Tax Practitioner Connect Issue 57 (October 2024)

SARS offers compulsory training for individuals who want to register as tax practitioners. The programme has been updated to ensure that it meets the growing needs of tax practitioners. In this edition we also remind you of the changes pertaining to the Employer Interim Reconciliation process which closes on 31 October.  Companies registered for Company Income Tax (CIT) may no longer need to pay CIT if they have ceased trading, undergone liquidation or dissolution, or has no taxable income or assets in South Africa. Read more about the deregistration process. Take note of the Income Tax Return filing dates to ensure that you are compliant and submit your returns on time.  Information is provided on Trust Filing Season.  Finally, taxpayers can learn about tax through the many workshops SARS offer.

Updated Tax Practitioner Readiness Programme

The SARS Tax Practitioner Readiness Programme is an education product that provides important information about the obligations and responsibilities of tax practitioners, and the SARS processes that tax practitioners need to follow to provide a high-quality, professional and ethical service to clients.  

As per the amended recognition criteria for Recognised Controlling Bodies (RCBs) and tax practitioners, this training has been compulsory for individuals who want to register as tax practitioners since 1 July 2022.  

Based on feedback received from those who have attended the programme, queries from tax practitioners and changes to the relevant rules and systems, SARS has amended the programme to ensure that it remains relevant for the needs of tax practitioners.

The updated material is available on the SARS website. However, the effective date of the assessment material for prospective tax practitioners is still to be decided with the recognised controlling bodies and will be communicated once decided. 

While the focus of the programme is on individuals who want to register as tax practitioners, the modules can also be used by existing tax practitioners to refresh their knowledge of the tax environment in which they operate.

Employer Interim Reconciliation

The Employer Interim reconciliation for the 2025 Employer Filing Season opened on 16 September 2024 and will close on 31 October 2024.

The enhancements below have been implemented for the interim Pay-As-You-Earn (PAYE) Filing Season:

• • A new source code has been added to the IRP5/IT3(a) certificate:
    • Source code 3926, relating to the savings withdrawal benefit, specifically a withdrawal from a Retirement Fund’s Savings Component/Pot, was added.
  • The following two source codes have been removed from the IRP5/IT3(a) certificate:
    • Source code 2039 (“Employer Contact Person Fax Number”); and
    • Source code 3137 (“Employee Fax Number”).
  • Enhancements have been made to the financial fields on the IRP5 certificate: A warning message will be displayed if all digits of a financial field are the same, e.g., 4444.00.
  • Updates to the employer statement of account:
    • The employer statement of account has been enhanced to display the status of payroll taxes.
    • The statement will now include the Employment Tax Incentive (ETI) account balance.
  • Enhancements to the EMP501 Reconciliation process:
    • • The directive validation module has been enhanced to allow the validation of multiple source codes for one directive number.
      • The employer will be prevented from requesting an EMP501 reconciliation prior to the Interim Filing Season start date. For example, if the employer requests an interim EMP501 reconciliation on 20 August 2024 and the start date is 16 September 2024, the request will be rejected.
      • The employer will also be prevented from submitting the saved interim EMP501 reconciliation on eFiling if the final EMP501 reconciliation has already been submitted.
      • Notification will be issued where an IT3(a) certificate with an Income Tax reference number is submitted and PAYE should have been deducted.
  • Enhancements to the employer deregistration process:
    • Where amendments were made to an EMP501 reconciliation that is in the Excessive Liability Change process, deregistration of payroll taxes will not automatically be re-instated.
    • The coding date of de-registration will always be later than the processed date of the last return and will not be considered if the Revised Declaration is submitted.
  • Enhancements to ETI account: ETI refund and forfeit process has been enhanced.

The e@syFile™ Employer application has been upgraded. The new employer e@syFile™ offers improved performance, which includes the following features:

• • The prioritisation of easier navigation and data capturing experience with a new look-and-feel and arrangement functions and workflows.
  • Full installations with every software update.
  • The introduction of quick links to related functionalities to remove the need to continuously navigate through multiple menu items.
  • An enhanced user maintenance functionality to add and remove users and restrict functionality.

Employers can update the old e@syFile™ while still installing the new version, rather than uninstalling the old version. Both versions can operate on the same PC. For the bi-annual submission, version of e@syFile™ Employer can be used to submit the reconciliation. However, for the annual filing season, only submissions via the new version of e@syFile™ Employer will be accepted.

For more information, see the Frequently Asked Questions on the e@syFile webpage.

