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Northern Region 1 SARS Stakeholder Meeting: Minutes

Friday, 15 March 2013   (1 Comments)
Posted by: Author: SAIT technical
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Source: SAIT Technical 

On Friday the 22nd of February, SAICA and SAIT had a meeting with the SARS Randburg branch to discuss operational issues raised by our members. The meeting was very interactive and valuable insights were obtained from both the bodies and SARS. The minutes of the meeting are as follow:

1. Loss of supporting documents in SARS offices

On 6 August 2012 a request was received from SARS to submit supporting documents for a taxpayer.  On 6 September 2012 the supporting documents requested, including the medical expenses invoices and receipts, were e-filed.  The relevant supporting documents were also handed in at the Randburg office on 5 September 2012. On 25 January 2013 we received a notice of invalid objection, as SARS claimed that the objection was not received timeously.  The notice of objection was e-filed on 31 January 2013.  What is happening to the documents and the objections that are being e-filed, and hand delivered to your offices?

SARS response: The supporting documents issue will be resolved. The documents were sent to Alberton for screening. Members are complaining that documents submitted via e-filing go missing. SARS reiterates that members must request to scan their documents at a SARS branch as proof of delivery and not merely just drop off the documents at the SARS branch office.

2. SARS contacting taxpayers directly, instead of the tax practitioner

The taxpayer received a call from the SARS centre demanding payment of the amount due, in respect of the 2012 assessment.  Why is SARS contacting taxpayers directly, and not the tax practitioner?

Tax practitioners are complaining that SARS is contacting their clients after they assured their clients that a specific matter is resolved. This causes tax practitioners to appear incompetent and not in control of their clients’ matters.

Another problem is that when SARS staff contact a client, they don’t leave any contact details. This makes it impossible for the taxpayer to correspond with the relevant SARS staff in subsequent proceedings.

SARS response: SARS has a legal obligation when a taxpayer is in a tax due position to contact any person identified on the system. If the tax practitioner is not available, then SARS will call the tax payer themselves. SARS prefers to make use of calls rather than emails, due to the rapid response rates that can be obtained.

SARS reiterates that according to law, the ultimate responsibility for tax rests upon the client. SARS however agreed to first call the tax practitioner, and to only contact the client when the practitioner is not available.

SARS may consider giving reference numbers to taxpayers which will ease the process of contacting the call centre. SARS will follow up the matter with Piet Nel.

3. Requests for supporting documents

Our firm e-filed ninety five individual tax returns in December 2012 and January 2013.  Of the ninety five returns that were e-filed, we had requests for supporting documents in respect of forty five of these returns (47%).  I have already raised this issue at the meeting held on 1 March 2012.  Why does SARS not just go back to the old method when returns were submitted manually, together with the supporting documents?  It takes an inordinate amount of time to collate all the supporting documents when SARS places such a request.  It needs to be borne in mind that tax practitioners’ offices are extremely busy now with provisional tax for their clients; hence it is not feasible, practical nor possible to suddenly stop processing provisional tax returns and collate all the supporting documents to e-file to SARS.

SARS response: SARS reiterates that they are risk driven. Once most of the fraudulent activities are identified, then the risk assessments are changed. SARS stands its ground and says that the risk engine only identifies 10% of the taxpayers. SARS is also in the process of adding another eight risks to the risk engine due to fraudulent activities in certain sectors.

Tax practitioners wanted to know why they cannot submit the supporting documents immediately with the return rather than having to wait till a few weeks/months later for the request to submit supporting documents. This would save time and prevent unbillable hours being spent by the tax practitioners (as the client has already been billed for the service of rendering the return). SARS stipulated that this would clog up their system but this suggestion would be followed up at the next stakeholders meeting. Tax practitioner bodies could also obtain statistics on their members as to the % of their client base that has been requested to submit supporting documents.

4. Penalties in respect of the "Under estimation – Provisional tax" being levied when the taxpayer has PAYE deducted from his monthly salary, and a subsequent refund is due to the taxpayer

This matter has been raised with SARS at previous stakeholders’ meetings.  The taxpayers had PAYE deducted, which exceeded the tax payable for the year.  Refunds were due and subsequently paid to the taxpayers.  How therefore can there be a penalty for "Under estimation – Provisional tax”, when the estimated taxable income for provisional tax purposes was based on the year last assessed, plus the attributable 8%, and the taxpayers’ assessed incomes were below R1 million?

