The 2014/15 tax filing season is about to start,
and it’s important that all personal income tax returns are completed accurately
and timeously.
Not everyone is aware that the SA Revenue Service (Sars) is
focusing on seven specific areas until the 2016/17 financial year, which is when
its five-year compliance programme ends.
These seven areas are:
. Wealthy South Africans and associated trusts;
. Large businesses and
transfer pricing;
. The construction
industry;
. Illicit
cigarettes;
. Tax practitioners and
trade intermediaries;
. Undervaluation of
imports in the clothing and textile industry; and
. Small
businesses.
Sars has made it very clear that, although its focus will be on the
seven areas mentioned, taxpayers who don’t fall within these categories won’t
escape notice.
Sars will continue with its regular risk-based compliance work
using a verification system, which includes audits and investigations, allowing
it to detect noncompliance in all areas.
The tax avoidance schemes Sars will be looking for include:
. Fringe benefits not
being declared;
. Input VAT claimed
without declaring VAT on trade income;
. Artificial losses and
deductions;
. Salary
restructuring;
. Assets and income
derived through associated entities; and
. Incorrect declaration
of revenue profits as capital in nature.
High-net-worth individuals – those with an average income of
R1.7 million a year – will do well to ensure they are 100% Sars compliant
because closer scrutiny can be expected.
High-net-worth individuals are often linked to associated trusts
and companies, some of which might be used as vehicles to channel and hide
income and assets.
You can be sure Sars will be taking a closer look at these
individuals.
Some initiatives Sars has implemented to achieve the compliance
programme goals include:
1 Increasing the use of data flows from other
jurisdictions through the international exchange of information programme.
2 Improving collaboration with the master’s
office by obtaining information on trusts, trustees and beneficiaries.
3 Improving the ability to trace the flow of
funds around the world.
4 Moving towards a more pre-emptive engagement
with taxpayers by meeting with taxpayers prior to the submission of personal
income tax returns.
5 Encouraging taxpayers to make use of the
advance-ruling regime at Sars.
6 Including additional third party information
such as lifestyle questionnaires.
7 Ensuring registration of income tax of all
wealthy individuals.
8 Focusing on wealthy individuals where Sars has
already identified discrepancies between the individual’s asset base and
declared income.
9 Reviewing the structure of tax returns for
individuals and trusts.
10 Encouraging all taxpayers to make a voluntary
disclosure of any default with regards to direct or indirect taxes to Sars.
I encourage all individual taxpayers to take extra care during the
upcoming filing season to ensure the completion and submissions of all personal
income tax returns are done accurately and timeously.
Signing your income tax return is a declaration that all the
information you have submitted is true and correct.
Taxpayers are advised to consult with a tax practitioner to ensure
full compliance with Sars this filing season, which starts on July
1.
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