The following guides have been updated:

• • IT-easyFile-G01 – Third Party Appointment AA88 e@syFile™TC Employer Guide – External Guide
  • PAYE-easyFileG01 – e@syfile™TC Employer Guide – External Guide
  • EMP-GEN-02-G01 – A Guide to the Employer Reconciliation Process – External Guide
  • PAYE-AE-06-G06 – Guide for Codes Applicable to Employees Tax Certificates 2025 – External Guide
  • PAYE-AE-06-G07 – Guide for Validation Rules Applicable to Reconciliation Declarations 2025 – External Guide
  • PAYE-AE-06-G08 – Guide for Completion and Submission of Employees Tax Certificates 2025 – External Guide
  • PAYE-GEN-01-G19 – Guide for Employers iro Employees Tax for 2025 – External Guide
  • GEN-VDP-02-G01 – Voluntary Disclosure Programme – External Guide

Please access Pay As You Earn | South African Revenue Service (sars.gov.za) for updates on PAYE.

Company Income Tax deregistration process at SARS

Companies that are registered or generating profits or income in South Africa are subject to Company Income Tax (CIT). They must register for CIT with SARS, file annual and provisional tax returns, and pay their CIT liability on time to avoid penalties and interest charges.

However, a registered company may no longer need to pay CIT if it has ceased trading, undergone liquidation or dissolution, or has no taxable income or assets in South Africa. In these cases, the company can apply for deregistration from CIT with SARS and stop receiving CIT compliance obligation reminders.

Applying for CIT deregistration from SARS

The company must ensure that it has filed all its previous tax returns and paid all its tax liabilities before applying for CIT deregistration. If the company has any outstanding tax obligations, it must contact SARS to arrange a settlement or dispute resolution. Before approving the application, SARS may also conduct an audit of or verify the company’s affairs.

To be deregistered, the company must prove that it meets one of the following criteria:

• It has ceased to trade or carry on any business activity in South Africa;
• It has been liquidated or dissolved by a court order or voluntary resolution;
• It has no taxable income or assets in South Africa and does not intend to derive any in the future; or
• It is a dormant company that has not traded for at least three consecutive years and has no intention of trading in the future.

It must also submit supporting documents, which may include:

• A letter from the company’s Board of Directors or a resolution stating the reasons for applying for CIT deregistration;
• A copy of the company’s final financial statements or audited accounts;
• A copy of the company’s liquidation or dissolution notice or certificate;
• A declaration of assets and liabilities of the company;
• A confirmation of the company’s bank account closure or balance; and/or
• Proof of payment of any outstanding tax debts or penalties.

The company can submit the application and supporting documents online via eFiling, email, or at a SARS branch. Upon processing and approval of the application, SARS will issue a confirmation letter to the company and deactivate its tax reference number. The company will then no longer be liable for CIT or have any related compliance obligations. However, it must keep its records for at least five years after deregistration in case of any queries from or audits by SARS.

Employer deregistration at SARS

• An employer who has ceased to operate or employ must apply for company deregistration to avoid further compliance obligations.
• The employer must submit an EMP123 form and supporting documents to SARS.
• The employer must pay any outstanding tax debts or penalties before they can be deregistered.
• The employer will receive a confirmation letter, and their tax reference number will be deactivated.

Trust Filing season: SARS focusing on the accountability of trustees, and tax and legal practitioners

Filing Season for Trusts runs between 16 September 2024 and 20 January 2025. This article outlines the tax obligations for Trusts.

Filing season for Trusts

As per Government Gazette 50741 Notice Number 4918, published on 31 May 2024  Trust taxpayers have a dedicated filing period of four months commencing on 16 September 2024 until 20 January 2025. This filing period will apply to both Provisional and Non-Provisional Trust taxpayers. Trustees, tax and legal practitioners should, however, not delay in attending to the Trust’s annual Income Tax Return (ITR12T) which is an extensive document with tax information requirements to increase the transparency and tax compliance of Trusts.

Trust Filing Season 2024 will prioritise the registration of Trusts for Income Tax, on-time filing, accurate and thorough declarations in the tax returns of Trusts and beneficiaries, and on-time payment of tax owing per the Trust’s tax assessment.  SARS has also modernised several processes that were previously manual to make it easy for taxpayers to comply with their tax obligations.

