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Warning! SARS will find you guilty of tax evasion if you can't provide suitable answers to these three questions

by , 27 June 2014
You can structure your tax affairs to pay the minimum amount of tax legally required. This is called tax planning.

That said, SARS won't let you completely avoid your tax obligations. It calls this 'impermissible tax avoidance'. This is when one carries out a transaction with the main aim of getting a tax benefit.

In order to determine whether or not you're trying to avoid tax or get a tax benefit, SARS will ask you these three questions. If you can't answer them properly, you'll be found guilty of tax evasion.

Read on to find out what these questions are.


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You'll be found guilty of tax evasion if you can't give SARS suitable answers to the three questions below

Experts behind the Practical Tax Loose Leaf Service give you three questions SARS asks when it screens your transactions:

Question #1: What was the effect of the transaction?

SARS will look for evidence that you tried to avoid paying tax or to reduce your tax liability when you weren't actually allowed to.

If there are two ways to achieve the same commercial outcome and you choose the one that offers a reduced tax liability, SARS can claim that you're intentionally seeking tax-avoidance benefits.

Question #2: What was the manner of the transaction?

Would a reasonable business mind find fault with the transaction? Was it carried out at arm's length? (i.e. the parties involved are independent of each other, so there's no question about a conflict of interests or benefits for friends!)

Question #3: What was the main purpose of the transaction?

Was it to hide your real intentions to escape the tax net or to score a tax benefit you're not entitled to?

If SARS isn't satisfied with your answers to these three questions, it'll find you guilty of general anti-avoidance or tax evasion.

To avoid the wrath of SARS, don't enter into transactions with the intention of avoiding tax or with the intention to get a tax benefit that's not allowed.


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