SA Tax Penalties on Companies

On 14 December 2018, the public notice that allows the South African Revenue Service (“SARS”) to impose penalties on companies for not submitting income tax returns was gazette. This is a new addition to the legion of penalties already faced by companies and permits the imposition of a monthly penalty on a company ranging from anything between R250 to R16 000 a month. Other penalties also faced by companies include: A 10% penalty for not filing a VAT return on time (if VAT registered); A 10% penalty for not filing a employees’ tax return on time (if registered as employer) A...

Should deposits be included in gross income?

The question of whether deposits should be included in a taxpayer’s gross income has become a contentious topic in recent months following SARS’ increased interest in deposits. Taxpayers are, typically following submission of the ITR14 and subsequent IT14SD, requested to explain why deposits should not be included in gross income. In our view, the rationale behind this special attention from SARS is that taxpayers are taxed on the earlier of receipt or accrual and since a deposit has been physically received, deposits are prima facie taxable. Deposits are therefore a ‘soft target’. However, the mere receipt of funds does not...

Tax objections: Welcomed proposals or proposed challenges?

The proposed changes to the Rules of the Tax Court (“the Rules’) promulgated under section 103 of the Tax Administration Act No, 28 of 2011 (“TAA”) have been published and, have been met with a mixed reaction – in our office at least. Most of the changes are welcomed. One proposed change in is however, worrying. The TAA and the Rules set out the prescribed manner, form and time periods within which an objection or appeal must be made. It also deals with the extension periods available to an aggrieved taxpayer and lays down the prescripts for steps that must...

Tax disputes: 3 years or 30 days?

If SARS did something a taxpayer is aggrieved by, the taxpayer has limited time within which to take action. The general rule is, when it comes to a dispute between a taxpayer and SARS involving an assessment, that limited period is 30 days (at the time of drafting this article, there is a proposal by SARS for the period to be extended to 60 days). If the taxpayer misses the 30-day period (or soon, possibly 60-day period) by more than 30 days (but less than three years), SARS can only consider the grievance/objection if the taxpayer can demonstrate to SARS...

The supreme court of appeal on late tax appeals

It was recently held by the SCA[1] that the tax court had no jurisdiction to hear an application by a taxpayer for condonation of a late tax appeal. It is respectfully submitted that the Tax Court and SCA judgments raises more questions than it gives guidance and makes what is already, in the SCA’s own words “hardly a model of clarity” even more obscure. Facts of the case The taxpayer in this case objected to an assessment raised by SARS, which objection was partly allowed. The taxpayer, not being satisfied with a partial win instructed its tax consultant to lodge...

When should SARS condone a late appeal?

In a recent application to the Johannesburg Tax Court (018/2016), the court was asked to condone an appeal submitted late by the taxpayer. The facts are simply that the taxpayer filed an appeal more than 75 business days after the notice of disallowance of the taxpayer’s objection. The reason for late submission is that the taxpayer’s representative thought that the appeal was filed on e-filing but later discovered that it was not filed due to an internet connection problem. SARS opposed the application stating that it has no discretion to extend the period for lodging an appeal beyond a period...

Understatement penalties

In a recent case before the Johannesburg Tax Court (IT 14247), the court was faced with the question of what constitutes a prejudice to SARS or the fiscus. Understanding this is important because SARS can only raise an understatement penalty (USP) if there was a prejudice to SARS or the fiscus. SARS can also only raise an additional assessment under section 92 of the Tax Administration Act, No. 28 of 2011 if there was prejudice to SARS or the fiscus. The facts of the case are briefly that: the taxpayer had paid provisional tax in respect of certain tax years;...

The VAT compliance landscape

VAT use to be a simple tax for taxpayers to comply with. Returns would go in regularly with very little hassle and SARS’ audits or verifications seldom resulted in an assessment. Not anymore.  With VAT fraud being more prevalent now than ever before (at least that is what we are told), all taxpayers are seemingly treated on the assumption that there might be a snake in the grass. This has resulted in an increase in the number of VAT returns being verified or audited by SARS and which in turn has resulted in an increase in the number of VAT...

Why are proposed tax changes important?

In the recent seminal judgment of the Pretoria High Court[1], hereinafter referred to as “the Pienaar Brothers Case”, the court reaffirms the importance of taking notice of not only changes in tax law but also proposed changes to tax law and the need to plan accordingly. Failing to do so may have devastating consequences for taxpayers, as it did for the taxpayer in the Pienaar Brothers case who was left out of pocket by a couple of million rand. In short, the taxpayer in the Pienaar Brothers Case was held liable by SARS for STC which it had not taken...

VAT registrations: Non-resident non-executives

On 4 May 2017 SARS issued Binding General Ruling No. 41 (“BGR41”) which requires of non-executive directors to register for VAT provided they satisfy the registration threshold and other requirements. Whilst the principles involved for South African resident NED’s are straight forward and fairly simple, for non-resident NED’s this is not necessarily the case. BGR41 merely confirms that the exclusion from the requirement to register for VAT that applies to salaried persons does not apply to NED’s. This does not mean that all NED’s must now register for VAT. All other requirements must be satisfied, the most prevalent in the...