Can you please assist with the tax law that require the taxpayer to keep the details of each client that he/she entertain?
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
The relevant law is found in sections 1, 29 and 46 of the Tax Administration Act. As defined in section 1, relevant material means any information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act as referred to in section 3. SARS is then entitled to call for the information under section 46 of the Act.
It is section 29 of the Tax Administration Act that requires of the person (taxpayer) to keep records that will enable the person to observe the requirements of a tax Act and enable SARS to be satisfied that the person has observed these requirements. The Act doesn’t deal with what is necessary to prove this – in other words, that record of the names of the clients entertained be kept. In the past, in response to such a question, taxpayers showed the detail entered in their diaries.
Section 30 explains the form in which the records are to be kept – relevant to your request is the “in their original form” part.
If the taxpayer refuses to provide the information the comment by Judge Smith, in SARS v Brown is relevant. The Judge said that “(a)ll that SARS is required to show is that the information sought is “relevant material” necessary for the administration of a tax Act.” Because SARS asked for it we can accept they consider it relevant.
If the taxpayer doesn’t have the information it should be pointed out to SARS in the response letter. Section 46(3) of the Act states that the request “is limited to material maintained or kept or that should have been kept by the person in respect of the taxpayer”.