Interpretation Note 132 and its Impact on Tax Practitioners
Purpose
This Note explains when a person cannot register as a tax practitioner because of tax problems. It also covers when SARS must remove a registered tax practitioner. Finally, it discusses how long they will be unqualified for registration.
Background
A natural person who gives advice on a tax Act or helps complete a return must register with a recognized body. They must also register with SARS within set timeframes. If someone is not registered with both a recognized body and SARS, they cannot work as a tax practitioner. Practicing without registration is a criminal offense. This can lead to a fine or up to two years in prison if convicted.
Section 240(3) stops SARS from registering someone as a tax practitioner. It also requires SARS to deregister a tax practitioner in certain cases. Section 240(3)(d) focuses on tax non-compliance. According to section 256(3), tax compliance means registering for tax, submitting returns, and paying any owed taxes. It also includes making arrangements for these returns or debts. Deregistering tax practitioners impacts their livelihoods and business continuity. It also affects the taxpayers that these practitioners serve.
People who want to work as tax practitioners should stay tax compliant. If they are not compliant, they should fix it quickly. Both new and registered tax practitioners are encouraged to respond to a notice from SARS. This helps them get registered faster, avoid deregistration, or shorten the time they are deregistered.
The law is outlined in Annexure A. Application of law Conditions for not being registered or for deregistration as a tax practitioner are in Section 240(3)(d). This section states two conditions that must be met. If these conditions are not met, SARS cannot register a new tax practitioner or must deregister a current one. The tax practitioner must be: - Tax non-compliant for at least six months in the last year. - Unable to show compliance or fix non-compliance within the time given by SARS in a notice.
Condition one: Non-compliance Condition one states that a tax practitioner must not follow the rules for at least six months. This must happen within the last 12 months. The word "aggregate" means something made by adding different amounts together.
To meet condition one, you must add up the months of non-compliance. If the total is at least six months in the last 12 months, you meet this condition. In other words, you need to be non-compliant for at least six out of 12 months. To stay eligible for registration, you cannot just be tax compliant for six months. If you are compliant for six months, you will still be non-compliant for the same time. This means condition one will still be met.
To stay compliant, you must meet the rules for at least seven months in the last 12. If you do not, the six months of non-compliance will still count. The term "preceding" in section 240(3)(d) means SARS must look back at the last 12 months. To check if you meet the first condition, we need to look at a specific time. At this time, we review the previous calendar year. We check which months the tax practitioner was not compliant according to section 256(3).
Months of non-compliance encompass those where the professional was not registered for a necessary tax, had pending tax returns or debts, submitted a tax return or payment after the due date, or did not coordinate with SARS regarding returns or payments. Additionally, since compliance is gauged based on the "prior" 12 months, the timeframe for measuring compliance is not fixed – the previous 12 months shift or roll ahead as time progresses, requiring measurements from varying points in time when verifying compliance. Consequently, SARS persistently checks tax compliance across different tax categories.
If a person ignores the notice from SARS for each month, it adds to their non-compliance. Each month that passes pushes earlier compliant months out of the review period. On the other hand, if a person is compliant for a month, their non-compliance total will decrease. It is important for tax practitioners to stay compliant or fix their non-compliance quickly.
Condition two: If a person does not show compliance or fix non-compliance, condition two applies. This condition stops SARS from registering a new tax practitioner. It also requires SARS to deregister a tax practitioner who does not comply. SARS will send a notice to the tax practitioners. This notice will give them a reasonable time to show compliance or fix the issue. If the recipient does not respond, or if they respond but do not comply within the given time, condition two will be met.
Prospective and registered tax practitioners are encouraged to contact SARS. They can use the contact information in the notice. This is especially important if they can show compliance or need help with non-compliance. The link between condition one and condition two is clear. The word “and” in section 240(3)(d) shows that both conditions must be met. This is necessary for non-registration or deregistration to occur.
Condition two depends on condition one. If someone does not follow the rules, it can only be seen if the records show they owe taxes. In other words, as long as condition one is met, condition two is still important. But if condition one is not met, condition two is no longer needed.
Here are two questions to see if section 240(3)(d) applies in a case. First, is the person non-compliant for the total months? If the answer is no, then condition one is not met. Condition two is not needed, and the section does not apply. If the answer is yes, then condition one is met. Next, we need to ask the second question: has the person failed to become compliant within the time given in the notice from SARS? If the answer is no, then condition two is not met, and the section does not apply.
If the answer is yes, then condition two is met. However, since time has passed, we must ask the first question again. This helps us see if it still applies in the current period. If the answer is no, then condition one and the section do not apply. If the answer is yes, both conditions are met, and section 240(3)(d) applies. This process continues until the answer to the first question is no. At that point, the answer to the second question does not matter.
SARS can register a new tax practitioner. They cannot remove a practitioner who fixes their issues before the deadline in the notice. If someone resolves their issues after the deadline, they will still face consequences. They must first meet the compliance condition to avoid these consequences. SARS can register a new tax practitioner. They cannot remove a practitioner who fixes their issues before the deadline in the notice. If someone resolves their issues after the deadline, they will still face consequences. They must meet the first condition of compliance to avoid these consequences.
The length of this cycle will depend on a person's past and future compliance. Both can help or hurt the path to being compliant for seven out of 12 months. A tax practitioner who is compliant but fails to show it during the notice period can be registered again. This is because that person was compliant all along. Therefore, prospective or registered tax practitioners should respond to a notice from SARS. This will help them stay registered, avoid deregistration, or shorten the time of deregistration.
You can find examples of section 240(3)(d) in Annexure B. In conclusion, most people who give tax advice or help fill out tax returns must register with a recognized body. They also need to register with SARS within the set time limits.
A person cannot register as a tax practitioner if they have not been compliant for at least six months in the past year. Registered practitioners must be deregistered by SARS under the same condition. If they do not show compliance or fix the issues within the time given by SARS, they will lose their registration. If they do not show compliance or fix the issues within the time given by SARS in a notice, they will lose their registration.
Link to Interpretation note 132
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