The ins and outs of the new Tax Clearance Certificate system
31 March 2015
Posted by: Author: Carin Grobbelaar
Author: Carin Grobbelaar (Grant Thornton, Cape)
A new and simpler process to apply for ‘Tax Clearance Certificate’ has been introduced, but it is not without pitfalls.
A ‘Tax Clearance Certificate’ (‘TCC’) is a written confirmation from SARS that a person’s tax affairs are in order at the date of issue of the TCC. TCC’s are critically important to business in today’s economy because tenders are awarded only to taxpayers whose tax affairs are in good standing. However, obtaining a TCC from SARS can be rather time consuming and frustrating.
To alleviate taxpayers’ frustration, SARS introduced a new tax clearance system (‘TCS’) to modernise and enhance the process of issuing of tax clearance certificates. Taxpayers can apply for a TCC via eFiling or at a SARS branch but a single application form (TCC 001) now replaces all previous forms. The good news is that applications are now processed online and in real-time, with the exception of a TCC required for a Foreign Investment Allowance or emigration (which will still need to be manually submitted to SARS together with the supporting documentation).
The new process
When applying for a TCC, all supporting documents must be provided to speed up the application process. A response on the outcome will be provided within five (5) business days. An email notification will be sent, where application, and include a reason for being declined, if applicable.
If a TCC application is not immediately approved, it will be sent away for review and can no longer be finalised at a SARS branch. Again, taxpayers will receive an email notification within five (5) business days, informing them of the result of their application and if the application is declined, a reason will be provided or if approved, the TCC must be collected at a SARS branch.
Requirements and potential pitfalls
SARS will only issue a TCC if the following requirements have been met:
- the taxpayer must have registered for Income Tax before applying for a TCC
- the taxpayer’s account must be in good standing for all types of tax
- any deferred arrangements made, must be honoured
- all returns and/or declarations must be up to date and in the process of being assessed by SARS
- all tax reference numbers must be active and correct, e.g. the tax reference number must not be de-registered or suspended on the SARS system
- the registration details on the TCC 001 must correspond with the information on the SARS systems.
The SARS website provides that where a TCC is requested for a holding company via eFiling, the holding company’s tax reference numbers (i.e. Income Tax-, Value-Added Tax (VAT) – and/or Employees Tax (PAYE) numbers) must be used. Where the application is for a branch or division of the main company, the branch VAT number and PAYE number must be used. SARS will add all sub-entities belonging to the holding company and provide a combined TCC.
A potential pitfall to this system is that the tax compliance of sub-entities, divisions or branches of a corporate entity will have an impact on the holding company’s tax compliance status, meaning if any one of the sub-entities is non-compliant, the holding company will also be regarded as non-compliant and a TCC will be declined.
This article first appeared on gt.co.za.