Legal liability of the Trustees

The Trust Property Control Act No. 57 of 1988 (TPCA) mandates trustees to act with care, diligence, and skill in managing trust affairs. The “joint action rule” requires co-trustees to act collectively. While trustees may delegate tasks, they retain ultimate responsibility. The TPCA voids any Trust deed provisions attempting to exempt trustees from liability. Trustees are legally liable for meeting a Trust’s tax obligations even where legal and/or tax practitioners are appointed.

Under the Income Tax Act No. 58 of 1962 (ITA), a Trust’s trustee is a “representative taxpayer.” The Tax Administration Act No. 28 of 2011 (TAA) defines “taxpayer” to include “representative taxpayer,” which refers to the ITA definition, creating a consistent legal framework for trustee tax responsibility. The TAA holds representative taxpayers, including trustees, liable for Trust tax debts in both official and personal capacities (sections 154 and 155 of the TAA).

SARS will hold all the trustees of a Trust jointly and severally liable for the tax non-compliance of Trusts.  This may include attachment of a trustee’s personal assets.

Tax practitioners (including legal practitioners who are registered tax practitioners)

Under sections 234 and 241 of the Tax Administration Act. No. 28 of 2011 (TAA), SARS has specific mechanisms to hold tax practitioners accountable. By leveraging these sections, SARS aims to maintain the integrity of the tax system and ensure that practitioners adhere to professional standards.

Tax obligations of a Trust

Tax registration of a Trust

Legal and tax practitioners must ensure that all Trusts on their records are registered with SARS for income tax and any other taxes that it may be liable for. This must be done after registration with the Master of the High Court. Tax registration of the Trust may be done digitally via the SARS online query system found on the SARS website or at a SARS branch after making an eBooking appointment also via the SARS website.  The SARS website provides a list of Trust tax registration supporting documents.

Tax Filing and accurate declarations

A Trust is a legal arrangement and a taxpayer. It is obligated to file an annual income tax return even if it is inactive. Taxpayers must register for eFiling to file the Trust income tax return. A simplified tax return is available on eFiling for passive Trusts. The ITR12T tax return is enhanced with a beneficial ownership declaration page to record all beneficial owners and those who may gain financially from the proceeds of the Trust taxpayer.  A Trust with ten or fewer beneficiaries, may have the ITR12T tax return captured at a SARS branch provided a prior branch appointment eBooking has been made via the SARS website and the return has been printed with required fields completed ahead of the appointment. SARS branches will no longer print the ITR12T income tax return. Any Trust that distributed amounts to more than 10 beneficiaries during the year of assessment must register and submit the ITR12T via eFiling.

The representative filing the ITR12T tax return must ensure all the Trust’s details are correct by verifying and updating these details on the Registration, Amendments and Verification Form (RAV01) on eFiling. More information may be viewed on the SARS Trust webpage.

Relevant records and material

The supporting documents required to file the return include all certificates and documents relating to income and deductions, statement of assets and liabilities, financial statements and/or administration accounts, proof of payment of any tax credits, details of persons or beneficiaries to whom income, capital and/or assets distributed, and a list of all beneficial owners that may exercise effective control over the Trust. 

Payment

The notice of assessment issued to the Trust taxpayer outlines the due date and grace period for making payment after an assessment has been issued. Late payments will attract penalties and interest. Payment arrangements can be made with SARS via e-filing or the SARS MobiApp.

Dispute resolution process

An automated process for Trust taxpayers was introduced on eFiling this year to electronically submit documentation to lodge a dispute. This applies to a Request for Reasons, Request for Remission (RFR), objections and appeal notices. A request for suspension of payment currently remains a manual process. Trusts that submitted any of these types of requests prior to 20 April 2024 should continue and conclude their dispute through the manual process.

Interpretation Notes and Rulings for Tax Exempt Institutions

Please see Tax Exempt Institutions | South African Revenue Service (sars.gov.za) to access interpretation notes and rulings issues for Tax Exempt Institutions.

Income Tax return filing dates 

Please note the Income Tax return filing dates for the 2024 Filing Season:

• Individual taxpayers (non-provisional): 15 July 2024 to 21 October 2024
• Provisional taxpayers: 15 July 2024 to 20 January 2025
• Trusts: 16 September 2024 to 20 January 2025

How can taxpayers learn about taxes?

SARS conducts workshops to help taxpayers understand their tax obligations. See How do I learn about taxes? | South African Revenue Service (sars.gov.za) for details of such workshops happening in October.

The step-by-step videos provide useful information about how taxpayers can use the SARS digital channels and solve difficulties that they may encounter when attempting to meet their tax obligations:  Step-by-step videos | South African Revenue Service (sars.gov.za).