South Africa
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SARS imposes heavier penalties on non-compliant SA taxpayers

Legal Manager at Africa Tax and Compliance at Tax Consulting SA, Jashwin Baijoo, has warned that the South Africa Revenue Services is focusing on the non-compliance of a small number of South African taxpayers, imposing heavier burdens of compliance, in an attempt to fill the ever-present deficit to the fiscus.

Baijoo said the welcome note from SARS’s director of the High Wealth Individual Unit (HWIU) that was received by C-Suite executives could very well more likely serve as a warning or ‘positive reinforcement’ that there will be an embarkment on a greater compliance drive.

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“The last few years have seen an increased compliance drive by the South African Revenue Service, fully backed by the Presidency and the National Prosecuting Authority, and more specifically, clamping down on higher net worth individuals worldwide.

“As we have seen, and as confirmed in the 2022 African Wealth Report, there are a small number of South African taxpayers, who hold a large portion of the country’s wealth. Although this proportionality was noted as the widest wealth gap in the world, discussions on implementing a wealth tax, may not be the most feasible option at this juncture,” he said.

Baijoo said that the focus here, lies on net assets and liabilities, and includes taxpayers who have left the country, but continue to have South African interests, who for many years – believed certain aspects of their wealth were tax-free so to speak, due to being located offshore.

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He warned that this misconception is fast being remedied by the revenue authority, who – together with external jurisdictions – which have an intersection of interests for specific taxpayers, may now perform a dual-audit, or abide by the obligation imposed by the automatic exchange of information protocols.

“While we do note that wealthy individuals generally do have more complex tax affairs, which in most cases does require the attention of a tax practitioner or specialist in the field, this is not always the case. However, on a critical analysis, an earlier Request for Documents, issued by the HWIU, places a key focus on non-compliance and the severity with which such will be treated,” he said.

In contrast to the recent welcome note, it appears SARS is yet to decide if they will be using the carrot, or the stick, with these very wealthy individuals.

But Baijoo advises: “In order to protect yourself and your assets from SARS, it remains the best strategy that you always ensure pro-active compliance. Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax advisory, ensuring you don’t get shot down, for what could be the smallest of mistakes. However, where things do go wrong, SARS must be engaged legally”.

“As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also being specialists in their own right, the taxpayer will be correctly advised on the most appropriate solution to ensure their tax compliance,” he concluded.