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Follow these four steps to ensure your inter-company transfers are always as they should be

by , 07 August 2014
If you want to beat a SARS auditor, the best thing you can do is think like one. This means looking at your business records the way he would.

This will enable you to find any errors that could land you with hefty SARS penalties at the end of an audit. You should study every part of your business in this way to ensure it stands up to scrutiny.

When you study your inter-company transfers, here's what you must do...

 

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Follow the SARS auditor's steps for examining your inter-company transfers to ensure they're right

 
Step #1: Investigate all transactions including consultation fees, interest on loans, stock transfers, rent paid and sale between related entities. Ensure all of these actually took place within your company.
 
Step #2: Confirm the reason for the above transactions.
 
Step #3: Pay special attention to any taxable income you transferred to any entities that have assessed losses. 
 
Step #4: Identify any possible risks emanating from:
 
- Trading activities (sales/purchases) you allocated to other related parties;
 
- Gross profits manipulated through inadequate mark-ups;
 
- Technical fees that aren't bona-fide. This could mean replacing your capital expenses with revenue expenses or simply transferring income.
 
- Cut-off problems such as purchases you haven't received but which you brought into your account to reduce income.
 
- Disposal of capital assets at an inadequate value to avoid recoupments and ensure a capital profit in the future.
 
If you examine your records according to these four steps you can see where the SARS auditor will pick up errors. Remember, he's looking for anything that you used to try escape or reduce your tax by moving an asset elsewhere in your company. 
 
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