Welcome to the latest edition of Tax Practitioner Connect, the electronic newsletter for tax practitioners that keeps you up to date with the tax matters that affect you.
Filing Season for employers ends on 31 May
The deadline is approaching for employers and other third-party providers to submit their data and Employer Reconciliation Declarations (EMP501) with tax certificates [EMP501 and IRP5/IT3(a)’s] to SARS.
Filing Season for employers commenced on 1 April 2021 and closes on 31 May 2021. This means employers and other third-party agents who have not yet submitted their reconciliation documents to SARS, have until 31 May 2021 to comply with this tax obligation.
As part of SARS’s strategic objective of making it costly for taxpayers who do not comply with their tax obligations, SARS Commissioner Edward Kieswetter, and the National Director for Public Prosecution (NDPP), Advocate Shamila Batohi, have agreed to further enhance collaboration and deal with key challenges of tax crime and non-compliance, eroding the tax revenue base and the integrity of the tax system.
“Whilst this enhanced collaboration covers a number of aspects, the immediate focus will be the non-compliance by employers, who deduct Pay as You Earn (PAYE), never turn those taxes over to SARS, and do not file their returns when required,” Commissioner Kieswetter and Adv. Batohi, said in a statement last week (14 May).
Importance of preparing for annual reconciliations
Accurate annual EMP501s and IRP5/IT3(a)’s play an important role in the tax value chain. Employers not only meet their own tax obligation by submitting the annual reconciliation documents accurately and timeously, but also assist their employees to be tax compliant as SARS uses the submitted annual reconciliations to prepopulate auto-assessments and personal income tax returns. Accurate auto-assessments make it easy for taxpayers to accept the auto-assessment and for other taxpayers to file their returns with ease during the individual filing season.
The annual reconciliation templates reduce risks of uploading incomplete and incorrect IRP5/IT3(a)s or inserting incorrect codes and values, which can prevent employers from being non-compliant and incurring administrative penalties. The EMP501 and IRP5/IT3(a)’s must contain accurate payroll information reflecting remuneration paid or due to employees, employees’ tax (PAYE) deducted or withheld, and tax certificates (IRP5/IT3(a)s generated for the full tax year from 1 March 2020 to 28 February 2021).
Importantly, this must be done timeously and accurately because SARS will use the data to populate auto-assessments, and taxpayers who still files a tax return will need the IRP5/IT3(a) certificates to file successfully when the individual filing season commences on 1 July.
Tips for employers
Below are a number of important tips that can help employers in preparing accurate employee reconciliations.
· Employers need to update and validate their employee’s payroll information.
· Employers must confirm or correct the amounts they declared to ensure that they reconcile to payments made and monthly employer declarations (EMP201s) submitted, as well as confirm remuneration and tax deductions/payments in respect of PAYE, UIF and SDL reflecting on the Employee Tax Certificates [IRP5/IT3(a)s] for the 12 months period.
· Employers need to check their statement of accounts, specifically with regards to any outstanding payments or returns. If any outstanding payments are identified, this amount must be paid immediately or by the latest with the submission of the EMP501 return. To reiterate, interest will be charged until such time the outstanding payment is made to SARS.
SARS appeals to you to take your tax matters to heart and play your part in assisting your employees to also be tax compliant. Submit your EMP501s by 31 May, and pay SARS all amounts due immediately. Your tax matters.
Non-compliance with your PAYE tax obligations can be costly
Non-compliance with your PAYE tax obligations can be costly and is a criminal offence, which may result in a fine for the employer or imprisonment for a period not exceeding two years.
· Wilful or negligent failure to submit an EMP201 return, EMP501 return or IRP5/IT3(a)’s to SARS
· Wilful or negligent failure to deliver an IRP5 to an employee or former employee, or
· Deducting or withholding employees’ tax from employees, whilst wilfully using the money for purposes other than paying it to SARS.
