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Play it safe with SARS: Ask yourself these two questions before you start any transaction

by , 12 June 2014
Every business owner hates the fact that he has to pay so much tax. But you probably hate the thought of getting into trouble with SARS even more.

The reason for this is SARS' punishments are serious and can involve hefty penalties, full audits, seizures and possible jail time.

So if you're worried about getting on SARS' bad side, ask yourself these two questions before you start a transaction...

*********** Product endorsement  ************
Avoid 200% tax penalty
 
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SARS will punish you if you break its anti-avoidance rules

Avoidance is when you try to use every possible tax deduction or tax allowance to avoid your income tax obligations. 
 
To prevent you from doing this, SARS has put anti-avoidance rules in place. These prevent you from entering into agreements just for the sake of a tax benefit.
 
If SARS catches you out for avoidance, you'll face a 200% penalty or even imprisonment. 
 
So, rather play it safe and ask yourself these two questions before you enter into an agreement...
 
*********** Reader's choice  ***************
Be invisible to SARS
 
6 reasons SARS will audit you...
 
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Ask yourself these two questions about your agreement to ensure you stick to SARS' anti-avoidance rules

To ensure you stick to anti-avoidance rules, ask yourself these questions:
 
1. Did I enter into an arrangement?
When talking about anti-avoidance, an arrangement is any agreement or transaction that's main aim is getting a tax benefit.
 
2. Does tax law prohibit this transaction?
The Practical Tax Loose Leaf says tax law prohibits a transaction if it:
- Is an abnormal transaction; 
- Misuses or abuses the provisions of the Income Tax Act; and
- Lacks commercial substance.
 
If you answer 'yes' to these two questions, it means you're breaking anti-avoidance rules are using tax benefits and deductions you don't qualify for. 
 
Don't continue with an agreement if you've answered 'yes' to these two questions. If you do, SARS will catch you.
 


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