the little-known consequences of not being tax compliant

by Madeleen van Schalkwyk | January 25, 2022

Suddenly SARS has become very active in focussing on tax compliance. What does this mean and how does it impact you?

In short, tax compliance means that all your tax returns are submitted, and all amounts owed to SARS are paid. This includes all tax types that you are registered for, including Income Tax, Value Added Tax and Payroll taxes.

I recently came across the following problems taxpayers face when they are not tax compliant:
  • Vat registrations for entities were declined due to directors that are associated with the entity not being tax compliant. This resulted in a delay while the outstanding tax matters for that director were being resolved. If the Vat registration was a mandatory registration, late registration would apply with penalties and interest raised by SARS.
  • Property transfers were delayed due to the tax affairs of the parties involved having to first be resolved.
  • Foreign investment tax clearances were declined due to an entity associated with the applicant being non-tax compliant. If the exchange rate is favourable to transfer money for offshore investments, the potential gains might be lost.
  • SARS using refunds due to a taxpayer to offset against outstanding debts.
Nowadays, a lot of transactions or potential opportunities are dependant on supplying a tax clearance certificate:
  • Applying for a bank overdraft facility.
  • Applying for a bond or loan.
  • Tender applications and Government dealings.
  • Opening of a credit facility with creditors.
  • Discussions or communications for business opportunities and deals.
  • Deregistration of an entity at the CIPC and SARS.
  • Trust de-registrations at the Master of the High Court – It is important to note that it is a legal requirement that all trusts are required to be registered for income tax, whether they are trading or not.
  • Finalisation of estates.
As mentioned above, it is extremely important to be tax compliant. Any future transactions might be delayed and negatively impacted if time and money needs to be spent to first get yourself tax compliant.

Another important note here is to always use a registered tax practitioner to look after your tax affairs. Not using a registered tax practitioner can result in time delays with SARS conducting additional verifications and requesting a lot of extra supporting documents, SARS adjusting previous tax assessments resulting in money owed to SARS and penalties raised due to insufficient information supplied. In fact, since July 2013 it has been illegal for anyone other than a registered tax practitioner to file a tax return on your behalf.

An action point is to always keep your details updated. The following are cases and issues I recently experienced with details that were not updated:

  • SARS refunds not getting paid out to taxpayers. This can lead to a couple of months delay as you first need to update your information with SARS. A taxpayer needs to make an appointment with SARS and send the supporting documents to SARS. Information required can include a certified copy of your identity documents (not older than three months), proof of address (not older than three months), and your latest bank statements.
  • Important communication from SARS not reaching the taxpayer.
  • Application for tax directives, for example to fix the tax percentage you get taxed monthly, will be declined and you can potentially be taxed at a higher tax rate. An example where this is applicable is when you earn commission.
  • When a taxpayer appoints a new tax practitioner, the tax profile needs to be transferred to the new tax practitioner. Information that is not updated will delay this transfer and can cause delays in the submission of tax returns resulting in penalties and interest.
Foreign nationals registered for tax in South Africa need to always update their passport details with SARS. New passports get issued with a new passport number. Passport numbers and tax numbers are connected, old information can result in the issues or problems mentioned above.

In summary, avoid delays in opportunities, tax refunds and not receiving important communications. Something that might look like an administrative burden can be costly!

At waucomply we can assist you to update your details with SARS, get you tax compliant and continue to work on keeping you tax compliant. Don’t delay it later than TODAY.


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