The South African Revenue Service (“SARS”) has changed the format of the annual income tax return to be submitted by corporates by replacing the IT14 form with the ITR14 form. SARS has indicated that this change is part of SARS’ initiative to modernise corporate income tax.
The introduction of the new ITR14 form came into effect from 4 May 2013. This means that the last day for the completion and submission of the IT14 forms was 3 May 2013. In particular, any IT14 forms saved on eFiling which were not submitted by 3 May 2013 will no longer be supported and ITR14 forms will need to be requested online, completed and submitted. This applies to tax returns of corporates which are due for submission in the current year of assessment, as well as any arrear tax returns for previous years of assessment.
In contrast to the IT14 form which was issued to all categories of corporate taxpayers in the same format irrespective of the nature of the entity, the ITR14 is similar to the format of tax returns for individuals in that the ITR14 form is a customised return which is populated with different fields and questions according to the responses completed when filling in the tax return. The format of the tax return becomes more detailed in accordance with the status of the entity – i.e. based on whether or not the company is dormant, and whether the company is a share block company or body corporate, a micro business, a small business, or a medium to large business.
For smaller entities, the ITR14 form contains less questions and fields for completion in comparison to the IT14 form. In contrast, the compliance burden imposed on larger corporates may increase due to a number of additional fields for completion and questions being included in the ITR14. It is now possible for an ITR14 form for a large corporate to extend to 14 pages in length.
The ITR14 appears to have an increased focus on international tax aspects, transactions between connected persons as well as disclosure relating to investments made by corporates. The form also incorporates more recently introduced tax concepts such as contributed tax capital and the dividends tax, and has also been updated to incorporate transfer pricing legislation. In addition, entities may be required to disclose holding company structures and SARS has also indicated that it will be compulsory for certain entities to upload their Annual Financial Statements upon submission of the ITR14, along with certain schedules such as controlled foreign company returns (IT10 forms) and schedules for headquarter company elections.
The change to the new format of the ITR14 is likely to require significantly more attention and preparation and may entail an increase in the disclosure of the affairs of corporates for the current year of assessment and going forward, as well as in relation to past years of assessment if any tax returns are overdue. It is also often the case with the introduction of advanced forms that some system and initial teething problems are experienced which may cause delays. These factors should be borne in mind by those involved in preparing ITR14’s for corporates, in particular due to the provisions of the Tax Administration Act prescribing, inter alia, that the period of limitation for the issue of additional assessment by SARS is only limited in instances where the taxpayer has not made any misrepresentation and has disclosed all material facts. Taxpayers should also exercise caution when preparing and submitting the ITR14 form so as not to fall foul of the recently introduced provisions prescribing the imposition by SARS of the understatement penalty and non-compliance penalties.