Today’s tax environments demand a more proactive and comprehensive view for effective risk management and business assurance.As organisations extend the use of analytics,it advances towards an automated and continuous tax model enabling businesses to shift from a reactive to a proactive approach for identifying and managing tax risk, delivering hindsight, insight and foresight for greater assurance and value to the business.
In October 2011, South African Revenue Services (SARS) announced the need for companies and close corporations to complete a supplementary declaration aimed at improving the reconciliations declared by the taxpayer over different tax areas.The new form, known as IT14SD, requires taxpayers to submit reconciliation statements for employees’ tax (PAYE), income tax, value-added tax (VAT) and customs.
As SARS increases the scrutiny on VAT vendors, they have issued increasingly random requests to companies as part of their verification process to ensure tax compliance.Companies may be required to supply proof of valid documentation substantiating output VAT declared and input VAT claimed for any period extending back five years.This will also require a full reconciliation between the total sales (standard rated, zero rated, non- and exempt supplies) as declared on the VAT201 returns that were submitted during the year, total turnover as per the financial statements and that had previously been declared on the IT14 income tax return.
SARS also stipulates that the IT14SD form is required to be accurate to within R100 and must be submitted to them within 21 days.To make matters worse, the ERP or accounting solution does not verify if you are meeting these new regulations.ERP solutions are able to provide only a reconciled summary of what has been captured and does not give insight into whether or not your data is compliant. It is also unable to verify if data has been incorrectly captured or if VAT has been correctly applied in your organisation.
It is important to note that submitted reconciliations need to correspond to the applicable tax year and that SARS may investigate any unexplained variances.Should it be found that a company has submitted incorrect information, it is assumed that not only will they face additional assessments, penalties and interest, but will probably also be subject to ongoing audits, to check that they are compliant. SARS’ warnings of financial penalties and criminal prosecution for non-compliance should therefore not be ignored.
CQS Technology Holdings in conjunction with BDO have developed a solution aimed at reducing the monthly headache involved in analysing this financial information and ensure 100% accuracy from the source data.So while these reconciliations can be performed when the annual financial statement is prepared, it would make more sense to ensure compliancy on a monthly basis before it is too late to take corrective action to resolve any issues or you could be faced with an inconvenient audit by SARS.
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.