The SARS headache
A few people jump with joy when a notification is received that SARS is requesting additional information. Honestly, for most people just mentioning SARS results in an instant headache. By Gerty Green
Although SARS has far-reaching powers in terms of the Tax Administration Act to obtain information from taxpayers as well as third parties, eg., banks, to conduct verification or audit, taxpayers have rights. And SARS is obliged to respect their rights..
SARS is an “organ of the state” and when exercising public powers or functions, compliance with the Constitution is required.
Section 195 of the Constitution stipulate that SARS must:
*Act with a high standard of professional ethics
*Use resources effectively, efficiently, and economically
*Act impartially, fairly, equitably, and without bias
*Be accountable
*Be transparent and provide taxpayers with timely and accurate information
Some of the fundamental rights of Taxpayers in terms of the Constitution and the Promotion of Access to Information Act,2000 (PAIA) are
*Right to privacy
*Right to information
*Right to just administrative action
*Right not to give self-incriminating evidence
*Right to a fair trial
As always limitations are applicable – SARS is entitled to request relevant information, if the request is per legislation and complies with the provisions of Section 36 of the Constitution. The Tax Administrative Act is an example of such legislation.
Taxpayers must keep in mind that they must prove to SARS that the information provided is a true reflection of their tax affairs.
SARS may request relevant information if the taxpayer is selected for verification, audit, or criminal investigation.
In the case of a criminal investigation, the onus of proof is on SARS and is a different topic all together.
Verification and audit are generally viewed as a single event, in fact, it is quite different.
Many taxpayers ask what they did wrong when selected for verification or audit and the short answer is nothing, yet. Any taxpayer can be selected thus the selection is random and also based on risk. In any case, SARS must formally notify the taxpayer of the selection.
Verification is comparing the information declared against third-party data gathered from various sources and supporting documents submitted.
An audit involves the examination of the financial and accounting records and/ or supporting documents provided. The process is more intrusive and could be complicated depending on the scope.
The verification notification will indicate the date or time frame to submit the relevant information and specify the relevant information required. Additional information can be requested to verify the information provided in the tax return. The turn-around time is 21 business days after all relevant information has been submitted. A completion letter must be issued. Should SARS find that the tax return does not comply with the relevant tax legislation, an additional assessment is issued. This procedure is also followed when relevant information they have requested, is not provided.
A taxpayer can be referred for an audit after the verification.
In case of an audit, the formal notification letter will indicate the scope of the audit and the method. It can be an online submission of information or a field visit from the auditor. The relevant information required is depended on the scope of the audit. The scope of the audit is the boundaries of the audit and does not necessarily include everything. The turn-around time is 90 business days after all information has been received, but gathering the information could take anything from 30 business days to 12 months, or longer, depending on the complexity of the matter, the volume of transactions, and level of cooperation of the taxpayer. SARS must provide progress reports every 90 calendar days.
SARS may not elect to issue an Audit Finding letter after the conclusion of the audit if SARS is of the view that the letter will impede or jeopardize the outcome of the audit. If an Audit Findings Letter is issued the taxpayer has 21 business days to respond, should the taxpayer disagree with the findings evidence must be provided to support the view. SARS will then reconsider the findings based on the response received. Thereafter a revised assessment, detailing the grounds of the assessment, will be raised.
Should the taxpayer not agree with the assessment a dispute procedure would be followed.
A self-assessment or income tax return will be finalized after 3 years and non-self-assessment or VAT will be finalized after 5 years. Important to note is that SARS has the right to open an assessment at any time where fraud, misrepresentation, or non-disclosure of material information is identified.
A top tip to prevent the SARS headache is to obtain the services of a tax advisor and to respond to SARS requests as quickly as possible.