Tax Practitioners Connect Issue 31 (April 2022)

SARS breaks revenue collection record

SARS collected R1.564 trillion in tax revenue between April 2021 and March 2022 – a new revenue collection record for the organisation and a 25.1% increase over the previous year, SARS Cmmissioner Edward Kieswetter announced at a media conference on 1 April.

He said SARS has collected more than R17.82 trillion since its formation 25 years ago. Over the past 25 years tax net revenue collections have grown more than a 10-fold increasing from R147.3 billion in 1996/97 to R1.564 trillion in 2021/22. For the period ending 31 March 2022, SARS collected a gross amount of R1 884.9 billion (R1 540.5 billion in the prior year). Offset by refunds of R321.1 billion (R290.7 billion in the prior year), this results in net collections of R1 563.8 billion, which represented a surplus of R314.0 billion (25.1%) against the prior year 2020/21.

“Over the past three years, notwithstanding huge challenges, SARS has made significant progress in restoring its integrity, its credibility and its performance. We would be the first to admit though, that we still have a very long way to go.

“In the past three years we have worked to clarify the components of the revenue system and made a hard distinction between the revenue we receive versus the revenue we collect.  Specifically, we have shifted our focus to the latter, which reflects the actual work we do that results in revenue collected whilst strengthening the revenue collection system. This work is what we refer to as the SARS Compliance Programme,” he said.

The significant contributors to this positive revenue performance reported against the prior year 2020/21 are:

  • PIT: Net PIT up by R67.3 billion (13.8%) to R555.8 billion
  • CIT: Net CIT up by R119.2 billion (58.3%) to R323.6 billion
  • VAT:  Net VAT up by R59.5 billion (18.0%) to R380.7 billion
  • Import Duties up by R10.7 billion (22.6%) to R58.0 billion
  • Domestic Specific Excise Duties up by R17.3 billion (53.5%) to R49.6 billion

Turning to cash outflow management, the refunds of R321.1 billion as processed reflect a growth year on year of 10%, mostly dominated by VAT (R262.4 billion), PIT (R33.7 billion) and CIT (R17.7 billion). The tax refunds paid in the year under review are the highest ever paid in the 25 years of SARS and represents an estimated 5.1% of GDP, reflecting the importance of efficiently processing refunds into the hands of individuals and businesses to stimulate the economy.

“Regarding the work we do as a tax administration, this year these efforts contributed R209,7 billion to the fiscal year that has just closed. This includes R137.5 billion of additional revenue and preventing impermissible refunds and leakages worth R72.2 billion from leaving the National Revenue Fund.

We are making steady progress in our administrative efforts as several pockets of efficiencies emerge. It is too early to declare victory. We have a long way to go, and we still drop the ball far too often. But it is important to appreciate progress already achieved and acknowledge the efforts of the committed employees at SARS,” he said.

Commissioner Kieswetter provided details of a number of general activities undertaken to increase collection such as tax base broadening, a focus on outstanding returns, late payments, etc., as well as successes with refund risk management; Customs and Excise audit and enforcement activities; breakthroughs in the illicit economy and successful litigation and prosecutions to illustrate how these administrative actions (compliance work) resulted in a compliance dividend of R209.7 billion.  

These details can be found in the Commissioner’s Speaking Notes, which were made available to the media after the announcement.

In conclusion Commissioner Kieswetter thanked SARS employees, “the millions of taxpayers, without whom we have no purpose, and specifically a huge thank you to every single taxpayer and trader whose efforts to comply, tax contributions, and their patience with us as we occasionally drop the ball”.

SARS thanks tax practitioners

SARS would like to thank tax practitioners who actively promote tax compliance that resulted in achieving the revenue target this year. SARS is grateful for the role tax practitioners play and hope that together we can achieve greater success in the new tax year. 

Engagements with RCBs

SARS has begun a series of consultations with Recognised Controlling bodies (RCBs) to ensure that they comply fully with their legal obligations as listed in section 240A of the Tax Administration Act. We are committed to our vision of creating a professional tax practitioner industry that can be trusted and demonstrate integrity and ethics. As part of the legislation, it is required that a RCB provide SARS its annual report that demonstrates the RCB continuously meeting the recognition criteria as published in 2014.

