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What will SARS do to you if it finds you guilty of tax evasion?

by , 21 August 2014
You have the legal right to arrange your finances and claim tax deductions so you pay the least amount of tax possible.

But you must be careful! There's a very fine line between what's legal and what isn't.

For example, if SARS catches you entering into an arrangement purely to get a tax-free benefit, it'll slap you with penalties of up to 200%.

This is the least of your worries. If SARS finds you guilty of tax evasion, it can seize your assets and even take you to court.

But before it can come after you for tax evasion, it must fulfil these four requirements first...

 

Before SARS can come after you for tax evasion it must fulfil these four requirements

 
SARS can come after you for tax evasion under Section 80A – 80L of the Income Tax Act. But before it can do that, it must prove the legitimacy of its tax evasion claims against you. That's why it must fulfil these four requirements:
 
Requirement #1: SARS must prove that you entered into an arrangement. It must show that this isn't a normal arrangement that your business would enter into on a normal basis.
 
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Legally pay less tax
 
 
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Requirement #2: It must prove that this arrangement resulted in a tax benefit. 
 
Requirement #3: It must prove the sole or main purpose of this arrangement was to obtain this tax-free benefit.
 
Requirement #4: If this arrangement is within a business context, it must meet one of these four conditions:
 
1. You don't normally employ these means and manner;
2. You don't normally create this right and obligation;
3. There's a lack of commercial substance; and
4. There's misuse or abuse of the provisions of the Income Tax Act.
 
If SARS can fulfil these requirements, you're in serious trouble. Ensure it can't by playing by the tax rules. 
 

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