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SARS about to make more transactions reportable

THE South African Revenue Service (SARS) has expanded the list of transactions that will in future have to be reported to the revenue authority, in a draft public notice on which the time to comment ended last week.

SARS acting commissioner Ivan Pillay said in the notice the arrangements have certain characteristics that might lead to an “undue tax benefit”, and that the list served as an extension of existing reportable arrangements in the Income Tax Act and the Tax Administration Act.

Cliffe Dekker Hofmeyr tax director Ruaan van Eeden said on Monday that the low thresholds set for the transactions would increase the number of reportable transactions to SARS. He said the changes would increase the administrative burden of business.

SARS would receive more information about what was happening in the market to contemplate future legislative changes.

“It is an onerous requirement, but I can understand where it comes from. It was part of an effort to protect the domestic tax base,” Mr van Eeden said.

According to the notice issued by Mr Pillay, any arrangement where fees of more than R5m were payable by a South African to a foreigner for any technical, managerial and consultancy services and the foreign entity had an office in South Africa and a bank account in the country and was registered as external company in terms of the Companies Act, had to be reported to SARS.

Mr van Eeden said that the threshold for these cross-border transactions was very low, with several transactions of this nature happening daily.

Failure to report the transaction could lead to a penalty of R1m.

The revenue service also sees the buy-back of shares in certain circumstances from one or more shareholders for more than R10m as high risk to the tax net.

Transactions which gave rise to a foreign tax credit if the tax credit was more than R10m and any arrangement where a person acquired the controlling interest in a company that had or might have an assessed loss of more than R20m also posed a risk to the tax net.

Mr van Eeden said this was part of an “early detection mechanism” and would not necessarily amount to an income tax or a value added tax (VAT) liability.

However, every reported transaction would have a reference number which must be reflected in the taxpayer’s income tax returns.


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