With 2022 filing season upon us, taxpayers are in great need of understanding what their current tax compliance status is with the South African Revenue Service (“SARS”); and if there is an outstanding tax debt, from where does such liability arise. 

We often see that taxpayers are left to tend to their wounds by taking action reactively instead of proactively when it comes to their tax affairs, predominantly regarding outstanding amounts owed to SARS.

Taxpayers are often the authors of their own misfortune

In recent months, SARS has been taking their pound of flesh by enforcing collection measures against taxpayers who have outstanding tax amounts owed. This includes sending letters of final demand, appointing third-party agents to collect funds from taxpayers’ bank accounts and salaries, in terms of section 179 of the Tax Administration Act No. 28 of 2011 (“TAA”), and in some cases, threatening personal liability of company representatives. These measures usually come as a surprise to taxpayers, who are often unknowingly, the authors of their own misfortune.

It may seem as if it is all doom and gloom once SARS has come knocking or by taking legal steps in recovery of a tax debt, but all hope is not lost.  If you find yourself in this position, it is important to take immediate and necessary steps to rectify the situation. 

Just as a doctor would provide a diagnosis of your symptoms before treatment, a tax consultant may advise the taxpayer on exactly where the non-compliance emanates from, by performing a ‘tax diagnostic’, before providing a remedial recommendation.

The Tax Diagnostic

A tax diagnostic is an all-encompassing review of a taxpayer’s past and present tax affairs. A tax consultant will conduct a full investigation into the taxpayer’s eFiling profile to provide an overall evaluation of the health of their tax affairs. The investigation will disclose their tax compliance status, and reveal unnecessary, and often unknown, non-compliance. 

Should the investigation reveal non-compliance, the tax diagnostic report will detail the findings, including the source of any tax liabilities, any errors or negligence that may have resulted in same, interest and penalties levied thereon, prior communication from SARS (whereby confirming its adherence with the TAA), and finally, detail a comprehensive plan to bring healing to the non-compliance faced by the taxpayer. 

Due to the technical aspects of a tax diagnostic, particularly, in a scenario where a third-party appointment may be involved, same should be performed by a professional tax practitioner or a tax attorney. It is advisable that the taxpayer consults the services of tax specialists who have a mutually respected working relationship with SARS, in the event of any further SARS engagement required on the taxpayer’s behalf.

Prevention is better than cure

A tax diagnostic report should not be seen as a cure, but rather as a roadmap to the right course of action required to remedy the non-compliance faced. Ideally, all taxpayers are encouraged to have a tax diagnostic performed on their eFiling profiles as a proactive measure of ensuring total SARS compliance. As tax is always evolving and tax laws are constantly being amended, a regular tax check-up will afford taxpayers with the opportunity to get a fresh perspective on their tax affairs, which can be incorporated and applied to all future tax and commercial planning. 

We strongly recommend the opposite of a fingers-crossed approach this tax season. Nothing trumps good, proactive planning done with a trusted tax advisory that has the relevant expertise to assist you in fully assessing the status of your tax affairs and providing you with the correct remedial advice to bring you to total tax compliance. 

Do not let your non-compliance go untreated, get a full diagnosis of your tax affairs before SARS comes knocking.

Written by Joshua Torpey, Tax Attorney at Tax Consulting SA; and Ralitza Zoe Pillay, Client Engagement Specialist, Africa Tax and Compliance at Tax Consulting SA