VAT ON IMPORTED SERVICES: WHAT IS IT?

VAT ON IMPORTED SERVICES: WHAT IS IT?

There seems to be an increased focus from SARS recently on non-VAT registered entities who enlist services from foreign suppliers. The reason for this is likely that, in most cases, there may be some VAT to be collected by SARS from these South African entities. It appears though, few people, especially those who are not VAT registered, are aware of their obligation to pay VAT on imported services. Subject only to a handful of exceptions, any person who is not VAT registered (or in some cases even those who are VAT registered but who also make exempt supplies) and who...

UNDERSTATEMENT PENALTIES: SARS’ BURDEN OF PROOF IS IRRELEVANT?

UNDERSTATEMENT PENALTIES: SARS’ BURDEN OF PROOF IS IRRELEVANT?

In a recent case[1] the Tax Court had to adjudicate on the imposition by SARS of understatement penalties on a taxpayer in consequence of a taxpayer’s failure to timeously declare a capital gain. SARS imposed a penalty of 25%, which is a penalty for failure by the taxpayer to take reasonable care when completing a tax return.  During evidence, however, SARS conceded that they should probably have imposed a penalty of 50% on the basis that the taxpayer had no reasonable grounds for the tax position it had adopted. SARS, therefore, conceded that it imposed the penalty incorrectly. However, since...

CLARITY FOR TAXPAYERS ON TAX DISPUTE RESOLUTION

CLARITY FOR TAXPAYERS ON TAX DISPUTE RESOLUTION

Taxpayers and businesses are under increased pressure as a result of the economic downturn and impact of COVID-19. On the flip side, the South African Revenue Service (SARS) is also under pressure to meet targets. A possible outcome of this double-sided scenario is, according to experts, the potential for an increased number of tax disputes in the near future, with SARS attempting to secure revenue and taxpayers wanting to reduce their tax burden. “Tax disputes have become increasingly complex,” says Nico Theron, tax expert and author of the newly released Practical Guide to Handling Tax Disputes published by LexisNexis South Africa. “There...

SARS, LIKE TAXPAYERS, MUST COMPLY WITH SPECIFIED TIME PERIODS

SARS, LIKE TAXPAYERS, MUST COMPLY WITH SPECIFIED TIME PERIODS

Most taxpayers know that the time periods that govern objections and appeals against assessments by SARS are very strict and, indeed, are very strictly applied by SARS. For example, a taxpayer must object and appeal within a prescribed time period. For the taxpayer, failing to comply with these time periods could have devastating consequences. The rigidity of the rules cut both ways, though – the rules also prescribe strict time periods within which SARS must do certain things. For example, SARS must decide on an objection within 60 business days. However, when SARS does not abide by these time periods,...

ABSA OPENS WAY TO AVOID TAX TIFF SLOG

ABSA OPENS WAY TO AVOID TAX TIFF SLOG

In a legal victory that could save companies time and possibly money, the high court in Pretoria affirmed Absa’s contention that it can bypass a mandated “protracted slog” through a dispute resolution mechanism to resolve a difference with the SA Revenue Service (Sars).Absa took two of the tax agency’s decisions directly on review before the North Gauteng High Court, arguing that Sars made errors in the application of the law when it accused it of being party to an impermissible tax avoidance scheme and issued it with an assessment of the tax liability arising from it. The victory could herald...

VDP: THE IRONY OF SARS’ MEDIA RELEASE OF 11 MARCH 2021

VDP: THE IRONY OF SARS’ MEDIA RELEASE OF 11 MARCH 2021

In a recent case[1] a taxpayer approached the High Court to review a decision by SARS to reject the taxpayer’s application for relief under the Voluntary Disclosure Program (VDP). SARS rejected the taxpayer’s application because, inter alia, the taxpayer’s application was not voluntary and one of the requirements for relief is that the application must be voluntary. The relevant background The taxpayer in this case had imported an aircraft and failed to account and pay over to SARS  the VAT applicable to the transaction. The taxpayer was advised by SARS that it will be liable for penalties.  It was after...

ABUSING TAX COURT PROCESSES WORK?

ABUSING TAX COURT PROCESSES WORK?

[Durban, 03 March 2021] The full bench of the Western Cape High court recently delivered judgment¹ (Cloete J dissenting) in a favour of a taxpayer who, according to the Tax Court, was simply abusing process. When studying the judgment of the Tax Court, it is difficult to see how the taxpayer’s approach was anything more than an abuse of process which begs the question: Why was the taxpayer successful on appeal to the full bench of the High Court? The taxpayer in question had agreed an assessment with SARS under section 95(3) of the Tax Administration Act, 28 of 2011...

VDP APPLICATION REJECTED: NOW WHAT?

VDP APPLICATION REJECTED: NOW WHAT?

Most taxpayers and tax practitioners are by now familiar with the Voluntary Disclosure Program  (VDP) process and the relief/incentive that the VDP offers.  Since taxpayers often bargain on getting VDP relief when they apply, a rejection by SARS of the VDP application is often not well received by taxpayers. If SARS rejects a VDP application, which they are entitled to do if the application does not satisfy the relevant requirements, it means SARS will not grant any relief from penalties. The question is – what to do next? Can the taxpayer decide not to disclose and “back out” of the...

PRESCRIPTION, ASSESSMENTS, SARS’ SUBJECTIVE SATISFACTION AND DISPUTES

PRESCRIPTION, ASSESSMENTS, SARS’ SUBJECTIVE SATISFACTION AND DISPUTES

150In a recent case[1], a taxpayer tried to defend himself against an assessment raised by SARS after the original assessment prescribed. The gist of the taxpayer’s defence, insofar relevant here, was that SARS was not allowed to have raised the assessment in question because the original assessment had prescribed and that SARS had not objectively satisfied themselves of the existence of the requisite fraud. What ensued was, amongst other things, an analysis by the court regarding the circumstances under which SARS may raise an assessment post prescription.  Whilst the analysis by the court of these circumstances relate to the now-repealed...

SOMETHING IS SERIOUSLY AMISS WITH THE TAX OBJECTION PROCESS

SOMETHING IS SERIOUSLY AMISS WITH THE TAX OBJECTION PROCESS

The Office of the Tax Ombud (OTO) recently released its 2020 Systemic Investigation Report in which the OTO published its findings regarding certain investigations the OTO conducted into SARS’s systems. One of the issues investigated was various areas of non-compliance by SARS with the rules that govern objections and appeals. Amongst the various findings by the OTO, there is one that for us at Unicus Tax Specialists SA stands out above the rest and which should be the single biggest cause for concern in the context of tax disputes. That finding is that over the period investigated by the OTO,...