Industry updates | October 2021

Please take note of the following industry updates that may be relevant to you and your business.

COMPLIANCE AND ADMINISTRATION

Due dates for reporting and payments- October 2021:

TAX ADMINISTRATION

1. Unresolved/ ongoing SARS operational matters

• Refund delays and refund reversals: SARS has implemented a new risk-based verification strategy to curb fraudulent activity resulting in an increase in the number of VAT and income tax refund reversals. SARS has not committed to a turnaround time in which they will finalise verifications but has committed to improving communication with taxpayers and tax practitioners.

• Delays in the processing of VAT201 returns: SARS implemented new programmatic consistency checks resulting in extensive delays in the processing of VAT201 returns. In short, despite having been submitted, the VAT201 returns are indicated as outstanding. As a result, VAT refunds are not being processed, and where a compliant status is required as part of a tender process, the taxpayer is ineligible to participate.

• Denial of employees’ tax deducted: In certain instances, SARS denies employees’ tax where the taxpayer is in possession of a valid IRP5 certificate, but the employer has not paid over the employees’ tax debt to SARS. The submission has been made to the SARS Stakeholder Engagement team to request clarity on the current policy regarding the recognition of employees’ tax credit where an employer has withheld an employees’ tax but has not paid the employees’ tax withheld over to SARS. No response has yet been received from SARS, we will provide information in due course.  

2. 2021 Income Tax filing season

Income Tax Filing Season 2021 dates:

• For non-provisional taxpayers- 1 July 2021 to 23 November 2021

• For provisional taxpayers- 1 July 2021 to 31 January 2022

3. EMP501 interim reconciliation submissions

The Bi-annual August 2021 PAYE reconciliation period is from the 15th of September to the 31st of October. All employers must prepare and submit their declaration (EMP501) and employees’ IRP5s to SARS reconciling the PAYE, SDL, and UIF paid during the period 1 March 2021 to 31 August 2021.

Late submission of the EMP501 return and submission of omitted information and incomplete IRP5 certificates will result in SARS levying penalties and interest. 

4. COVID-19 provisional tax relief measures:

We have received multiple queries regarding the penalties and interest levied against the taxpayer where the COVID-19 provisional tax relief was utilised. The cases were investigated, and the following scenarios were identified:

• The relief measures were initially applied as part of the provisional payments. However, where SARS determines on the assessment that the taxpayer does not qualify for the deferment of the provisional tax liability, penalties and interest will be raised on the underpayment.

• The taxpayer qualified for deferment of the provisional tax liability, but SARS did not apply the tax relief measures. As a result, penalties and interest were raised on the provisional tax account. In these instances, the penalty and interest are reflected on the provisional tax statement of account (PROVSA).

In both scenarios, a Request for Remittance (RFR) together with all the relevant information and supporting evidence can be submitted to remedy penalties and interest levied by SARS.

5. Businessman gets 5-year jail term for VAT fraud

A businessman who used false tax invoices in the calculations of VAT Output and Input tax was sentenced to five years of direct imprisonment for fraud last week.

The Bloemfontein Regional Court heard that Ntabe Trading & Projects CC and Mr. MJ Ntabe provided the South African Revenue Service (SARS) auditors with false supporting documents to substantiate the VAT calculations.

SARS Audit raised additional assessments, which resulted in a total prejudice of R1-million to SARS. The Close Corporation seized the operation and only Mr. Ntabe was charged, and he then pleaded guilty.

On the 21 counts of fraud, Mr. MJ Ntabe was sentenced to 8 years imprisonment of which 3 years were suspended for 5 years on condition that the accused is not convicted of fraud committed during the period of suspension.

SARS Commissioner Mr. Edward Kieswetter noted with concern that the scourge of VAT crime has been on the ascendancy for a long time. “There are companies that are created for the sole purpose of defrauding SARS. This sentence of direct imprisonment must communicate a clear message that SARS has the capacity to detect fraud and make it costly for the perpetrators”. Working with other law enforcement, SARS will continue to bring to book those who commit these crimes.

Domonique Ramos | 12 October 2021