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Six facts you need to know about SARS audits

by , 26 June 2014
'SARS audit': These two words often invoke fear and resistance.

One of the reasons for this is that some business owners don't have the correct facts regarding SARS audits.

To change this and take the fear out of audits, our experts have gathered six important facts about SARS audits you need to know.

Read on to find out what they are so you'll know why you're audited.

Six must know facts about SARS audits

Fact 1: SARS has the power to audit you at any time, without notice.

Fact 2: The taxman adopts a risk-based approach when it chooses who to audit. By doing this, it hopes to increase tax compliance.

The experts behind the Practical Tax Loose Leaf Service say, if for example, SARS notices a sudden drop in your gross profit it could conduct an audit on you because it believes there's a chance you're skimming cash off your top-line to reduce gross profit and pay less tax.

SARS also identifies risks by asking specific questions on tax returns and by sending out payroll and transfer pricing questionnaires. It looks out for any large changes in ratios that it can measure in annual financial statements, such as gross and net profit margins, revenue, financing options and connected parties disclosed from year to year.

We're not done with SARS audits. Here are four more facts you need to know

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Four additional facts about SARS audits

Fact 3: SARS conducts audits as a way to stop tax evasion and avoidance schemes, for example, if it believes you're laundering money.

Fact 4: SARS audits are there to encourage voluntary compliance. If an auditor picks up that you've made a mistake, you'll be liable for more tax.

Fact 5: SARS conducts field audits in line with the identified risk. For example, when your company's Vat claims don't add up.

Fact 6: SARS is consistent in its audit processes. So no matter who's auditing you, you get the same treatment from the taxman.

The bottom line: If you're honest with your tax affairs you'll have no reason to fear SARS audits. So don't fear audits, instead, see them as a tool that's in place to ensure everyone adheres to tax laws.

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