South Africa

Details

  • Service: Tax, Corporate and Business Tax, International Executive Services
  • Type: Business and industry issue
  • Date: 2010/08/23

Global Mobility Services & Employment Tax Advisory

Our Global Mobility Services (GMS) team specialises in expatriate taxation, employees' tax, emigration, immigration services and exchange control assistance.

Recent SARS Audit initiative 

The South African Revenue Service (SARS) has implemented a new initiative concerning employees’ tax audits, aimed specifically at travel allowances, the employees’ tax treatment of remuneration paid to expatriate employees and employee share incentive schemes.

In light of this, taxpayers will receive, or may already have received, a “limited scope audit questionnaire” containing questions relating to one of the above three categories, and may receive three separate questionnaires covering each category should all three apply to a particular taxpayer.

 

KPMG has had sight of the three questionnaires, and has noted that SARS is generally auditing a taxpayer’s last five years of assessment. The questionnaires are fairly comprehensive and include requests for specific information pertaining to a company’s expatriate workforce, share incentive schemes and travel allowance policy.

 

It is critical that each questionnaire, which must be signed by the public officer, is accurately completed. It is worth noting that included in each questionnaire is a note to the effect that although the audit is limited to selected areas of compliance, a comprehensive audit could follow if areas of non-compliance are identified.

 

In addition to interest charges, penalties of up to 200% could apply to any shortfall of employees’ tax identified by SARS as a result of the audit process. This is in contrast to the situation where SARS states that a voluntary disclosure of issues known to a taxpayer prior to a SARS audit will result in a reduction of penalties and no additional tax will be charged.

 

Accordingly, it is recommended that taxpayers take proactive steps to determine whether their employees’ tax matters are being conducted in accordance with the applicable tax legislation and SARS practice. It is also recommended that advice is sought should taxpayers be issued with one or more of the abovementioned questionnaires, being mindful that any response to SARS could form the basis of a later Objection, Alternative Dispute Resolution, or Appeal process with SARS.


Voluntary Disclosure Programme

 

The Finance Minister, Pravin Gordham, announced SARS' intention to implement a voluntary disclosure programme in his budget speech earlier this year.

 

The voluntary disclosure programme which applies to all taxes (including employees’ tax) will run for 12 months from 1 November 2010 to 31 October 2011.

 

Defaulting taxpayers who are unaware of any pending or current investigation into their tax affairs may avail of relief under the programme provided taxpayers make a complete disclosure of a default that would trigger additional tax or penalty/interest charges. It should be noted that defaulting taxpayers may in certain limited circumstances still avail of the voluntary disclosure programme where a current investigation is taking place into their affairs.

 

The voluntary disclosure programme will enable qualifying taxpayers to obtain amnesty from any criminal prosecution; obtain a waiver of additional taxes, penalties (other than administrative penalties) and interest of up to 100%, arising from a previous default which must have occurred at least twelve months prior to the commencement of the voluntary disclosure programme. It is understood that the twelve month condition is currently under review.

 

For further information concerning the above issues, please do not hesitate to contact us.