SARS is Becoming More Active: What This Means for You

The South African Revenue Service (SARS) has recently become far more active in enforcing tax compliance and it’s already affecting individuals and businesses in very real ways.

What is tax compliance?

In simple terms, tax compliance means:

• All your tax returns are submitted on time, and
• All amounts owed to SARS are paid in full

This includes all registered tax types, such as Income Tax, VAT, and PAYE.

Why tax clearance status matters more than ever

Many transactions today require a Tax Clearance Status (TCS). Without it, opportunities can be lost or delayed.

This includes:

• Bank overdraft and loan applications
• Bond approvals
• Government tenders
• Opening credit accounts with suppliers
• Business negotiations and partnerships
• Deregistration of entities with Companies and Intellectual Property Commission (CIPC) and SARS
• Trust deregistration at the Master of the High Court (note: all trusts must be registered for income tax, even if inactive)
• Finalisation of deceased estates

Real consequences of non‑compliance

Recent experiences show that being non‑compliant can cause significant delays and financial consequences:

• VAT registrations declined
  Applications may be rejected if a director linked to the entity is non‑compliant. This can delay operations and result in penalties and interest if registration was mandatory.
• Property transfers delayed
  Transfers may be held up until all parties involved have resolved their tax affairs.
• Foreign investment tax clearances denied
  If any associated entity is non‑compliant, approvals may be declined – potentially causing you to miss favorable exchange rate opportunities.
• Refunds withheld
  SARS may offset refunds against outstanding debts, reducing or eliminating expected cash inflows.
• Increased use of Third‑Party Debt Appointments

One of the more aggressive enforcement tools currently being used by SARS is the appointment of third parties to recover outstanding tax debt. This means SARS can legally instruct your bank, your employer or even clients / debtors to pay money directly to SARS instead of to you.

These actions can happen without prior notice once you are in debt, and can have a significant impact on cash flow and operations.

Use a registered tax practitioner

It is highly advisable to work with a registered tax practitioner. The potential risk associated with non‑compliance is not a risk worth taking.

Not doing so may result in:

• Delays due to additional SARS verification processes
• Increased requests for supporting documentation
• Adjustments to prior tax assessments
• Penalties due to incomplete or incorrect submissions

Keep your information up to date

Outdated information with SARS can create unnecessary complications. Common issues include:

• Delayed refunds
  Updating details often requires appointments and submission of supporting documents (e.g. ID, proof of address, bank statements), which can delay refunds by months.
• Missed communications
  Important notices from SARS may not reach you.
• Rejected tax directives
  Applications (e.g. for commission earners) may be declined, resulting in higher tax deductions.
• Delays when changing tax practitioners
  Incorrect details can slow down the transfer of your tax profile, leading to late submissions and penalties.

Special note for foreign nationals

Foreign taxpayers must ensure their passport details are always up to date with SARS.

Since passport numbers are linked to tax records, outdated information can lead to many of the issues outlined above.

Addressing compliance issues after the fact is far more time‑consuming and costly than maintaining compliance proactively. Tax compliance is no longer just administrative – it’s a critical business requirement.

By staying compliant, you place yourself in a position to operate without unnecessary disruption – avoiding delays in transactions, accessing opportunities as they arise, receiving refunds timeously, and staying informed of important communications from the South African Revenue Service (SARS).

Ultimately, what may seem like a minor administrative task today can quickly become a significant and costly obstacle tomorrow.

Staying compliant ensures smoother operations, better access to funding and partnerships, and improved cash flow certainty. If you’d like to review your current compliance status or address potential risks, connect with Lileya Hanauer at lhanauer@wauko.com or on 021 882 8033.