Non-compliance administrative penalties are imposed on employers who:
· Fail to submit a complete EMP501 on or before 31 May 2021. They will be penalised for each month that a complete return remains outstanding. Depending on the number of months outstanding, the penalty is up to 10% of the total employees’ tax liability.
· Fail to pay the full amount of employees’ tax to SARS on or before the due date for payment (that is, by the last working day before or on the 7th of the following month). They will be penalised by an amount equal to 10% of the outstanding employees’ tax amount. In addition, interest will be charged for the period that the amount remains unpaid.
Note that penalties and interest are imposed for late payment of Skills Development Levy (SDL) and Unemployment Insurance Fund (UIF) as well.
Establishment of the SARS High Wealth Individual Unit
The South African Revenue Service (SARS) has embarked on a journey to build a smart and modern SARS with unquestionable integrity, trusted and admired by all. Our Strategic Intent is to develop a culture of voluntary compliance.
In the February budget speech this year, the Minister of Finance announced the establishment of a dedicated unit to improve compliance of individuals with wealth and complex financial arrangements. In support of these efforts overall, an additional spending allocation of R3 billion was approved over the medium term.
SARS has adopted a segmented approach, which aims at improving service to all taxpayers, including high wealth individual taxpayers, acknowledging the significant revenue contribution this segment makes. The objective of the unit is to deliver and end-to-end service for high wealth individuals and their associated entities, enabled by an entire value-chain of SARS services, with a view to improve turnaround times and enable quicker resolution of complex taxpayer queries.
The High Wealth Individual segment will focus on an initial taxpayer base of 1406 taxpayers with significant assets.
The unit comprises a highly qualified and seasoned team with experience and expertise both in tax and in SARS. Capabilities in risk detection, compliance auditing, investigative auditing, relationship management, communication, research development and data analysis, as well as information technology systems are dedicated to the unit.
Welcome letters have been sent to the taxpayers in the high wealth individual segment and as SARS we look forward to an engaging and collaborative relationship with this segment and their duly appointed intermediaries, towards enabling government to build a capable state that ensures economic and social development for the well-being of all South Africans, as per the SARS mandate.
Corporate Income Tax (CIT): Audit risk re-submission tool and audit letters to specify due dates as from 23 April 2021
As part of ongoing work to update the systems and processes relating to the filing of Income Tax returns for companies, SARS is implementing legal and system changes in three phases.
In December 2020, SARS implemented legislative changes, as well as form and system enhancements. On 23 April 2021, internal system enhancements were implemented. Phases 2 and 3 relate to changes aligning SARS systems to legal changes that enable SARS to finalise audit cases efficiently and effectively through enhanced risk identification mechanisms.
As from 23 April 2021, the content of all CIT Audit letters states the specific due date for relevant materials, supplementary declarations, corrections or any other requests to the taxpayer. In the past, the CIT Audit letters would have requested relevant materials within a certain number of business days, for instance 21 or 30 days. Failure to adhere to the stipulated deadline may result in withholding payments due to the taxpayer, administrative penalties being imposed and expenses disallowed.
The CIT changes that were implemented on 23 April provide taxpayers with the necessary clarity and certainty regarding their tax obligations, while making it easy and simple to comply. The internal system enhancements further allows SARS to detect non-compliance by finalising audit cases through enhanced risk identification mechanisms. In so doing, we will be able to meet our strategic objective of responsibly enforcing compliance to make it difficult for those who do not comply.
Changes to the eFiling Tax Type Transfer process for Personal Income Tax products
As part of its ongoing eFiling enhancement SARS brought about changes to the eFiling Tax Type Transfer process for Personal Income Tax products during the 2020 Filing Season.
The benefits of these changes were:
- To provide the taxpayer with full control of their eFiling profiles;
- Correctly authenticate the relationship between taxpayers and their representatives.
