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Record keeping is one certain way to limit your fear when the taxman is near…

23 September 2012   (0 Comments)
Posted by: SAIT Technical
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By Michelle Scholtz (Grant Thornton e-taxline)

Tax queries from SARS can be distressing, especially if your house is not in order and you face the prospect of parting with your hard earned money due to fines and penalties. However, if you are unable to provide the documents or information requested by SARS, you may be convicted of a criminal offence and face imprisonment of up to 24 months.

Why keep records?
Tax returns are often left to the last minute and it is very difficult to obtain accurate records in the final rush. Although supporting schedules, for example details of consulting fees, legal fees, repairs and maintenance, no longer have to be submitted with the income tax return, SARS may request them at any time. Keeping accurate records will save you time, effort and money should SARS knock on your door with a query a few years down the line.

For example, in the case of an interest bearing loan and determine whether the interest payments will be allowed as a deduction or not, SARS will be interested in the purpose of the loan and what the funds were used for.

If you do not sufficiently document this information and are unable to respond to SARS’ requests, you may lose out on a tax deduction as well as incur penalties, possible additional tax and interest.

Accurate record keeping will become more important
Recent tax developments also place more onerous record keeping requirements on tax payers. With the recently introduced dividends tax, by not keeping records in the prescribed manner, the taxpayer will incur a 15% dividend tax, even if the dividend payment is exempt or the taxpayer is entitled to a reduced rate in terms of a double tax agreement.

The company paying the dividend must receive the relevant documentation, declarations and undertakings from the tax payer on time, or withhold 15% tax. Similar documentary requirements will apply in terms of the proposed changes to withholding tax on royalties and the introduction of withholding tax on interest which should become effective 1 January 2013.

Tax eventIncome Tax Act sectionPeriod that records need to be retained
Rendering of returns73A5 years from last date of correspondence with SARS regarding the return
Taxable capital gain or assessed capital loss73B(1)5 years from the date the return was received by SARS
Objection / appeal lodged against an assessment73CRetain until that assessment becomes final
Declarations for purposes of dividends tax73C5 years from the date on which the declaration was submitted, received or replied on by that person



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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