FAQ - 29 July 2014
29 July 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Prescription periods in the context of the Voluntary Disclosure Programme
Q: A South African resident wants to apply for voluntary disclosure relief in respect of his
personal income tax matters. The Voluntary Disclosure Programme (VDP) is envisaged due to the fact that material facts were not disclosed in his income
tax returns for previous years. SARS assessed the taxpayer based on his misrepresentation. The misrepresentation of material facts in his income tax returns occurred over a period of more than ten years, this
includes income from capital gains tax and other income.
When disclosing material
facts on a voluntary basis according to the VDP, full and complete facts
of the default needs to be submitted to SARS. However, in my
opinion, there is no specific time prescription principle
stated in the Tax Administration Act (the TAA). Are there any time prescription rules pertaining to the VDP? I could not find any references in the
TAA, external guide on VDP and SARS short guide on the TAA, 2011. My
conclusion is that the complete history of taxpayer's misrepresentation needs to be
disclosed to SARS (e.g. in this case a period of ten years) in order for the VDP application to be accepted by SARS.
How will the time
prescription principle from the Income Tax Act interact
with the VDP legislation and disclosure described as above. Is there a
possible "conflict" between the Income Tax Act and TAA's time
prescription principles? Following, if the VDP route is followed, and the complete history will be disclosed to SARS, SARS
will include in the VDP agreement tax liabilities for the complete history
(e.g. ten years).
A: (1) You
are correct that no time prescription period in respect of the non-disclosure
and full disclosure for the full period of the relevant non-disclosure must be
made to SARS to the extent that the taxpayer still has the information. In our
experience SARS mostly does not go beyond 5 years but nothing prevents them from
doing so depending on the facts.
(2) Section 99(2)
of the Tax Administration Act states that the prescription periods in section 99(1) do
not apply where the full amount of tax was not charged as a result of fraud,
misrepresentation or non-disclosure of material facts. Usually when the VDP
applies the exclusion to prescription also applies so there is no conflict.
noted SARS does not always go back the full period and have in many instances
gone back only the last 5 years. However if the relevant information is
available etc. nothing bars them from doing so and that determination would be on a case by case basis.
2. Medical scheme fees tax credit where taxpayer's dependents are on a separate medical aid scheme
Q: I have a client on a basic option medical aid, who put his wife and child on a separate medical aid with more cover. However, although this separate medical aid is in his wife's name, he pays the premiums. I want to know whether an individual can claim a medical tax credit for medical aid contributions he makes for his wife and child, even if they are on their own separate medical aid and not on his medical aid.
A: Section 6A of the Income Tax Act provides for the deduction of the medical scheme fees tax credit. However, it only applies to payments made by the taxpayer for
benefits made to the taxpayer and any of his /her "dependents” as
defined in the Medical Schemes Act. If the taxpayer's wife and child are
on a separate medical aid scheme and are not "dependents” on the taxpayer's medical aid scheme, then only the wife (we assume she is the main member of the other
scheme) can claim the medical scheme fees tax credit, not the taxpayer, who is making payment on her
behalf. This is confirmed at Part 3.1. of SARS’ ITR12 Comprehensive