SARS will be focusing on these taxpayers this tax season
SARS has set the start date for tax season 2024. Despite seeming stricter, everyday taxpayers may not be the main target.
SARS has been using technology such as machine learning and artificial intelligence to simplify the process of filing taxes. This involves automating various administrative tasks. The goal is to make the process easier for taxpayers.
The revenue service is using more third-party data and algorithms to check simple tax returns more thoroughly. This helps taxpayers follow the rules and makes it harder for people to avoid paying their taxes.
This has helped the staff of the service to enhance their skills. They can now focus on specific tax areas. These areas often involve large amounts of money that are frequently missed.
1. Trusts and beneficial owners
SARS has been focusing a lot on trusts this past year. They now have a specific filing period from September 16, 2024 to January 20, 2025.
In 2023, a new law in South Africa says all trusts must follow the Tax Administration Act. They must now reveal more information about the 'beneficial owner' of the trust.
This updated definition was put into effect upon its announcement, which occurred on December 22, 2023.
In 2023, SARS made changes to tax processes. They now require more information on tax returns, including a page for declaring beneficial ownership and additional mandatory supporting details.
By 2024, trusts will be required to navigate through an increased number of compliance requirements, which are detailed in this link.
2. Foreign employers
Foreign employers must register as "employers" with SARS by the end of 2023. This mandate requires them to withhold and pay PAYE.
This change took place on December 22, 2023, and applies to foreign employers operating through a permanent establishment in South Africa.
Prior to the modification, an overseas employer without a 'proxy employer' in South Africa authorized to disburse salaries was not required to withhold PAYE from the payments made to South African workers, as these individuals would settle the income tax owed as provisional taxpayers.
In the February 2023 budget, the National Treasury proposed aligning rules for foreign employers with those for resident employers. This proposal has been implemented.
Revisions to immigration legislation now permit non-residents to work remotely in South Africa on a specific visa without the need for tax registration. However, this is only applicable if their earnings exceed the equivalent of R1 million and their stay does not surpass six months within a 36-month timeframe.
3. New industries
As e-commerce and independent energy production sectors in South Africa continue to grow, SARS has signaled that these industries are prime targets for future "optimal revenue collection".
The group's plan for 2024/25 includes new sectors to tax for more revenue.
The statement indicated that it would devise plans to "efficiently gather tax" from the "continually expanding" online transactions and e-commerce. Simultaneously, it would keep an eye on the "emerging alternative-energy sub-sectors" to guarantee improved compliance rates and optimal revenue collection.
4. Banks and tax practitioners
SARS is aiming to make banks and tax professionals accountable for their clients' shady activities, arguing that they have the duty to intensify efforts to thwart organized fraud and financial offenses, and fight against illegal capital movements and tax avoidance.
Commissioner Edward Kieswetter stated that financial groups and representatives tend to only focus on checking boxes for their clients' behavior. They often overlook addressing larger risk issues. This was mentioned earlier this year.
"Banks prefer to claim credible ignorance. It's more advantageous for them to be unaware of a person's fraudulent activities since such individuals are lucrative customers," he stated.
Tax professionals may lose their licenses and face criminal charges if they do not handle their own taxes correctly. Many have already had their licenses provoked based on not being tax compliant themselves.
5. High Net-worth Individuals
The wealthy are another prominent and thoroughly recorded focus of the tax collector. SARS created a special unit to handle wealthy South Africans with complicated tax situations.
The taxman is targeting billionaires and using its tax processes to make them pay their fair share.
HWIs make money by using complicated investment structures in different locations, both in their own country and overseas. This leads to these wealthy people needing to navigate complex rules and computations to maintain compliance on a regular basis.
SARS is using advanced technology to make audits more efficient. They now request "relevant material" on provisional tax filings, a task usually done during audits or verifications in the past.
The HWI Unit requires detailed calculations for the submitted return. They also need income and deduction predictions for the next six months. This shows that SARS is increasing its use of AI algorithms to improve its operations, especially for upcoming taxes. SARS is expanding its reach by incorporating AI technology. The focus is on enhancing operations, specifically for future tax-related tasks.
Last year, the tax collector effectively gathered an extra R12.5 billion in taxes from this group.
6. Crypto traders
A newer occurrence is SARS targeting cryptocurrency traders and assets related to cryptocurrency (CA).
South African tax law considers crypto assets as financial instruments under the Income Tax Act. This means that any money earned from trading cryptocurrency may be subject to taxes. You may need to report this income to SARS.
In the past, traders have been reluctant to report their profits. SARS aims to change this behavior.
A prevalent misunderstanding within the cryptocurrency sphere is that a "taxable event" only transpires when a CA is disposed of, leading to the generation of "real world money," also known as a profit or gain in fiat currency.
The tax authorities are likely to consider any sale, exchange (CA for CA), or disposal of crypto assets as a taxable event.
Similar to the process of selling a property, you incur capital gains tax liability when the earnings from the sale of cryptocurrency surpass the original cost. This tax rate is typically lower than if the sale proceeds were considered as regular income.
If SARS sees profits from crypto transactions as income, they will be taxed at individual rates or company rates. Individual rates can go up to 45%, while company rates are at 27%.
7. SMMEs and Company Directors
SARS is presently conducting a trial run of its "SMME Compliance Programme," which is said to be approximately 80% finished.
This initiative aims to proactively rectify non-adherent conduct within SMMEs.
Looking at small and medium-sized businesses alone, their tax contribution has increased by 10% to R466.8 billion. However, many businesses in this sector still do not comply with tax regulations.
The tax collector is also battling against non-adherence among corporate executives.
A new measure to ensure compliance is to hold individuals responsible for the financial management of their companies. Directors must make sure their companies follow tax laws.
SARS is prepared to serve summonses to directors to convey the message.
Under South African law, it is a criminal offence for company directors not to submit their corporate income tax returns and those pertaining to payroll taxes and VAT.
The Tax Administration Act says that directors must make sure their companies' returns are submitted on time. If they don't, they could be fined or even sent to jail.
The initiation of legal actions that may result in prosecution is signaled by the criminal summonses issued by SARS.
SARS South African Revenue Service is now processing a larger scale of information on these taxpayers this tax season through various recent improvements especially as it relates to AI. Taxpayers are urged to get their affairs in order if they haven't yet because SARS is on the hunt for non-compliant taxpayers.
Non-compliant taxpayers are a great revenue source for SARS with all the penalties and interest being charged on outstanding returns.
Do you need a Quote for our Tax and Accounting Services?
Contact our team via any of the following channels to get a proposal for your accounting and tax services:
Subscribe to our newsletters.
Disclaimer:
The views or opinions expressed on this site are solely those of the original authors and other contributors.
The material and information contained on this website is for general information purposes only.
This information is for general purposes only. Don't use this information for making business, legal and tax decisions without consulting a professional.
We do not make any express or implied representation, as to the completeness or accuracy of the information published.
Tax law regularly changes, so any tax information on this site could become outdated.
We are not responsible for any other websites that you may access through links on our website.
ZPA accepts no liability for any loss or damage arising from the use of any material on this site.
