SARS doesn't tolerate non-complaint behaviour when it comes to tax. One wrong move could result in hefty penalties. And, as a result, you won't save on tax.
But you can avoid this with these three tips.
Use these three tips to save on tax
Tip #1: Hold onto your records
Record keeping is the key to ensuring that your tax planning efforts are rewarded over the long term. By keeping accurate records, you'll have nothing to fear from SARS and you'll ensure you survive a SARS audit.
The law requires you keep all records substantiating submissions made in your annual tax return for a period of five years from the date that SARS receives the relevant return, says the Practical Vat Loose Leaf Service.
Remember, it's your responsibility to keep all source documents, such as contracts, cash receipts and invoices.
If you claim expenses in your tax return and you can't provide the source documents on which your claims are based, you could face a 200% fine levied on the tax you already owe.
If you hire a tax practitioner to complete your return, supply him with copies of documents relevant to your return and file the originals. Mark the date on which you submit your return to SARS so you can destroy the relevant documents after five years.
Tip #2: Your tax planning should also take into account Vat implications that may translate into significant savings
This is where significant savings are often overlooked. For example, if you buy immovable property with the intention of:
Even if you didn't pay Vat when you bought the property, for example, you only paid transfer duty you can claim a notional input tax credit. This will be limited to the amount of the transfer duty paid.
Tip #3: Get cash back for giving money away
Get a tax break while doing a good deed! You can claim a tax deduction on any donation you make, in cash or in kind, of up to 5% of your taxable income.
This deduction must be made before you deduct your medical expenses.
But, before you can claim the deduction in your annual tax return, you must be in possession of a receipt issued under Section 18A from the institution to which you made the donation. The receipt must reflect the following:
There you have it. Using these tips will ensure you comply with SARS and help you save on tax.