SARS response: SARS concurs with member and is in the process of resolving the matter.

5. No notification or letter of finding issued in respect of an audit

On 12 March 2012 we received an e-mail from Maki Pelotona, with an attached letter requesting supporting documents for a taxpayer, in respect of his 2011 return.  All documents and information requested was e-mailed back to Maki on 26 March 2012.  After this date we received no further correspondence from Maki.  During the course of our dealings with the taxpayer, we requested a Statement of Account for assessed taxes.  On the Statement of Account it was noted that the taxpayer has been selected for an audit, to which we had received no notification or correspondence.  We then wrote to SARS on 3 October 2012, bringing this to their attention, and stating that we have received no correspondence or notification relating to this audit, and requesting them to contact me with any queries or issues that they have, to which I received no reply.  On 27 November 2012 SARS issued an additional assessment, disallowing all expenditure, and advising the taxpayer that they owe SARS R5 654 125.69.  SARS never issued a letter of findings relating to the abovementioned audit.  I then contacted your call centre on 8 February 2013 to find out why this additional assessment had been raised.  I was advised that SARS had requested supporting documents to be uplifted, and for an IT14SD to be completed, which we had not attended to.  I attached a screen dump of the 2011 tax work page for this client.  You will note that there is no correspondence on this work page, nor is there any request for an IT14SD, or supporting documentation.  We now have to lodge objection to this incorrect, ridiculous assessment, in an attempt to correct it.  Please advise why we were never notified of an audit, nor were we provided with a letter of findings related thereto, nor were we ever requested to upload any documentation onto e-filing, or to complete the IT14SD.

SARS response: SARS does not send out requests for compliance audits. This matter will be escalated to the National meeting.

6. SARS Call centre

The SARS call centre is extremely difficult to get through to, the level of helpfulness, friendliness and efficiency is unacceptable.

SARS response: SARS requests people to physically come in to a SARS branch if the call centre is blocked. SARS however acknowledges the problem.

SARS is listening into some of the calls to identify SARS officials providing unfriendly service. SARS assured the members that unfriendly and unhelpful service would not be tolerated and that disciplinary action would be taken against such officials. Tax practitioners are urged, however, to take down the reference numbers provided to them so that the matters can be followed up quickly.

7. Notice of judgment

Incorrect judgments are issued against various taxpayers. Various request and communication sent to SARS attempting to resolve the matters were either ignored by SARS or not yet rectified.

SARS response: SARS is going to provide feedback on this matter during this week.

8.  21 working days’ notice not followed by SARS

The 21 working days’ notice by SARS is not followed, for the taxpayer. The original "Verification of income tax return” request for the submission of supporting documentation is dated 18 January 2013.  The final request letter however is dated 8 February 2013, in which case the 21 working days has not expired.

SARS response: SARS reiterates that they work according to calendar days.

9. Finalisation of Deceased Estates

Can SARS please clarify what is happening with the final assessments for Deceased Estates? We cannot finalise with the Master’s Office as the SARS staff have been removed from their offices  and  have been centralised somewhere in Pretoria  with no contacts. No telephones, no emails and no names of officials are available.

SARS response: The last income tax return of a deceased taxpayer must be submitted via e-filing with the relevant code for a deceased individual.

10. Constant Unannounced Changes

For example, a VAT registration now requires a certified copy of company registration documents (CIPC). The application form does not require this. In many instances the front office goes through an application, for example, the updating of banking details and finds it in order whereafter the back office will find the documents incomplete and send it back to the applicant. This is not a productive process.

SARS response: SARS is also experiencing problems. SARS had inconsistency between their standard operating procedures and the VAT 101 form. The matter was escalated and SARS is in the process of updating the VAT 101 form to align it with the standard operating procedures. SARS is however highly aware of numerous fraudulent VAT registrations and in an attempt to mitigate this risk, applications are sent to the Alberton screening centre for review.

11. SDL Activation

Why can the SDL field not be activated via e-filing? It is unnecessary that one has to give written notice to SARS and then hope for the best. As time passes, penalties and interest may become payable.

