FAQ - 4 December 2014
03 December 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Remedies where SARS claims you have earned
income which you have not actually earned
Q: A client
received an original assessment dated 31.01.2012, which was objected to
08.02.2012 in respect of the underestimation of provisional tax. The objection
was allowed and a nil assessment was issued. On 19.03.2012 an additional
assessment was raised in which SARS had increased the local interest received
by Rxx xxx as well as disallowed the medical deduction. The taxpayer has
requested from SARS the reason and proof of the local interest received, to
which the tax practitioner was told that they cannot see this on the system.
The client has on many an occasion attempted to request this
information from SARS as to her knowledge there is no additional interest
received other than that originally declared on the return. We would like to
know what you would suggest the next step to be. The client is attracting
interest on this amount and she would really like to close this off.
A: If everything
would have been done in time, you could have requested reasons for the
additional (19.03.2012) assessment before objecting.
You stated that:
"The taxpayer has requested from SARS the reason and proof
of the local interest received, to which the tax practitioner was told that
they cannot see this on the system. The client has on many an occasion
attempted to request this information from SARS as to her knowledge there is no
additional interest received other than that originally declared on the
My question is how was the request for "this” information
done? Was it done telephonically or was a formal request for reasons for an
assessment done as laid out in rule 6 of the Rules promulgated in terms of
section 103 of the Tax Administration Act?
Unfortunately you are way outside the period for requesting
reasons for the additional 2011 assessment.
What makes things difficult is that it doesn’t seem your client is
certain that she actually earned the interest income that SARS claims she
Your possible remedies include requesting SARS reduce or
withdraw the assessment as per sections 93(1)(d) or 98(1)(d) respectively.
Section 93 remedy
According to section 93(1)(d) of the Tax Administration Act
"SARS may make a reduced assessment if SARS is satisfied
that there is an error in the assessment as a result of an undisputed error by—
the taxpayer in a return.”
What needs to be determined then is the meaning of
"undisputed error by SARS”.
SARS’ interpretation of an ‘undisputed factual error’, which
appears in section 98(1)(d)(i)(aa) of the TAA is that one should not encounter
any interpretation problems when applying the law to the facts. We submit that
the same could be said of "undisputed error” in section 93(1)(d).
Section 93(2) additionally points out that "SARS may reduce
an assessment despite the fact that no objection has been lodged or appeal
You could request for the 2011 additional assessment to be
reduced, citing the fact that SARS erroneously claimed your client earned
interest income (when this was actually not the case) and that this amounts to
an undisputed error by SARS. You could also, on the same basis, state that
their disallowance of the medical deduction was also an undisputed error and should
Section 98 remedy
Section 98(1)(d), which is similar to section 93(1)(d), may
also be applicable. It states:
SARS may, despite the fact that no objection has been lodged
or appeal noted, withdraw an assessment which in respect of which the
Commissioner is satisfied that—
it was based on—
(bb) a processing error by SARS;
1. it imposes an
unintended tax debt in respect of an amount that the taxpayer should not have
been taxed on;
2. the recovery
of the tax debt under the assessment would produce an anomalous or inequitable
3. there is no
other remedy available to the taxpayer; and
4. it is in the
interest of the good management of the tax system.
After the assessment is then withdrawn in terms of section
98, a corrected assessment can be issued by SARS. You can cite the same reasons
as those cited for the section 93 remedy for why the assessment should be
You can choose which of these remedies you would like to
make use of. For both, you would have to write a letter to SARS and drop it off
at a local branch or you can send it to the email@example.com email
2. Penalties for late payment of VAT depending on the method of
Q: I see that for
the last few months SARS automatically charges penalties on the VAT returns if
they are not paid before the 25th. This causes me to write to SARS every month
and ask them to write it off. Please can you advise if you have encountered the
same problem with other practitioners?
A: You did not
indicate how the amount due is paid.
In terms of proviso (iii) to section 28(1) of the
Value-Added Tax Act a vendor registered with SARS to submit returns
electronically is deemed to have submitted the return and made payment within
the period ending on the twenty-fifth day if the vendor submits the returns and
makes full payment of the amount of tax electronically and in the prescribed
form and manner within the period ending on the last business day of the month
during which that twenty-fifth day falls.
If payment is for instance made by cheque after the
twenty-fifth day SARS would be entitled to levy penalty. The same would apply if the return is not
The payment must also be in SARS’s bank before close of
business –for some banks this would mean before 12:00 on the last day. If not, SARS would also levy the penalty.
Follow-up Q: The
return is submitted via efiling and the payment via the credit push method on
Follow-up A: You
have now indicated that the 'return is submitted via efiling and the payment
via the credit push method on efiling’.
Consequently, as indicated in our previous guidance, the payment of the
amount of tax can be made on the last business day of the month during which
that twenty-fifth day falls. SARS would
therefore be wrong to levy a late payment penalty in this instance if the
payment was received by them on the last business day of the month.
In summary: the general rule is that payment due on a VAT201
must be made on before the twenty-fifth day of the relevant month. If, however, the electronic route is followed
(efilng and credit push), the payment can be made after the twenty-fifth day
until the last business day of the month.
This is what we explained in our previous guidance. If the last day of the month falls on a
Sunday for instance, the payment will have to be made on the Friday to avoid
We trust this is clearer.
As indicated we are not aware of other tax practitioners who are
experiencing the same problem.
3. Apportionment of the primary residence exclusion for CGT
Q: Whether an
individual will be able to claim a capital loss in terms of the selling of his
primary residence, if he only physically resided in this property for 2 of the
4 years the property was held.
Our client is planning to sell his primary residence and a
capital loss will be realised. However he only stayed in the property for 2 of
the 4 years the property was held. We would like to know whether our client
will be entitled to claim the capital loss and how the calculation / apportionment
will work in this case. Also, if you can just confirm that attorney fees and
transfer costs are not a deductible cost for capital gains tax purposes.
I am of the opinion that there could be an apportionment
allowable, but I am uncertain as to the exact calculation thereof. I am also of
the opinion that attorney fees and transfer costs are not deductible for
capital gains tax purposes.
A: The matter
that you require guidance on is covered in Part VII: Primary residence exclusion
(paragraphs 44 – 50). The SARS CGT guide
covers it chapter 11.
To provide the guidance required we need to know what the
residence was used for in the period that he didn’t reside in it (was not
ordinarily resident in that residence).
The capital loss determined in respect of the disposal of the primary
residence of that person will then only be available for set-off to the extent
that it exceeds R2 million.
We assume the attorney fees and transfer costs relate to the
acquisition of the property. These costs
will qualify as base cost – see paragraph 20(1)(c)(i) and (iii) of the Eighth
Schedule – if they were actually incurred as expenditure directly related to
the acquisition or disposal of that asset.
Disclaimer: Nothing in these queries and answers should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.