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Tax Practitioner Connect Issue 14 (31 January 2019)

Greetings and best wishes for 2019.
 
SARS gratefully acknowledges the support from the tax practitioner community in 2018 and hope that we will continue to work together towards increased compliance and fiscal citizenship in 2019.

On 1 December 2018, SARS re-established an interim unit dedicated to servicing taxpayers identified as large business and high net-worth individuals. This is regarded as an interim structure and the SARS Executive intends to have the structure fully functional by April 2019.

Mr. Narcizio Makwakwa, previously Acting Group Executive for Relationship Management, was appointed as the Acting Head of the unit. He has been tasked with championing and capacitating the unit while engaging with stakeholders in the various sectors to formulate an effective and efficient service offering that will best serve the taxpayer and by implication positively impact the fiscus.

At the time of his appointment Mr Makwakwa said: “The re-establishment of the Large Business and High Net-Worth Individuals unit confirms our commitment to offering an end-to-end service that will enable us to deliver on our mandate to collect all revenues due, ensure optimal compliance and provide us with the ability to service our clients optimally.”

The Illicit Economy Unit (IEU) was established in December 2018 as part of SARS’ commitment to develop and strengthen capacity to address the risks posed by the illicit economy.

Mr. Pieter Engelbrecht, previously head of the multi-disciplinary project team responsible for execution of complex civil cases was appointed as the Interim Executive: Illicit Economy Unit (Civil Execution). He will lead the process of capacitating the teams with the required skills and abilities to address this critical issue. As with the Large Business and High Net-Worth teams, it is expected that this team will be fully functional by April 2019.

The establishment of the IEU forms part of SARS’ new cross-functional integrated approach, adopted to tackle the complex issue of the illicit economy. This involves identification of existing capacity within SARS to enable an integrated case selection, rapid customs responses, criminal investigations, as well as civil execution.

In the interim the IEU will focus on organised tax, customs and excise evasion schemes in various sectors including tobacco, cash and carry, textiles and alcohol and fuel industries.

SARS has updated the systems and processes for filing of Income Tax returns for Companies to allow for legal changes and continuous improvement enhancements. These changes will come into effect from 25 January 2019.

Corporate Income Tax (CIT) is imposed on businesses incorporated in terms of the Companies Act and which derive income from within the Republic or through a branch or permanent establishment within the Republic. Such companies are required to submit a return of income twelve months after the end of the financial year in the prescribed form. In addition to annual returns, companies are required to submit provisional tax returns. These returns are to be submitted every six months and must contain estimated figures of total income earned for that period and taxes paid over in respect of the income estimates for that period.

To meet the strategic objective of increasing tax compliance and improving revenue collection, all new legal changes as well as non-legal changes to enhance risk identification will be implemented in January 2019. Some of the changes include:

  • Enhancement of the current ITR14 form to allow for most recent legislative changes
  • Pre-pop of certain special allowances previously claimed
  • Replacement of the ITA34 with the new Notice of Assessment (ITA34C)
  • Enhancements to letters due to the renaming of the ITA34 to ITA34C and the legislative changes.

Furthermore, SARS has issued new filing requirements for CIT returns for the 2018 year of assessment. Returns must be submitted by every company or other juristic person, which is a resident that:-

  • derived gross income of more than R1 000
  • held assets with a cost of more than R1 000 or had liabilities of more than R1 000 at any time during the 2018 year of assessment
  • derived any capital gain or capital loss of more than R1 000 from the disposal of an asset to which the Eight Schedule of the Income Tax Act applies, or
  • had taxable income, an assessed loss or an assessed capital loss

Please note that it is compulsory for registered companies to submit their income tax returns. If a company is dormant, it is still required to submit any outstanding returns prior to 2018, to prevent a penalty being imposed. The criteria for the exception in 2018 are set out in Notice 600 of 15 June 2018.

SARS will be imposing administrative penalties from 25 January 2019 for outstanding Corporate Income Tax (CIT) returns.

Administrative penalties will be imposed on companies that receive a final demand to submit a return. In terms of Section 210 of the Tax Administration Act of 2011, non-compliance with regards to non-submission of required CIT returns may be subjected to a penalty, as follows:

(1) If SARS is satisfied that noncompliance by a person referred to in subsection (2) exists, excluding the non-compliance referred to in section 213, SARS must impose the appropriate ‘penalty’ in accordance with the Table in section 211.
(2) Non-compliance is failure to comply with an obligation that is imposed by or under a tax Act and is listed in a public notice issued by the Commissioner, other than:
      (a) the failure to pay tax subject to a percentage based penalty under Part C; or
      (b) non-compliance subject to an understatement penalty under Chapter 16.

The penalties range from R250 to R16 000 per month that non-compliance continues, depending on a company’s assessed loss or taxable income.

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