SARS response:  E-filing is not linked to the core system at the moment. In future, as modernisation increases, SARS may consider including the SDL field in e-filing.

12. VAT Registrations

·Going concern purchases
SARS requests the financial statements of the seller to allow the purchaser to register as a going concern purchaser.

This is private information of the seller and not ordinarily available to the purchaser.

Surely SARS has the VAT history of the seller available by virtue of the VAT registration of the seller and can confirm (silently without breach of secrecy) the fact that the seller is a vendor and accordingly that the purchaser qualified to register.

·Office Practice
It would seem that every office has its own practice with regards to making the application; some offices will only accept a letter from the bank as proof of bank account even though a bank statement (which meets the requirements) may be accepted. Where the applicant is not registered for income tax (new business) one office will accept the IT77 together with the application as a VAT vendor, and the other not.

SARS response:  SARS uses the seller’s VAT details only to verify his turnover. SARS would only accept the following to support the application: the sale agreement (if it reflects the turnover), audited financial statements (which presents a problem), tax invoices, or tax returns.

VAT registrations at certain SARS branches (including the Edenvale branch) must be done by making an appointment at reception due to the high demand to register. Prospective vendors would therefore be required to visit a SARS branch in person. SARS will however give notice of the branches where an appointment is required.

13. Errors on assessment

A lot of incorrect assessments are coming through, objections are lodged against these. To get SARS to rectify their errors can take up to 4 months, if lucky.

SARS response: In order to reduce the turnaround time with Notice of Objections, taxpayers are requested to immediately submit their supporting documents via e-filing. A request for correction must be made for a random error in a return.

14. Errors on e-filing

We find a lot of e-filing errors, such as documents not available on e-filing, and to try and obtain these documents can take hours upon hours on the phone with the call centre.

SARS response: The matter will be escalated.

15. SARS branches

To visit a SARS branch has become one of the biggest nightmares - something that took half an hour 5 years ago, now takes a minimum of 3 hours. The queues are always a mile long, no matter what time of the day. SARS needs to make sure that all counters are manned.

SARS response: We acknowledge the problem.  It should however be reiterated that the problem is cyclical. Generally, when we are not in e-filing season, the offices are not that busy.

16. Objections via e-filing

When is SARS going to enable us to lodge objections via e-filing for trusts and to lodge ADR’s? We file the tax return and are assessed and that’s all we can do. How do we object and how do we send documents if these are called for?

SARS response: Trust procedures have not yet been modernised enough. An ADR and NOO must be submitted at a SARS branch. Trust modernisation is on next year’s agenda.

17. PAYE payments on e-filing

For PAYE purposes, on e-filing when we attempt to pay the amount due for the latest EMP 201 return, we find details of many amounts for earlier periods that have all been paid. How do we clear these out?

SARS response: A member made a recommendation that new forms must be developed to ensure that additional payments are correctly allocated. SARS concurs.

18. Provisional Tax – Basic Amount 1/2013

A number of individuals with taxable income over R1 million have received letters from SARS in respect of their first provisional tax payment from the LBC – Durban. Their IRP6’s were prepared based on the basic amount.

Herewith an extract from the standard letter issued by SARS:

"Paragraph 19(1)(b) of the 4th Schedule of the Income Tax Act requires a company to furnish "an estimate of the total taxable income which will be derived by the company in respect of the year of assessment in respect of which provisional tax is or may be payable by the company.

”Paragraph 20 of the Fourth Schedule only directs when and how penalties are to be imposed in the event of an underestimation. This does not imply that SARS should accept taxpayer’s estimate if it differs by 20% or less than the estimate required in terms of paragraph 19(1)(b).

Paragraph 19(1)(c) directs that the estimate furnished should not be lower than the basic amount. The mere acceptance of the of the basic amount does not absolve the company from complying with the provisions of paragraph 19(1)(b).

Paragraph 19(3) empowers the Commissioner to "call upon any provisional taxpayer to justify any estimate made by him in terms of sub-paragraph (1), or to furnish particulars of his income and expenditure or any other particulars that may be required”.

"Based on the above, kindly email me the company’s financial records for the first 6 months (1 March 2012 to 31 August 2012) e.g. Management Accounts, Trial Balance and Tax computation.

