In case you haven’t already heard, the South African Revenue Service (SARS) is stepping up its efforts to ensure full income tax compliance by making it increasingly challenging for taxpayers to avoid scrutiny. With a tightening of the tax rules and severe penalties for non-compliance, expat taxpayers must adopt proactive strategies to effectively manage their South African taxation. This is especially important, given that the onus of proof lies squarely with taxpayers, and SARS has become more sophisticated in its collection methods. This shift in the balance of power means that individuals must take a more strategic approach.
To have any hope of avoiding potential clashes with SARS, taxpayers must accept that transparency is unavoidable and accuracy is their best friend when it comes to filing season. Outdated tactics such as withholding information or providing incomplete responses are surefire ways to attract unwanted attention. Still, by understanding the changes and implementing above-board tax practices, taxpayers can reduce their risk of triggering alarm bells on SARS’ radar.
Income tax in South Africa: How to avoid a dispute with SARS
As with the flu every winter, prevention is better than cure for tax matters during tax season. However, when disputes arise, taxpayers must honestly evaluate the accuracy and completeness of tax submissions before climbing on their high horses to attack SARS.
The most common causes of tax disputes have shifted over time as SARS has digitised matters using eFiling. Previously, taxpayers blamed SARS for denied deductions and incorrect assessments despite providing sufficient evidence. Today, the tables have turned. Now, an increasing number of disputes stem from taxpayers or their accountants submitting inaccurate or incomplete returns or failing to provide adequate information in response to SARS verification requests. Rushing tax return submissions to avoid penalties is a common mistake, as this often leads to errors that need to be corrected in time, exacerbating the problem and increasing the likelihood of a dispute.
What is a dispute with SARS? A dispute with SARS occurs when a taxpayer disagrees with a decision or assessment made by the South African Revenue Service. It is advisable to avoid disputes with SARS as much as possible, as these can result in SARS audits, in which SARS will closely scrutinise the taxpayer’s financial records to verify the accuracy of their tax returns. In an audit, SARS may request documents, conduct interviews, and adjust the taxpayer’s tax liability based on the findings, which could land up with you owing SARS more than anticipated if discrepancies are discovered.
Read more:
- SARS: New developments regarding South African expats.
- Double tax warning for emigrating South Africans – what you need to know.
Personal income tax in SA: how to become tax compliant
Proactive tax management is the best defence against unwanted SARS audits. Incorporating tax planning and management into your financial routine can significantly reduce the risk of errors and penalties. For this, it is essential to adopt a strategic approach to your tax affairs and to back up this approach with solid evidence and precise recordkeeping. A qualified tax advisor can help you establish a robust tax management system tailored to your needs. This system ensures ongoing compliance and provides a strong foundation for handling potential tax challenges with minimal panic. A strong relationship with a credible tax practitioner is worth every cent.
Read more:
- SARS Voluntary Disclosure: window for non-compliant South African taxpayers to come clean.
- Steps to take if your SARS tax compliance status shows as “non compliant”
South African taxation: how to initiate a tax dispute
SARS is not immune to making mistakes. When errors occur, or you disagree with a SARS outcome, it’s best to take action immediately. Your first step in challenging an incorrect tax assessment is to submit a Request for Reasons. This compels SARS to provide a clear explanation for their assessment, which gives you what you need to build a stronger case and focus the dispute on specific issues.
An evidence-based approach is vital for meeting the objection deadline, typically 80 business days. Even if you miss this deadline, there’s often a three-year window for objecting if you can provide compelling reasons for the delay.
Read more: It’s complicated – South African expats face double tax relief hurdles with SARS.
Taking on SARS: how to know when to get help
Successfully seeing through a tax dispute with SARS requires more than persistence and determination. It demands specialised expertise. While a dispute is often the first recourse, a skilled tax practitioner understands the full spectrum of available options, such as a Request for Reduced Assessment, which can be used to compromise.
Understanding the tax landscape and legal framework is vital for protecting taxpayer rights. As SARS continues to make strides in digitisation, expert guidance from tax practitioners will be required to achieve ongoing compliance.
Read more: Reducing taxes as a South African expat: what you need to know about cross-border tax planning.
Staying ahead of tax compliance
Staying on the right side of the revenue authority means more than just following the rules. It requires careful planning, proactive action, and seeking expert advice. As tax laws become more complex, taxpayers need to be equally sophisticated in their approach. By being well-prepared and seeking the assistance of a trusted tax practitioner, you can effectively manage tax risks and ensure compliance.
Read more: How to handle your final South African tax return as an emigrating resident.
FinGlobal: your cross-border tax specialists
Navigating tax laws in multiple jurisdictions can be too much for one individual to manage alone. Don’t let SARS catch you off guard. FinGlobal specialises in helping South African expats manage their international tax obligations. We can guide you through tax emigration, minimising your tax burden, and obtaining essential tax documents like clearance certificates and SARS non-resident tax status confirmation letters.
Ready to simplify your cross-border taxes? Contact us for a free consultation that starts with clarifying your tax residency status.