Why must Record Keeping be a Burden?

Why must Record Keeping be a Burden?

• 01 October 2024
• Tax Administration
• Adv Christel van Wyk

Taxpayer obligations are balanced against SARS’ powers and duties. SARS is responsible for the administration of all tax legislation under the control of the Commissioner/ Taxpayers on the other hand are liable to comply with a multitude of prescribed tax obligations, which include the duty to keep records in a particular manner and to retain those records for a particular length of time.

 Section 29 of the Tax Administration Act, 28 of 2011 (the Act) is widely worded and requires a person to keep records, books of account or documents that:

• Enable the person to observe the requirements of a tax Act
• That are specifically required under a tax Act or by the Commissioner by public notice
• Enable SARS to be satisfied that the person has observed these requirements

This duty in relation to a tax period rests on any person who has submitted or is required to submit a tax return for the period in question and these records must be kept for five years from the date of submitting the relevant tax return. If a return is therefore submitted late, the duty to keep records is linked to the date of actual submission and one cannot escape the obligation through non-compliance.

Where there is no requirement to submit a return but the person receives income, has a capital gain or loss or engaged in any other activity subject to tax during a tax period, the person is required to retain these records for five years from the end of the relevant tax period.

There are however exceptions to this document retention period, and this is where things become complicated, especially in the case of capital gains and capital losses where the asset is sold after many years. Consider that the burden of proof is on the taxpayer to prove the base cost calculation. If a person buys a house in 2014 and sells it ten years later, the person must therefore ensure that  all the supporting documents for the base cost calculation are retained for this extended period  until five years after the end of the tax year in which the property was disposed, in other words, the full ten years’ records must to be retained for another five years after the capital gain was realized. Being mindful of these obligations, a person is therefore well advised in this scenario to proactively manage and maintain a proper record keeping system, which does not have to be overly sophisticated as long as it is easily accessible.

In another instance, where a person formally disputes an assessment, section 32 of the Act requires that, where a person has been notified of or is aware of an audit or investigation and where a person has lodged an objection or appeal to an assessment, the relevant records must be retained until the audit or investigation is finalized or until the assessment or decision on the objection or appeal becomes final.  This could also mean that records may need to be kept for lengthy periods, and again, being well organized has its distinct advantages in providing the required level of proof of the person’s case.

When SARS requires the required supporting documents to be submitted based on the prescribed retention periods, it will be very detrimental for a person’s case to discharge the burden of proof if these records have simply not been retained or for some reason cannot be accessed. Having an organized and easily accessible record keeping system therefore clearly adds significant value in managing one’s overall tax burden, whilst ensuring an impeccable tax compliance status.

Join Adv Christel van Wyk October 10th for a webinar on "Practical Guidance: Dealing with Tax Administrative Burdens".

• Click here to read more and reserve your seat.
• Click here for a short introduction video.

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