SARS Audits: Know your rights
Is there anything worse than the moment when you open that letter from SARS, 'kindly advising you' they're arriving next week to audit your business?
Don't panic! There are set rules and procedures that the SARS auditors MUST follow, to protect your rights even while it audits your business. Here are nine things you should know and put into practice now.
1. SARS must have a reason to audit you
Usually, SARS will audit your business if it needs more information or if you're withholding something. SARS uses four different audit types to identify risks and intervene: a desk audit, a refund audit, a field audit and an integrated audit.
2. SARS must give you reasonable notice
Yes, SARS does have the right to access or request any information from you, in its mission to administer tax law. And this includes the audit process. But it MUST give you reasonable notice if it's going to conduct a field audit or an integrated audit. This is 21 days.
3. You can — and must — refuse to comply if SARS doesn't put it in writing
SARS must give you its audit notice in writing. It must tell you not only when the audit will take place, but also the type and purpose of the audit. Normally, it will also give you an extensive list of the documents that you must collate and make available for the auditors, as well as how far back the auditor will go in your records (usually between three and five years, ending with the most recent tax year assessed).
Statistics show: Your company will be audited at least once every five years! Are you ready for your next SARS VAT audit?
Thanks to Dee's How to Survive a SARS VAT Audit, it's easier to come out of a VAT audit unharmed by SARS than you ever thought possible!
Click here to survive a SARS VAT Audit.
If it doesn't give you this information, then ask for it.
4. Always request a letter of authorisation and ID card
Under both the VAT and Income Tax laws, only the Commissioner has the right to conduct and authorise audits. He'll give his auditors a letter of authorisation, vesting them with the right to carry out the audit in his name. Make sure you ask to see this letter, when you're given notice of an impending audit.
Every South African tax law explained by our experts
The Practical Tax Loose Leaf Service offers you:
Click here for more details
All the definitions and legal regulations, useful advice, exceptions to the rules that help you slip through the legislative jungle of taxes.
Case studies and practical examples that show you what elements you should consider for your taxes to be perfect.
Red flags you need to watch out for and the penalties you'll face if you don't respect them.
Sample templates at your disposal, ready to be filled in, customised and printed.
Without this letter (or a court order) the auditors may not audit your business!
5. Follow-up queries MUST be made in writing
If after auditing you (or even during the audit) the auditors have any questions or follow-up requests for more information, they must put it into writing so that you can respond in writing. This prevents misunderstanding. It also documents the proceedings and timelines so that there's a paper trail.
6. Insist on a pre-assessment meeting with SARS
Once the audit has been completed, insist on a pre-assessment meeting with SARS. This is your opportunity to clear up any misunderstandings or errors BEFORE SARS raises an assessment against you. Once it's been raised, it's too late!
7. SARS has three years to impose a revised assessment
The key to getting through a SARS audit is preparing for it before your unwelcome guests arrive
That's why we compiled How to survive a SARS tax audit.
This guide reveals audit secrets like:
I'm sure you can see how tips like these could reduce the headache of a SARS audit significantly.
What risk areas SARS' auditors are interested in
4 Expenses SARS will target during an audit
What SARS will consider about your transfer duty
The 9 risky strategies used to avoid tax liability
11 Questions you'll be asked about your cash flow
And so much more…
According to our laws, SARS has three years after an audit or assessment in which to issue you with a revised assessment.
8. The onus of proof is on you
Bad news for you is that if SARS finds evidence of tax evasion, they can cite Section 103(4) of the Income Tax Act, and presume you guilty until YOU can prove otherwise. That's right, the onus of proof will fall to you.
9. Spot your audit risks early
When they look for risks, SARS will make a comparison between your annual financial statements, VAT returns and tax returns. They'll do the same with tax certificates issued, versus disclosures made on the returns. They'll also compare other businesses in your sector, to spot any risks.
SARS will also identify risks by asking specific questions on tax returns and by sending out payroll and transfer pricing questionnaires. They look out for any large changes in ratios that can be measured in your annual financial statements, such as gross and net profit margins, revenue, financing options and connected parties disclosed from year to year.
Other comparatives are made between revenue on your annual financial statements and your VAT returns for the same year, as these amounts should be the same.
I don't know anyone who enjoys being audited. But if you know what your rights are and what to expect from an audit, you'll be much better prepared.
Note: 4 of 5 votes