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Three questions SARS will ask you when it investigates you for anti-avoidance

by , 12 June 2014
If SARS suspects you haven't adhered to its anti-avoidance rules, it's going to investigate you. This will involve a lengthy process of SARS looking into your finances and checking if you've entered into any agreements just for the sake of getting a tax benefit.

And because SARS has to prove you didn't play by the rules, it's going to ask you some serious questions.

Here's what they are so you can ensure you have the right answers...

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SARS will ask you these three questions if it thinks you didn't play by the rules

SARS will have some tough questions to ask you if it thinks you haven't played by the rules. According to the Practical Tax Loose Leafthese are the three questions it'll ask you:
1. What was the effect of the transaction?
SARS will try look for evidence that you tried to avoid paying you tax or get a tax deduction it doesn't actually allow you to claim.
If there are two ways to achieve a commercial outcome and you go for the one that gives you a tax allowance, SARS can claim you're intentionally looking for tax-avoidance benefits.
2. What was the manner of the transaction?
Would a reasonable business mind think there was something wrong with this transaction? Did two independent parties carry it out so there's no question about a conflict of interest? 
There's one more questions that SARS will need an answer to...
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The final question SARS will ask to determine if you broke anti-avoidance laws

3. What was the main purpose of the transaction?
Did you complete this transaction so you could hide your real intention to avoid your tax obligations or to get a tax benefit?
SARS will find you guilty of general tax avoidance if you can't give it suitable answers to these questions. So rather play by the rules and give SARS truthful answers.

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