Back to basics: navigating a SARS audit and dispute process

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Back to basics: navigating a SARS audit and dispute process

• 17 October 2018
• Tax Administration
• Taryn Solomon

Important:

This article is based on tax law for the tax year ending 28 February 2019.

Author: Taryn Solomon

Receiving and responding to a request for relevant material from the South African Revenue Service (“SARS”) and generally dealing with SARS during an audit or a dispute can be a daunting task for any taxpayer. In this article, we go back to basics in briefly discussing the processes followed by SARS during audits and disputes (up to the appeal stage), including providing some tips and insights in dealing with SARS in these processes, which may assist taxpayers in navigating their way through them.

Request for relevant material and audit findings

SARS has wide information-gathering powers in terms of section 46 of the Tax Administration Act, 2011 (“TAA”) and may require a taxpayer or another person to submit relevant material “for the purposes of the administration of a tax Act”. A taxpayer or another person must be given a “reasonable period” within which to submit the relevant material. Upon receiving a request for relevant material from SARS, a taxpayer or person should therefore first consider whether the information requested is indeed required for the administration of a tax Act and secondly, whether SARS has provided the taxpayer or person a reasonable period within which to respond to the request. If the material requested is voluminous and/or covers an extended period of time, a further period may be requested to submit the response. It is a criminal offense in terms of section 234(h) of the TAA to refuse or neglect to furnish information requested by SARS.

Once SARS has completed its audit (which may involve various correspondence over a period of time), and where the audit identified potential adjustments of a material nature, SARS must, in terms of section 42(2)(b) of the TAA, provide the taxpayer with a document containing the outcome of the audit including the grounds for any proposed assessment or decision. This document is commonly referred to as the letter of audit findings. A taxpayer must, within 21 business days, respond in writing to the facts and conclusions set out in such letter. Based on the complexities of the audit, an extension can be requested by the taxpayer. The letter of findings and response thereto is an important step in the audit/dispute process, as this is the first time in which SARS formally sets out its views following an audit and it gives the taxpayer the first formal opportunity to provide SARS with any further explanation and/or the opportunity to correct any misinformation or misunderstanding prior to SARS deciding to raise additional assessments. 

This article first appeared on ensafrica.com.

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