Ever wondered why SARS is asking for extra documents after you’ve already filed your tax return? Or maybe you’ve heard horror stories about audits and you’re worried that you’re next. Don’t stress, let’s break it down.
When it comes to SARS tax compliance, there’s often confusion between a SARS verification and a SARS audit. They sound similar, but they’re very different processes. Understanding what each one means, what triggers them, and how they work can save you a lot of stress and potentially a lot of money.
What you need to know about SARS audit vs verification
Read more: Tax advice for South African expats – avoid hot water this tax season with these SARS lifelines.
The SARS verification process is a face-value check.
A SARS verification is a simpler process compared to an audit. It’s a face-value check of the information you provided in your tax return or declaration. SARS will compare the details you submitted with third-party data, your financial records, or any supporting documents they request. This helps SARS ensure that your tax position is fair and accurate.
What does SARS verification mean?
When SARS selects you for verification, you will receive a SARS verification letter notifying you of this. The letter will include a list of SARS supporting documents that you must submit within a specific timeframe, typically via eFiling, the SARS Online Query System, or by visiting a SARS branch.
Once SARS has all the required documents from you, they aim to complete the verification within 21 business days. If they identify discrepancies, SARS may revise your tax assessment, impose penalties, or, in some cases, refer your case for a SARS audit. If you have a refund due, it will only be processed after verification is complete.
The SARS audit process means deeper scrutiny.
A SARS audit is far more in-depth. It involves a detailed examination of your financial records, accounting books, and supporting documents to verify that you have correctly declared your tax position. The SARS audit process begins with a Notification of Audit letter, which outlines what documents you must submit and by when.
What triggers a SARS audit?
SARS can select any taxpayer for an audit, but common triggers include:
- Large or unusual tax deductions
- Discrepancies in your return
- Mismatches with third-party data
- Past non-compliance history
A SARS tax compliance review may also escalate into an audit if SARS identifies high-risk factors in your tax affairs.
How long does a SARS audit take?
The SARS audit timeframe is usually much longer than verification. While a simple audit may take around 30 business days, complex audits can last up to 12 months or longer, depending on the complexity of your finances and your cooperation. SARS will provide progress updates every 90 calendar days, as required by law.
Difference between SARS audit and verification
The main difference between a SARS audit and verification lies in the depth of review:
- Verification is a surface-level check, usually completed within 21 business days.
- Audit is a detailed examination of all relevant records, with progress reports every 90 days, and can take several months.
Additionally, a SARS verification is typically limited to reviewing a specific return or declaration, while an audit may cover multiple tax periods, third-party information, and even external data sources.
SARS review vs audit – the terms you need to know
It’s important to distinguish between a SARS review and vs audit:
- A review or verification is a routine process to check information.
- An audit is a formal investigation, often triggered by concerns about accuracy, compliance, or risk.
What are your taxpayer rights during a SARS audit?
As a taxpayer, you have specific rights during an audit. SARS must:
- Notify you in writing before the audit starts
- Provide a Notification of Audit letter outlining the scope of the audit
- Offer progress reports every 90 days
- Allow you to respond to an Audit Findings Letter before finalising the audit
- allow you to dispute their findings through the objection process
During both verification and audit, you have the right to:
- Be treated fairly and respectfully
- Receive clear communication from SARS
- Seek help from a tax professional or legal adviser
Avoiding SARS audits – top tips for tax compliance
While anyone can be selected for verification or an audit, you can reduce your risk by:
- Filing your tax returns accurately and on time.
- Keeping all SARS supporting documents for at least five years.
- Ensuring your income, deductions, and expenses are properly documented.
- Responding promptly to any SARS letters or requests.
- Avoiding common red flags, such as overstating deductions or underreporting income.
Read more: Top tips for staying under the radar with SARS.
Understanding the difference between a SARS audit and a SARS verification can help you find your way through the SARS tax compliance review process with confidence. Whether you receive a SARS verification letter or a Notification of Audit, always respond promptly, provide accurate information, and seek assistance if you are unsure.
If you believe there are errors in SARS’ findings, you have the right to object. Remember: transparency, accuracy, and cooperation are the keys to avoiding SARS audits and maintaining good standing with the tax authority.
Read more: How long does SARS take to respond to disputes?
The SARS Voluntary Disclosure Programme (VDP)
If you’ve made a mistake in your tax return or have undeclared income, you might be worried about the risk of a SARS audit. This is where the SARS Voluntary Disclosure Programme (VDP) comes in. The VDP allows taxpayers to come forward voluntarily to correct any errors or omissions before SARS catches them. By applying for the VDP, you can avoid penalties of up to 200% and reduce the risk of criminal prosecution.
The VDP is a legal agreement between you and SARS. You’ll need to make a full and honest disclosure of the issue, submit the required paperwork, and settle any outstanding tax. If SARS approves your VDP application, they’ll waive penalties, and you’ll only pay the outstanding tax and interest.
If you’re worried about being flagged for a SARS audit because of past mistakes, the VDP can be a smart move to protect yourself and get your tax affairs in order.
FinGlobal: cross-border tax specialists for expats abroad
Need help clarifying your tax status with SARS? If you’re unsure about your tax compliance in South Africa, or you’ve recently emigrated and need assistance, FinGlobal is here to guide you. From determining your tax residency status to helping you with tax emigration and accessing your retirement annuity, we offer end-to-end support. We’ll also help you obtain tax clearance and manage your international money transfers out of South Africa, making sure the process is as seamless as possible.