial institutions, medical schemes and so on.
A taxpayer who is auto assessed and is satisfied that the SARS assessment is correct, does not have to do anything (unlike in the years before, where the taxpayer had to “accept” a simulated assessment before it became an original assessment). If a refund is due, the refund will be paid and if tax is due to SARS, the taxpayer must pay to SARS the due amount on or before the due date indicated on the assessment.
A taxpayer who is auto assessed but is not satisfied that the assessment is correct must file a tax return in the normal way, within 40 business days of the notice of assessment. It is important to note that the dispute resolution route cannot be followed at this stage of the process – the taxpayer must file a tax return so that SARS can evaluate it and, where necessary, issue a revised assessment. However, if SARS decides that the original assessment is to remain (i.e., SARS does not issue a revised assessment in response to the taxpayer’s submission of a tax return after an auto assessment), the taxpayer can use the dispute resolution route as per the normal process.
- SARS can extend the 40 business days referred to above if the taxpayer requests extension before the expiry of the 40 business days and submits reasonable grounds for the request.
- SARS can extend the 40 business days after the expiry of the 40 business days if the taxpayer’s request is submitted to SARS within 21 business days after the expiry of the 40 business days, and if accompanied by reasonable grounds.
- SARS can extend the 40 business days after the expiry of the 40 business days if the taxpayer’s request is submitted to SARS within 3 years after the expiry of the 40 business days, and if accompanied by exceptional circumstances.
Important dates for individuals – Filing Season 2022
1 July to 24 October 2022
- Non-provisional taxpayers who file online via eFiling or through the SARS MobiApp.
- Non-provisional taxpayers who cannot file online, can do so at a SARS branch, only by appointment.
1 July 2022 to 23 January 2023
- Provisional taxpayers can file online via eFiling or through the SARS MobiApp.
SARS auto assessments are an innovative way to simplify the process and to make it easy for taxpayers to comply.
SA sign language interpreters at designated branches
SA sign language interpreters will be available to assist deaf taxpayers and those with hearing loss at the following branches on Fridays 19 and 26 August; and on 2 and 9 September 2022:
Contact [email protected] for more information.
SARS Security System Enhancements
In light of the various incidents of cyber fraud cases reported to SARS, SARS has taken various steps to enhance its security features on its systems to protect taxpayers. It is intended to roll out additional security features in the next week provided the current testing is successful.
Currently, the one-time pin (OTP) is used as a security feature for sensitive transactions such as login retrieval and resetting of passwords. SARS is now extending this to certain key updates done on the Registration Amendments and Verification (RAV) form. This will be for updates for security contact details (individuals) and bank details (any authorised user as per RAV rules) as a first phase.
Should the logged in user have the relevant access to perform sensitive transactions, SARS will send the OTP in cases where the sensitive details are changed.
Essentially, if an eFiler makes either a security contact detail or banking detail change on the RAV form, they will be requested to capture an OTP (to email or SMS) for the changes to be submitted.
Coming Soon: Restriction of simultaneous logins by the same username
SARS has noted the fact that in institutions, the same user log in details are used by multiple persons. This behaviour has contributed to significant risks. SARS intends to change its systems in due course to ensure that a username is only allowed for a single active login session. That means that usernames and passwords will need to be actively managed. SARS values your support and hope you will continue to work with us in creating a safer environment for taxpayers.
Women’s Month
South Africa commemorates Women’s Month in August each year to pay homage to the more that 20 000 women who, on 9 August 1956, marched in defiance against the extension of Pass laws to women.
Now, almost 30 years later these rights are inalienable, form part of the SA Bill of Rights, and are enshrined in the Constitution of the Republic of South Africa, 1996. Revenue, through taxation, is vital to translate these rights into goods and services for the common good of citizens. Hence the importance of ensuring high levels of tax compliance in the country.
It is interesting to note that women continue to do the right thing in the tax world. A study of the compliance behaviours of men and women in four different countries (UK; USA; Sweden and Italy) was published by John D’Attoma, Clara Volintiru, Sven Steinmo, in 2017. It was found, contrary to the research hypothesis, that there were significant differences between men and women’s tax compliance behaviours. They found that women were significantly more tax compliant than men whether they were in Western more gender-neutral countries or in more traditional communities.
For more information see the article called Willing to share? Tax compliance and gender in Europe and America – John D’Attoma, Clara Volintiru, Sven Steinmo, 2017 (sagepub.com)
What’s New
VAT Issues
SARS has published the documents below as regards VAT Binding General Rulings, Guides and FAQs:
- Binding General Ruling 59 – Calculation of VAT for table games of chance – issued 13 December 2021
- VAT 404 – Guide for Vendors – issued 29 June 2022, and
- Frequently Asked Questions: Domestic Reverse Charge Regulations for VAT – issued 19 July 2022
Tax Directives: Emigration withdrawal changes
The tax directive system currently includes a validation that results in tax directive applications with the ‘Emigration withdrawal’ reason, where the date of accrual is on or after 1 March 2022, being rejected. The tax directive validation has been subsequently removed.
This means that the accrual date for tax directive applications with the reason ‘Emigration withdrawal’ can be a date after 1 March 2022 but the following supporting documents must be attached to the tax directive application submitted through eFiling to prevent the tax directive being rejected:
- The emigration application (MP336(b)) with a date stamp before 1 March 2021; and
- The letter issued by the authorised dealer must indicate that the emigration is recognised for purposes of exchange control before 1 March 2022 (SARB Approval date).
The Tax Directive Guides have been updated with the information:
- IT-AE-41-G02 – Guide to Complete the Tax Directive Application Forms – External Guide, and
- IT-AE-33-G01 – Tax Directive for Emigration, Cease to be resident and Expiry of visas – External Guide
Latest Trade Statistics
SARS released the trade statistics for June 2022, recording a preliminary trade balance surplus of R24.23 billion attributable to exports of R184.61 billion and imports of R160.38 billion.
These statistics include trade data with Botswana, Eswatini, Lesotho and Namibia (BELN).
See the full Media Release. Or visit the Trade Statistics webpage.
New Scam
SARS continues to raise awareness about scams that affect taxpayers. The latest of these can be viewed at:
https://www.sars.gov.za/sars-scam-319-summons-letter-13-july-2022/
https://www.sars.gov.za/scam-sars-electronic-statement-july-2022/
Click here to view a complete list of the Connect Newsletters.