In the coming months, SARS will extend the above process to the remaining tax products and for all entities transacting on eFiling. Towards the end of April 2021, SARS will introduce the following key changes on eFiling:
Adding taxpayers to a profile (Organisations & Practitioners)
o Removing multiple capture fields to simplify process
o Validate captured information to ensure alignment to SARS records
Activating and Requesting Tax Types (All products and return types)
o Registered Representatives will have access to their clients
o SARS will provide products on register (masked) – user activates selected products.
Tax Type Requests to be reviewed by the taxpayer or their appointed Registered Representative
o Manage Tax Types on www.sars.gov.za
o Authentication layer with One-Time-Pin (cell and email)
o Online POA for Tax Type Transfer
o Requests can be Approved/Rejected for each return type
An important implication of the aforementioned change is that tax practitioners are to ensure that details provided to them by their clients match the information as per the SARS records. Failure to do so will result in the tax practitioner not succeeding in adding a client.
Upload documents before a meeting with SARS
It has been noted that certain taxpayers and practitioners are unaware that they should upload all relevant supporting documentation prior to the date of a virtual meeting with SARS.
Please note that when a virtual appointment is booked on behalf of a taxpayer on the eBooking system via the 0800 117 277 number, the taxpayer will be contacted telephonically 48 hours prior to the appointment.
The relevant branch staff member will call the taxpayer in order to confirm all the details of the appointment, and to remind the taxpayer to upload the relevant supporting documentation. It is imperative that documents be uploaded before the meeting takes place.
The steps to follow to submit supporting documents on the SARS website are as follows:
STEP 1: Go to the SARS website (www.sars.gov.za).
STEP 2: Select ‘Online Service’.
STEP 3: Double click the icon ‘Submit supporting docs’ under tools available.
STEP 4: Select ‘Supporting document upload’ as a query type and complete the required information.
STEP 5: Select ‘Documents’ then ‘Add documents’ and follow tips on upload.
STEP 6: Click the ‘Select’ button then choose file to upload.
STEP 7: Click ‘Submit’ to submit to SARS.
STEP 8: You will then receive an email indicating the status of the documents received.
Note that a taxpayer will receive an email requesting him/her to resubmit the documents should the case number and tax number not match SARS’ records, or if SARS does not receive the supporting documents due to a technical error.
Legislation regarding home office expense deduction unchanged
Kindly note that in terms of the amendments to the Income Tax, gazetted in January 2021, no changes were introduced to the home office expense deduction.
This means Sections 11(a); 23(b) and 23(m) remain effective.
26 April 2021 – Enhancements to the Managing of Tax Types
The Guide on how to register for eFiling and manage your user profile was updated to include the new function on how to Manage Tax Types and Practitioner configuration. The purpose of this document is to assist clients to register for eFiling and manage their eFiling profiles. For more information, see the Guide on how to register for eFiling and manage your user profile.
12 March 2021 – Enhancements to the Tax Type Transfer process
As part of ongoing enhancements to eFiling, during 2020 the eFiling Tax Type Transfer process was updated for Personal Income Tax products. These changes provided the taxpayer with full control of their eFiling profiles. Furthermore, any transfer requests to access taxpayer profiles, now require the taxpayer or their appointed Registered Representative to approve or reject such requests.
How will the enhanced process work?
In the coming months, SARS will extend the above process to the remaining tax products and for all entities transacting on eFiling. Towards the end of April 2021, SARS started introducing the following key changes on eFiling:
- Adding taxpayers to a profile (Organisations & Practitioners)
- Removing multiple capture fields to simplify process
- Validate captured information to ensure alignment to SARS records
- Activating and Requesting Tax Types (All products and return types)
- Registered Representatives will have access to their clients
- SARS will provide products on register (masked) – user activates selected products
- Tax Type Requests to be reviewed by the taxpayer or their appointed Registered Representative
- Manage Tax Types on www.sars.gov.za
- Authentication layer with One-Time-Pin (cell and email)
- Online Power of Attorney (POA) for Tax Type Transfer
- Requests can be Approved/Rejected for each return type.