”The letter appears to be a standard letter that has been sent to these taxpayers and inappropriate paragraphs are being applied to these taxpayers who are INDIVIDUALS and not companies.

SARS response: The matter is escalated to level 3 to look into the matter.

19. Delays for VAT refunds

Why are there such delays with the refund due to VAT vendors? The refunds should be made within 21 business days but SARS immediately wants a VAT audit. If the vendor owes money to SARS, the legal collection process starts immediately and SARS just takes the money out of the vendor’s bank account without any notification.

SARS response: This occurs on a seldom basis and would only occur if the supporting documents are not submitted in time.

20. Diesel Rebates

SARS disallows rebate when "diesel distribution and use logbooks” cannot be produced. Often farm workers are not schooled, and it is impossible to maintain logbooks from a practical point of view.

The VAT201 return does not allow a payment to be created in the event where the rebate is more than the VAT amount.

SARS response: SAICA established a sub-committee to recommend legislative changes in an attempt to resolve the matter. The professional bodies also suggested that the communities (eg. farming) be engaged with directly as there has been no formal communication with/to them (since 2010).

21. Logbook

Our view on the logbook is that if you record the business trip and the balance is private then you have sustained your onus. SARS officials require a detailed DAILY logbook.

The taxpayers have been keeping a monthly record of the opening and closing mileages and diarise the days they do business mileage and note the kilometres travelled. At the end of the month they have a total mileage and a record of the business mileage. The difference is recorded as private. The SARS official said they are not accepting that and want it daily and relying on Draft Interpretation Note No14. The SARS official was requested to put it in writing and she said they don't do letters and are just phoning the client and we were informed that if we don't upload a daily logbook for the 2012 tax return they will dis-allow the claim. The Income Tax Act does not define a log book.

SARS response: In Gauteng, members are required to adhere to Draft Interpretation Note No 14. The implications are that a taxpayer would be required to keep record of the following for business kilometres: the date, total distance travelled, where did you go, and the reason for travelling. There is an example of a logbook on the SARS website. This is especially important for commission earners that have to provide a daily logbook.

22.Tax Clearance Certificates

Ongoing issues are encountered by members where a taxpayer’s affairs are in order but TCC’s are declined for no valid reason. For example the person has a double barrelled name, or the Income Tax number is not linked to the VAT number. Applicants are informed that they may not apply for new TCC prior to 7 days before expiry of old TCC, but on application is given notice that application can take up to 21 business days.

A problem encountered with this process is that it has a damaging effect on the South African economy.

At what stage is the modernising of the TCC application process going to take effect?

SARS response: SARS acknowledges that the application process under the current state of affairs poses a problem. SARS is however currently busy implementing a new TCC system which will come into effect on 1 April 2013. The new system would be more efficient and would rid itself of the abovementioned problem.

23. Source code – Section 10(1)(o)(ii)

At a previous meeting we were informed that SARS will not consider this deduction/non assessment if the incorrect source code is used on the IRP5. This results in unnecessary objections – can SARS’s view on this be revisited?

SARS response: SARS acknowledges the problem. This matter will be addressed at the next stakeholders meeting.

24. Obtaining Tax Numbers

This is an ongoing issue. In many instances an employer tries to get his/her ex-employee’s tax number from SARS but is unable to do so as details cannot be accurately verified. Are there any alternatives?

SARS response: We will never give an employee’s tax number to an employer. The employer must ask the employee for his tax number upon appointment. If the employee only becomes liable to register at a later stage due to his taxable income now exceeding the tax threshold, then the employer must register the employee to obtain his tax number. SARS states that it would like to go to clients and their employees to educate them on these tax matters. This would also tend to ease the process of ensuring that taxpayers register when they become liable to.

25. IT14SD – Basis of selection

Surely the fact that the taxpayer is to receive a refund is not in itself a basis for the selection of the IT14SD.Surely this should only be used if there is a disjunction in the correlation of income tax and VAT.

SARS response: Our risk engine only identifies 10% of all taxpayers and a refund does not necessarily trigger a request to complete an IT14SD.


Corne Struwig says...
Posted Tuesday, 25 March 2014
Point 22-TCC (It21a & Fia001) -We have the experience at sars branch in vereeniging that every application is sent for "review" is this a new process?



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