South Africans were shocked to find money in their bank accounts from South African Revenue Service (Sars) without having done their tax returns this year.
In fact, Sars introduced the process of tax auto-assessments where they pre-populate your tax returns - in 2019.
To do this, Sars relies significantly more on third-party data to assess more than three million individual taxpayers. While the tax auto-assessment process may make your life simpler, it does not reduce you obligations to Sars.
Donaldson Madungwe, senior tax consultant at Tax Consulting SA, said the auto-assessment “is intended to remove the need for taxpayers to travel to branches for submission of their tax returns. Additionally, the process was also introduced to increase the number of tax returns filed to Sars".
For those who are confused about it, Madungwe answers the most asked questions about the auto-assessment process below:
1. What is the tax auto-assessment process?
This is where Sars receives data from third-party providers such as employers, medical schemes and retirement annuity funds. This information from the third-party providers is then pre-populated on the taxpayer’s tax return.
However, information like additional income will not be included. Then Sars will issue the taxpayer with an auto estimated assessment based on the data.
2. What should the first-time taxpayer know about the auto-assessment process?
For the 2022 tax year, instead of taxpayers having to accept the auto-assessment for submission, Sars will now automatically submit the assessment and notify the taxpayer via SMS.
Madungwe said if the data on the assessment is incorrect, the taxpayer will then have 40 business days to make a request to Sars to prepare and submit a corrected tax return.
3. How does the process work?
Here is a step-by-step look at how the new system works:
– Sars will submit the assessment based on the information gathered from local employers, medical schemes, financial institutions, and other relevant institutions.
– The taxpayer will be contacted via SMS using the contact details on your tax profile and the RAV01 form.
– If the data on the assessment is incorrect, the taxpayer will then have 40 business days to make a request to Sars for them to prepare and submit a corrected tax return.
4. To whom does the auto-assessment process apply?
There are no public guidelines as to who are the specific taxpayers to which the assessments are applied to.
However, many local tax residents who “supposedly” do not have any other income, have been subject to being auto-assessed by Sars.
A warning
Madungwe said when it comes to tax in South Africa, Sars correctly follows the principle that ignorance is no excuse in law. Negligence in failing to properly comply with one’s tax obligations is now considered a tax offence, making it easier for Sars to prosecute.
“For example, a failure to notify Sars of a change in registered particulars, or any material facts, or to submit a return as required, may result not only in penalties and interest, but also a fine or imprisonment for up to two years,” Madungwe said.
If you are not sure if your contact details are up to date with Sars, taxpayers need to get a tax diagnostic done on your tax position to ensure their compliance.
Expatriates need to ensure that their foreign income has been properly declared.
If you are a non-resident for South African tax purposes (that is not liable for South African tax on foreign-sourced income), you need to be sure that your status properly reflects on the Sars system.
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