Authored by: Roxanna Naidoo, Admitted Attorney and Lisa Mihalik, Tax and Legal Administrator at Tax Consulting SA 

A new set of tax law amendments, signed by President Cyril Ramaphosa, and promulgated on 20 January 2021 has granted SARS all the legal fire power it needs to impose criminal sanctions on taxpayers who neglect their tax affairs.
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Criminal Negligence
Prior to the promulgation of the Tax Administration Laws Amendment Act, 2020 (Amendment Act) a mistake made by a taxpayer was only a crime when it was done “wilfully and without just cause.” In other words, the law required an element of intent; where negligence or ignorance caused your administrative non-compliance, you would have gotten off with a slap on the wrist.

Henceforth, your intention does not matter – where you “negligently” fail to comply or make certain mistakes on your taxes you commit an imprisonable criminal offence. Ignorance, a defence commonly used by taxpayers, will no longer fly – SARS will from now on hold you to a higher standard of care.

Strategically speaking, this is a bold, brilliant move from the SARS-Treasury team, as the simple inclusion of the word “negligence”, now allows for the offence criteria to be broadened to such a degree that even the slightest mistake made in one’s compliance could result in criminal prosecution.

The 11 Mistakes
As the saying goes “we all make mistakes,” but when it comes to mistakes on your taxes each of the 11 mistakes listed in the Amendment Act can result in up to 2 years in prison. So, it is vital that you educate yourself on precisely what they are to remain unmistakably compliant and lawful.

What are they?

1. Failure to register your details with SARS or to notify them of any changes to your details;
2. Failure to appoint a representative taxpayer or to notify SARS of such appointment or a change in representative taxpayer;
3. You receive compensation for assisting someone with their taxes and you fail to register with SARS as a tax practitioner;
4. Failure to submit a return when required to do so;
5. Failure to retain all relevant substantiating records; 
6. Failure to provide any information as and when requested by SARS to do so;
7. Failure to appear and comply when you are requested by SARS to attend a meeting or a hearing in order to give evidence;
8. You are issued with a directive or instruction by SARS and you fail to comply with it;
9. You fail to disclose any material information to SARS or you fail to provide SARS with any notification as required under any tax Act;
10. You are notified by SARS to pay an amount on another taxpayer’s behalf in settlement of a tax debt and you fail to do so; or
11. You have a withholding obligation and you fail to withhold or deduct the tax correctly and pay it over to SARS.

The only way to avoid a mistake is to not make it
The Amendment Act just demonstrates that the new SARS Commissioner and the SARS-Treasury team have adopted a complete no-nonsense approach to non-compliance.

Given how easily (and how often) these mistakes can happen, and how hard they will be to correct, taxpayers should exercise extreme accuracy and vigilance when filing their taxes.

It may serve you well to appoint a qualified tax consultant or experienced tax attorney to ensure you do not end up on the wrong side of these new rules.

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.

For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook:Tax Consulting South Africa

Authored by: Thomas Lobban, Legal Manager for Cross-Border Taxation at Tax Consulting SA 

With South Africa and the world at large facing an economic downturn as a result of various factors, not the least of which being the Covid-19 pandemic, SARS is on a mission to plug the existing gaps in tax revenue collection and compliance.

It is no stretch of the imagination to believe that cryptocurrency must be high on the list of SARS’ compliance concerns, given how it has existed under little-to-no regulation and these transactions are often easily concealed. Indeed, cryptocurrency has been steadily increasing in its popularity as a speculative investment by South Africans and, it appears, is now squarely within SARS’ focus.

A Request by SARS
When a taxpayer files a tax return, SARS may (in many cases) send a request for verification or “audit request” in which it seeks clarification and / or supporting documentation from a taxpayer. The information sought by SARS is inevitably linked to the disclosures made by the taxpayer in that return. This is a preliminary step taken by SARS in audit proceedings, and it is crucial that a taxpayer prepare themselves accordingly for this ahead of time.

Tax Consulting South Africa has recently been approached by taxpayers who were presented with a SARS audit request. These requests posed standard questions as would be expected on the taxpayers’ returns, but also went further to request the following:

• The purpose for which the taxpayers purchased cryptocurrency; and
• A letter from the trading platform(s) confirming the investments and the relevant trading schedules for the period and bank statements.

This would have been reasonably expected by the taxpayers, if they had made any disclosure of cryptocurrency-linked trading amounts in their returns, along with the rental amounts and certain investments that were indeed disclosed to SARS. However, in this case, we had explicitly confirmed that the taxpayers had not, to their knowledge, ever effected a cryptocurrency-related transaction.

While this is certainly a first, it is certainly the kind of approach by SARS that taxpayers should expect moving forward.

Playing by the Rules
In the first instance, taxpayers should already know that it is a criminal offence where a taxpayer wilfully fails to submit a document or information as requested by SARS or makes a false statement to SARS. It is no longer material whether the taxpayer concerned had justification for such non-disclosure or false statement made.

This means that a taxpayer who fails to correctly disclose their cryptocurrency-related income or comply with an audit request by SARS to this effect may be convicted for an offence and be liable to a fine or imprisonment for up to two years.

In light of this recent change to our tax laws, it is feasible to understand that SARS is in the process of ensnaring culpable taxpayers who have not disclosed their cryptocurrency-related trading profits and / or losses. While further cryptocurrency regulation is certainly on its way, and with the international Common Reporting Standards now in full swing, audit requests are still a primary weapon in SARS’ arsenal and the walls are closing in on non-compliant cryptocurrency traders.

So, when is SARS disclosure required? A misconception often harboured by taxpayers is that they do not owe any tax liability on their cryptocurrency-related income and do not need to make any disclosure to SARS to this effect. This is, unfortunately, not the case.

When SARS Disclosure is Required
From the outset, it should be known that all cryptocurrency transactions will bring tax consequences for a taxpayer. A tax disclosure obligation does not only arise where a cash balance is withdrawn from a trading platform – all transactions that have been made (whether a transaction of cryptocurrency for money or cryptocurrency for other cryptocurrency) must be disclosed to SARS.

Taxpayers should take the time to consider and understand the tax consequences when dealing with cryptocurrency, in order to prevent being caught off guard upon a SARS inquiry to this effect. Any taxpayer who has not disclosed cryptocurrency held or traded should immediately seek professional guidance in getting their tax affairs in order. Alternatively, where you have never bought or sold cryptocurrency previously, it is important to proceed with caution when responding to an audit request.

As has been well reported, SARS is well within their rights to compel a taxpayer to respond to an audit request. Failing to disclose any relevant amounts or respond to an audit request correctly could well result in substantial penalties or harsh criminal sanctions.

There is little doubt that SARS is pursuing non-compliant cryptocurrency traders, so it is best for these taxpayers to stay ahead of the curve and ensure that their tax affairs in order beforehand. Click here to view the SARS audit request mentioned above.

ENDS
 
MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@thatpoint.co.za, www.atthatpoint.co.za

ABOUT Tax Consulting SA:
Tax Consulting SA offers a streamlined service in the calculation and filing of individual income tax returns, provisional income tax returns or any other more complex individual tax relate matters. Our highly qualified team of Tax practitioners are registered with SARS under controlling body of the South African Institute of Tax Practitioners (SAIT). As tax specialists, we remove the burden from clients to keep their tax affairs in good order, achieving optimal tax savings while ensuring full compliance.

For more information on Tax Consulting please visit:
Website:  http://www.taxconsulting.co.za/
LinkedIn: Tax Consulting South Africa
Facebook:Tax Consulting South Africa