Tax season can be a real headache, especially if facing issues with the South African Revenue Service. But don’t worry, you’re not alone. Many taxpayers find themselves in a similar boat. In this article, we’ll look at some options for those struggling with tax compliance. It’s important to note that not complying with SARS can lead to severe consequences, including late payment penalties, interest charges, and even criminal prosecution. There might be a way out, whether you’re late with your tax returns, dealing with late payments, penalties, or something else entirely. Let’s see what SARS offers to get you back on the right side of income tax law.
Option 1: The South African Revenue Service Voluntary Disclosure Programme
The SARS VDP offers a valuable opportunity for taxpayers who have defaulted on their tax obligations to regularise their affairs and avoid the severe consequences of non-compliance. This program provides a significant relief from SARS penalties and the risk of criminal prosecution, giving you a chance to set things right.
Read more: SARS Voluntary Disclosure: window for non-compliant South African taxpayers to come clean.
What is a tax default?
According to SARS, a tax default can occur when a taxpayer:
- Submits inaccurate or incomplete information to SARS.
- Fails to submit required information related to any tax type administered by SARS.
How to apply for the VDP: To qualify for the VDP, as a defaulting taxpayer, you must meet the following criteria:
- Voluntary disclosure: Your disclosure must be made before SARS becomes aware of your default.
- Complete disclosure: All relevant information about your tax default must be provided.
- Timely disclosure: Your default must not have occurred within five years of a similar disclosure.
- Relevant behaviour: Your default must involve a behaviour listed in the understatement penalty table of Section 223 of the Tax Administration Act. This table outlines specific actions that could lead to penalties, such as deliberate underreporting of income or assets.
- No refund due: SARS will not owe you a refund due to the disclosure.
- Compliance with the prescribed form and manner: Your disclosure must be made using the correct form and following the specified procedures.
By meeting these requirements, you can benefit from reduced penalties, avoidance of criminal prosecution, and the opportunity to regularise your tax affairs. Suppose you believe you may be eligible for the SARS VDP. In that case, it’s advisable to consult with a tax professional to assess your specific situation and explore the potential benefits of participating in this program.
Option 2: Objecting to SARS
If you’re dissatisfied with the outcome of a SARS auto-assessment or decision, you have the right to object. This process is designed to be fair and transparent, ensuring that your concerns are heard and addressed.
Here are some examples of decisions you can object to when it comes to dealing with the South African Revenue Service:
- Late payment penalties for VAT, PAYE, Unemployment Insurance Contributions (UIC), and Skills Development Levies (SDL)
- Late payment penalties on provisional tax
- Late payment interest on provisional tax
- Late payment interest on VAT and PAYE (not UIF or SDL)
- Late submission/non-submission penalties on Personal Income Tax (PIT), Company Income Tax (CIT), and PAYE
What you need to know about using this SARS lifeline:
It is important to note that you cannot object to a self-assessment, like VAT or PAYE (Pay As You Earn) in South Africa unless SARS has issued a revised assessment. You have 80 days to submit an objection when the SARS auto-assessment is issued.
Option 3: Compromise of tax debt application
If you’re unable to pursue an objection or don’t qualify for the VDP, a Compromise of tax debt application might be a viable option.
What is a Compromise of tax debt?
A Compromise of tax debt is an agreement between a taxpayer and SARS that reduces the tax liability. This option is particularly useful for taxpayers facing financial hardship or other circumstances that make it difficult to pay their total tax debt.
How does it work?
When a taxpayer approaches SARS with a well-supported application, the tax authority will assess their financial situation. If the circumstances warrant a reduction, SARS can respond with a compromise agreement. This process is flexible and can be tailored to your specific financial situation, empowering you to find a solution that works for you.
What you need to know about using this SARS lifeline:
Your ability to repay the reduced tax debt will be a significant factor in determining whether a compromise is feasible. You must provide evidence of your financial situation, such as income statements, bank records, and proof of expenses. The compromise process may involve negotiation between you and SARS to reach an agreement that works for both parties.
FinGlobal: cross-border tax specialists for South African expats
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