In addition to the above, SARS is undertaking site visits to the offices of the RCBs to better understand how they work and their challenges concerning the above.  There are some areas where the legislation does not provide details which SARS needs to provide clarity. To provide the clarity and review the current recognition criteria to ensure the legislation is fully implemented, there have been a number of discussions between SARS and the RCBs. The discussion has been fruitful to date and a number of agreements have been reached.

SARS eFiling notifications not reaching tax practitioners

RCBs and tax practitioners made SARS aware that certain notifications, notices and correspondence were not reaching tax practitioners via eFiling. SARS’ technical teams have resolved the issue.  Should this continue to be a challenge, SARS should be informed.

Updating of registered particulars

Section 23 of the Tax Administration Act (the Act) requires that a taxpayer must communicate to SARS within 21 business days any change of registered particulars.

Section 234 of the Act provides that it is criminal offence if a person fails to comply wilfully and without just cause with the provisions of section 23.

SARS wishes the remind tax practitioners to ensure that they timeously update the registered particulars for themselves and their clients. 

For more information click on:

 Client Information System | South African Revenue Service (sars.gov.za) 

SARS multilingual tax terminology publication

SARS Commissioner Edward Kieswetter launched a ground-breaking list of tax terminology in 10 official languages – with the exception of English. It is hoped that this will assist taxpayers to understand the tax environment in their mother-tongue.

 See the SARS Multilingual Terminology list here.

Search and seizure operations in various sectors reap rewards

SARS, through its Tax & Customs Crime Division, recently carried out inspections as well as search and seizure operations on entities in the banking sector, tobacco and cigarette sector, alcohol, gold and clothing industries in KwaZulu-Natal, Western Cape and Gauteng.

This included residential premises of certain individual taxpayers in the gold industry and banking employees. The operations were related to wider investigations and audits into illicit financial flows and illicit trade in gold, alcohol, clothing, cigarettes and tobacco products.

The objective of these interventions was twofold. Firstly, they assist SARS with its verification processes for tax compliance and with identifying information that may support such verifications. Secondly, SARS may corroborate its evidence already at its disposal, for potential criminal proceedings.  These interventions were initiated after potential discrepancies were identified in customs declarations and tax returns related to such entities as well as bank statements which could not be relied on.

Click here to read SARS’ statement.

Customs: extension of the ePenalty deadline

As persons who are required to submit Caro Reports are currently still in the process of making systems and operational changes to ensure full reporting compliance, industry has requested SARS to extend the implementation date, once again. Taking this into consideration, SARS has extended the pilot by another month until 30 April 2022.

The imposition of monetary penalties for the non-submission of cargo reports has now commenced on 1 May 2022.

For more information, see Extension of the ePenalty deadline.

Annual Reconciliation Season 2022 has opened

The Annual Reconciliation Declaration (EMP501) submission period opened on 1 April and closes on 31 May this year. Employers are required to submit their annual reconciliation declarations covering the full tax year from 1 March 2021 to 28 February 2022. The EMP501 must reflect accurate and up-to-date payroll information about employees, employees’ tax (PAYE) payments made and tax certificates (IRP5/IT3(a)’s) generated.

SARS Making it easy

To reconcile easily and conveniently, see useful information below:

  • Always ensure the latest version of [email protected]™ Employer is being used, as any information submitted to SARS using previous versions of [email protected]™ Employer, will not be accepted.
  • The latest version of the software can be accessed by visiting the SARS eFiling website www.sarsefiling.co.za and downloading the latest version.
  • Employers must submit outstanding monthly declarations (EMP201) and make all payments due before submitting the EMP501 for 2022.
  • Where employees are not registered for income tax purposes, employers must register them using Single (“Individual ITREG”) and bundle IT Registration (“Bundled ITREG”) for existing tax numbers as well as new registrations available on [email protected]™.
  • First-time job seekers can register for income tax via eFiling or on the SARS MobiApp.
  • Employers must check, verify details, and issue IRP5/IT3(a)’s to employees on time.

