Taxpayers increasingly view themselves as walking a tightrope from a compliance perspective, with Sars (South African Revenue Service) on one side and a daunting administrative burden on the other.
The stakes can be very high, and it does not help that the rules of engagement are always changing.
When it comes to disagreements with Sars, things certainly have changed from how they used to be. Providing half answers to Sars requests, with no substantial detail, along with an inclination to try and keep important information away from Sars is now hurting more and more taxpayers. Sars is evolving, and in order to avoid friction with the taxman, taxpayers need to adapt.
One of the golden rules in tax is that the onus of proof generally falls on the taxpayer. At the same time, the tax authority has become increasingly proficient and vigilant in its collection efforts. So, how do you ensure you’re not caught on the wrong end of Sars, or in the crossfire of a Sars dispute?
“Prevention is certainly better than cure, when it comes to tax. But when things do go wrong, before you decide to lodge a dispute, it’s crucial to first be honest about the completeness and accuracy of your submissions – and to approach the dispute from that angle,” advises Razael Manikus, COO at Latita Africa.
Common Reasons for Tax Disputes
In the past, taxpayers would often point fingers at Sars for their woes. Denied their deductions and misplaced assessments, despite providing sufficient evidence, were common culprits. Now, however, the tables are turning. According to Manikus, an increasing number of tax disputes are arising from taxpayers or their accountants either submitting incorrect (e.g. nil) returns or providing incomplete to no information during Sars verification requests.
“More and more, we have found disputes becoming necessary due to rushing tax return submissions through at the last minute to avoid late penalties. Many times, this is done under the impression that it will be corrected later, which is not always the case and there are many instances when no corrective steps are taken in time. Unfortunately, this only makes matters worse,” says Manikus.
Becoming Tax Compliant and Resilient
According to the firm, the best defence against an adverse tax assessment by Sars is a strong offense – in other words, proactive tax management. For both businesses and individual taxpayers alike, integrating tax planning and management into your financial routine is essential. Being well prepared for submissions on time eliminates the need to rush and reduces the risk of costly errors or omissions.
A strategic, evidence-first approach to your tax affairs is key. “A competent tax advisor will help you develop a personal and business tax management system that keeps you compliant and resilient to adverse tax events. This should be a hallmark of your relationship with your advisor,” says Manikus.
Getting the Ball Rolling
Sars is not infallible. Mistakes can occur, and when they do, having a proactive stance allows you to address the issues head-on. Your first step in challenging an incorrect tax assessment is usually to submit a Request for Reasons, compelling Sars to provide definitive reason for their assessment if one has not already been given. This not only equips you with valuable information to build your case but also keeps Sars to the defined issues (i.e., reasons) later on.
With an evidence-based approach, meeting the (generally 80-business-day) deadline to lodge an objection becomes a lot more manageable. Even if this deadline is missed, you can still take action up to three years later in many cases, provided you have compelling reasons for the delay.
Knowing When to Hand Over
Navigating the maze of the tax dispute resolution process with Sars requires more than just mere persistence or principle; it demands expertise. A diligent tax practitioner also knows that a dispute is not the only tool at their disposal. They might, for instance, recommend a (non-contentious) Request for Reduced Assessment when appropriate.
Understanding the full range of mechanisms available for dealing with Sars is crucial. A qualified tax practitioner, armed with a mastery of these tools and strong legal expertise, can protect your rights throughout the process.
“Sars is to be commended for its commitment to becoming a technologically advanced tax authority, but taxpayers will increasingly need specialist help to stay ahead of the compliance curve, as it remains a moving target,” adds Manikus.
Staying Ahead in the Compliance Game
In the world of tax compliance, staying ahead of the game requires more than just following the rules – it requires strategic planning, proactive management, and expert guidance.
As Sars evolves, so must your approach to Sars engagement. In the land of the blind, the one-eyed man is king. Equally so, by taking an evidence-first approach and seeking the right expertise where necessary, you can confidently navigate this new era of tax compliance with a full view of the risks ahead of time and the means to effectively deal with them.
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