SARS: A Look At The Benefits for Small Business – Part 2/3

Welcome back to another Did You Know? chapter where we breakdown everything business and finance simply for SMEs to understand. We continue our look into SARS and how small businesses benefit from it as well as many other fun things that come with SARS to further your knowledge base about how it all works.

Let us recap on Part 1 if you have not read it yet click here to immerse yourself so that you can follow along, we listed the main tax revenues of South Africa that every individual and business owner has to pay to the government to maintain the country’s infrastructure, but we are going to in this chapter look at what SARS offers to make the process of submitting your taxes easier to stay compliant.

SARS Functionality:

• Collection and administration of all taxes types;
• Protect against the illegal importation and exportation of goods, duties, and levies;
• Facilitate trade, and advise the Minister of Finance on all revenue matters.

Debunking Common Misconceptions about SARS:

• Can SARS arrest me?

 Yes, but this is a very last resort.  If it appears during a verification, inspection, or audit that a serious tax offense has been committed the matter is referred for criminal investigation under the Tax Administration Act – the taxpayer can then be regarded as a suspect and SARS is obliged to investigate with due recognition of the taxpayer’s constitutional rights as a suspect in a criminal investigation. Only once SARS has laid a criminal charge, can the taxpayer be arrested, detained and the accused person can invoke the full protection afforded by the fair trial rights under the Constitution.

• Can SARS take money out of my bank accounts?

Yes, SARS can take money from your bank account personal or business.  Taxpayers should be aware that if you have outstanding tax debt SARS has the power to instruct your bank to pay the outstanding funds – this is done via a 3^rd party agreement.  This instruction to your bank is most times effected without notification (depending on the relationship you have with your banker). Chances of this happening increase especially where a Final Demand has been issued and no action has been taken by the Taxpayer to communicate with the agent in charge of the case.

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• Can SARS close my business and seize my assets during liquidation?

No, many people fear SARS and think that they have magical powers, but SARS debt is written off in a liquidation. SARS does not have any special powers. There are a few things that make SARS different, but in general terms, SARS is just a creditor like any other during liquidation.

The only SARS debt that is not written off in liquidation is any taxes that are owing under the Customs and Excise Act, because, in terms of this Act, the manager of the premises of the business is personally liable to pay these taxes. All other taxes, which include VAT, PAYE, and Income Tax are written off.  SARS cannot collect these taxes from the directors of a Company or members of a Close Corporation unless the directors or the members signed an Acknowledgment of Debt document in which they assumed personal liability to pay the taxes on behalf of the business.

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• Can SARS blacklist me?

Yes, they can!  Since 2018, SARS has appointed 8 different debt collection agencies to recover over R16.6 billion in back taxes from taxpayers who are not compliant with SARS as well as big businesses who use major tax avoidance strategies to not pay their corporate taxes.

How SARS Does It

“In doing our work, we are guided by the code of conduct and the principles of SARS values of accountability, fairness, honesty, integrity, respect, transparency and trust”.

SARS encourages compliance with tax and customs laws to ensure that everyone pays their fair share. They do so in a manner that does not unduly impede trade, economic growth, and development by imposing an excessive and unfair administrative burden on taxpayers, traders and businesses and to achieve compliance most efficiently and cost-effectively.  Their approach to promoting compliance is based on three principles. Taxpayers must be made aware of their obligations, make it easy to meet them, and act against those who break the law.

SARS List of Services

• SARS eFiling Functions:
  • Enquire on outstanding debt and how to make payment
  • Enquire on tax returns outstanding
  • Tax Compliance Status
  • Notice of Registration (IT 150)
  • Filing Income Tax Returns
  • Update personal details (including Bank Details)
  • Request Statements of Account
  • Register for Personal Income tax (Completed by your employer on eFiling)
  • Submission of Supporting Documents for an audit case
  • Progress of an audit case
• e@syFile
  • What is it? This portal was designed to help taxpayers (who are employers or payroll administrators) working with SARS  to quickly, easily, and conveniently manage their employee tax affairs.
• Tax Exempt Organisation
  • What is it? Organisations structured and operated exclusively for religious, charitable, scientific, testing for public safety, literary, educational, or other specified purposes and that meet certain other requirements are tax exempt.
  • Types of Tax Exempt Organisations are:
    • Charities
    • Churches and Religious Organisations
    • Private Foundations
    • Political Parties
    • Social Development Organisations
  • Embassies
    • What is it? The primary purpose of an embassy is to assist South African citizens who travel to or live in host countries. The Department of International Relations & Foreign affairs also interviews citizens of the host country who wish to travel to South Africa for business, education, or tourism purposes.
  • Venture Capital Companies
    • What is it? Venture capital is a form of funding that is provided to new, small, or emerging businesses that are considered to have high growth potential.  Venture capital companies invest in exchange for ownership in the business they invest in.

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• Business Trust
  • What is it? A business trust is defined as a trust where the trustee uses the trust assets to do business for profit to benefit the trust beneficiary or to further the aims of the trust. The trust protects your assets against personal creditors because the assets of the trust belong exclusively to the trust.
• Tenders
  • What is it? An invitation to tender is a formal, structured procedure for generating competing offers from different potential suppliers or contractors looking to obtain an award of business activity in works offered by Government departments or big business.

SARS is a complex beast and the purpose of this chapter is to highlight what SARS is capable of doing for small businesses in South Africa as well as how they are building processes that can assist existing and future entrepreneurs to excel in the growth of the South African economy.

In Part 3 we look at the last and final function of SARS and how this all ties into what small business owners in South Africa can do to grow their product and service offering as well as thinking of economy of scale.  In short, looking at other markets to drive economic prosperity.  Stay tuned to the Did You Know? blog and keep it real.