Accuracy and on-time filing is critical

It is very important for employers to complete EMP501s and file them correctly. We use the information received through the submitted EMP501 to populate the tax returns of employees and, if they are part of our auto-assessment population, to populate their assessments. Incomplete or inaccurate information will negatively affect employees’ ability to meet their tax obligations.  In addition, incomplete or inaccurate information may result in significant delays of refunds to your employees when it is due.

Why is it important to submit an accurate EMP501 return on time?

If an employer submits the EMP501 late, administrative penalties will be charged. The penalty will equal 1% of the year’s PAYE liability, which will increase each month by 1 percentage point up to 10% of the year’s PAYE liability.  Furthermore, an employer who wilfully or negligently fails to submit an EMP201 or EMP501 return to SARS is guilty of an offence and is liable, upon conviction, to a fine or imprisonment for a period of up to two years.

Submission channels

Employers with less than 50 employees can use either SARS eFiling or SARS [email protected]™. Employers with more than 50 employees must file the EMP501 using [email protected]™ Employer.

Enhancements to [email protected]™ Employer

  • Updated letter template for new Tax Directives feedback report for retirement funds.
  • Adjustment to the PAYE Dashboard to display information related to the selected period of reconciliation.

Status of Submission

Employers must always check the status of submissions to ensure that the EMP501 has been successfully filed at SARS.

More information

For more information, please visit the Businesses and Employers webpage.

Employers guides for fringe benefits and allowances for 2023 

The guides have been updated in accordance with the 2022 National Budget Speech. 

Guide for SARS payment rules updated

SARS’ payment rules have been updated to include Discovery Bank and Grindrod Bank for payments that can be made via EFT (Electronic Fund Transfer) into the SARS public beneficiaries listed on the banking platform. This development is in step with SARS’ strategic objective of making it easy for taxpayers to pay their taxes.

Please be reminded that SARS clients must adhere to certain payment rules to ensure timeous and accurate payment allocation. Payments that do not adhere to the payment rules may be rejected. It remains the full responsibility of a client to ensure SARS receives payment on time in order to avoid any penalties and/or interest from being charged.

Click here to access SARS’ Guide for the SARS Payment Rules, which sets out the details of the payment rules that must be adhered to make payments to SARS correctly.

The guide sets out various requirements for payments to SARS, for Customs and Excise clients who are required to declare goods electronically in terms of Rule 101A.01A(2)(a)(v) of the Customs and Excise Act, No. 91 of 1964; VAT payments and declaration forms for Diplomats; options available to clients depending on whether a payment is made within or outside the Republic, etc. The guide provides complete directions for the different payment options that are available.

Remember that SARS will only recognise a payment once received into the SARS bank account. 

New channel to register a trust

SARS has launched an online functionality for the registration of Trusts for Income Tax purposes via the SARS Online Query System (SOQS) on its website. Trustees, representative taxpayers, and registered representatives can now not only register a trust for income tax purposes, but also submit any supporting documents online. In simplifying this process, we have made it easier for taxpayers to have a seamless experience when interacting with SARS in a digital environment rather than visiting a SARS branch for Trust tax registration.

For more information, see our:

If you need the detailed process before going to the online registration link, please see the updated Guide on how to use the SARS Online Query System, and scroll through to the Trust section.

Distribution of funds to non-resident trusts by resident trusts

It has been the practice of SARS not to approve the release of funds when resident Trusts make distributions to non-resident Trusts.  Following numerous queries in this regard, SARS wishes to re-iterate its stance on the matter and confirm that it will not approve the release of funds vested and distributed to non-resident Trusts.

SARS is currently investigating other options related to the distribution of funds/amounts to non-residents and is in discussions with relevant role players in this regard. SARS takes note of the fact that the SARB has relaxed certain exchange control requirements but has decided, based on the risks involved, not to approve the release of funds to non-resident Trusts.

This does, however, not preclude a resident Trust from vesting amounts in non-resident individuals and to apply for the relevant approvals, as per the current approved practice.

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