Taxpayers in South Africa will from now on face strong audit from The South African Revenue Services (SARS); following the regulation gazette in April 2013 which giving SARS the ability to receive the return of information to be submitted by third parties in terms of section 26 of the tax administration act, 2011.
The direct implication of this regulation is give SARS more power and the information submitted in tax returns could be more easily verified by the tax administration.
Persons required to submit third party returns are Banks; co-operatives, the South African Postbank; Financial institutions, Companies listed on JSE; Sate Owned companies and connected persons in relation to the companies that issues bonds (debentures and similar financial instruments); organs of state; any person who purchases any livestock (produce, timber, mineral or precious stones from a primary producer other than on retail basis); any medical scheme; estate agent and Attorneys.
The regulations give SARS ability to access a large range of third-party information including information on medical aid contributions, out-of-pocket medical expenses, retirement annuity contributions and interest earnings.
The taxpayer must be informed that information concerning the amount paid or received in respect of/or by way of any investment, the purchase and disposal of financial instruments, the monies paid in respect of purchase or sale or shipment of livestock, precious stone and mineral can now be obtained by SARS from third party.
The due date for submitting a third party return is 31 October for the period from 1 March to 31 August and 31 May for the period from 1 March to the end February. If the third party return comprises 20 or fewer detailed records, the declaration portion of the return and detailed portion of the return must be submitted electronically (using SARS efiling) or manually to the SARS office. If the third party return comprises 21 to 50,000 detailed records, the submission must be done electronically.
The information from the tax authorities confirming the increased number of audits performed by SARS particularly audits of high net worth individuals and during his budget speech, the South African minister of finances, promised that the coming years the small businesses will receive more and more audits to make sure that information submitted are accurate. “We also owe it to our taxpayers to ensure they are not carrying the burden of those who benefit from our country’s infrastructure and resources without paying their fair share of the costs”, stated the South African Finance Minister.
The tax authorities notice that data verification had been part of the income tax system for at least the past five years but the new legislation “does indeed allow a more flexible approach to requiring information from third parties”.
We will surely see in coming years the Tax authorities in South Africa having more and more power and taxpayers need to seek correct advises in managing their tax affairs.