Here are eight common situations where SARS will carry out a Capital Reconciliation
Now, from time to time, SARS will ask you for a statement of your assets and liabilities in what is known as a Capital Reconciliation.
SARS uses this information to determine whether or not you are disclosing all of your income.
Having said that, here are eight common cases that call for a Capital Reconciliation:
If you always declare a low level of income from a business that appears to be profitable.
If you accumulate assets, such as residential property and luxury vehicles, without any indication of any alternative, and legitimate, form of income.
If you're used to living an expensive lifestyle of frequent holidays, lavish entertainment and high costs of living.
If there isn't enough growth within your income to maintain a high standard of living. This takes into account the fact that the cost of living increases. Also, this is a case when there's no evidence of loans by you.
You earn consistently low business income without any reduction in your assets, include cash and bank account values.
A comparison between drawings and basic living expenses, where your drawings are not enough to cover your basic living expenses.
You submit a lower estimate of living expenses to SARS compared to any of your previous estimates.
There's a high growth in your net assets but very little income declared.
It's worth noting that Capital Reconciliation is not an exact science and so it results in many disputes going to the Special Tax Court.
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