Don’t forget to claim qualifying tax deductions

rain taxes
rain taxes

The new tax year opened on 1 July and with it, the rush to gather the necessary tax certificates and documentation.

Double check that you don’t have to file

Those excluded from having to submit a return are South Africans who earn an income from only one employer and who earned less than R350 000 for the period from 1 March 2014 to 28 February 2015. To qualify, you should also:

– not have conducted any trade for the financial year
– not have received any travel or accommodation allowances
– not have had a capital gain or loss of more than R30 000
– not have received interest of more than R23 800 (for taxpayers below 65) or R34 500 (for taxpayers 65 and over) from a South African source
– not have any assets abroad

“If you fall into this category, you are correct in thinking that you do not have to submit a return. However, by not submitting, you give up the opportunity to claim back some of the tax you have already paid to the South African Revenue Service (SARS),” says Nieman. In many cases, taxpayers are unaware of the qualifying deductions that they can claim back. “This can even apply to those who earn more than R350 000 a year and have to submit tax returns in any case.”

Claim what’s yours

Your contributions to a retirement annuity qualify for a tax deduction, but only if you submit a return.

“The tax deduction can be quite substantial,” she adds. For example, a 35-year-old taxpayer earning a salary of R340 000 per year would pay tax of R63 384 for the 2015 tax year if no deductions are claimed. “If, however, the taxpayer submits a tax return and claims a deduction for retirement annuity fund contributions of R30 000, the tax payable would reduce to R54 084. That is a reduction in tax and a reimbursement from SARS of R9 300 for the year.”

Use eFiling to make it even easier

Although it might sound like an enormous task, a basic return can be submitted within a matter of minutes using eFiling. Taxpayers who are not fully comfortable completing their tax return online but do not feel up to travelling to the SARS offices (and sometimes waiting in long queues), can contact the SARS eFiling call centre on 0800 00 7277. A trained consultant will help you file your return electronically. “Alternatively, you can download useful SARS guides on how to complete individual tax returns from their website,” Nieman concludes.

Pay Your Accountant

Accountant

I want to dispel a misconception that you only have to pay your accountant when you have received your refund from SARS. Your employer does not pay your salary only after they have received their refund from SARS. You do not pay your mechanic for fixing your car only after you received your refund from SARS. You do not pay your utility or medical bills only after you received you refund from SARS.

We are NOT employed by SARS. We are an independent entity filing your tax returns to the authorities using our training and expertise to maximize your refund within the framework of the law. This is how we earn a living, we are human after all and we need to eat too, not only after you received your refund from SARS.

PROOF REQUIRED FOR INCOME TAX RETURNS – INDIVIDUALS

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Filing Season has started on 1 July 2015 and the following documents should, if applicable, be submitted to the accountant who completes your tax return and should be available if the South African Revenue Service (SARS) requests them:

  • 1.IRP5 and IT3 certificates

IRP5 and IT3 certificates reflecting salary, annuities, pension and other income received.

  • 2.Interest received – local and foreign

IT3 certificates reflecting the interest received for the year 1 March 2014 to 28 February 2015 relating to savings accounts, cheque accounts, fixed deposits and other investments.

  • 3.Dividends received – local and foreign

Details and/or proof of dividends received.

  • 4.Bequests and donations received

Details and/or proof of bequests and donations received.

  • 5.Capital gain or loss

The following information is required:

  • Was the asset your residential property?
  • Return on the sale of the asset.
  • Base cost of the asset, i.e. the purchase price if purchased after 1 October 2001, or a capital gain valuation of the asset.

6. Other income

Details and/or proof of other income (e.g. partnership income).

7. Medical fund contributions

Medical fund contribution certificate.

Proof of payment of claims not covered by your medical fund and paid by yourself.

8. Annuity fund contributions

Annuity fund contribution certificates.

9. Travel allowance

If you wish to claim expenses against your travel allowance, the logbook for the tax year is required, together with the following information concerning the vehicle for which you received the travel allowance:

  • Make and model
  • Year of manufacture
  • Purchase price
  • Registration number
  • Kilometre reading on 1 March 2014
  • Kilometre reading on 28 February 2015

If you kept a record of travel costs incurred during the year, proof of the following is required:

– Fuel and oil consumption

– Repairs done

– Insurance and license fees

– Lease/Installment agreement

10. Income protector

Contribution certificates.

11. Donations

Proof of deductible donations.

12. Other information

Details of any other action or event that may influence your tax liability

SARS VAT REVIEWS AND AUDITS

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It has become a common occurrence for vendors to receive a notice for a VAT review from SARS, which requires the vendor to submit supporting documentation in respect of a specific VAT201 return within 21 days. If the vendor fails to submit the supporting documentation, SARS may issue an additional assessment, disallowing the full value of the input tax claimed for that period. The vendor then needs to lodge an objection against this additional assessment and submit the necessary supporting documentation to substantiate the input tax claimed.

When a VAT return is submitted, that return is measured against certain pre-set risk factors on the computerised system of SARS. If certain parameters according to this system are exceeded, a review letter will be issued automatically by the system to the particular VAT vendor. No historical profile is maintained per vendor, and there is no limit on the number of review letters that can be issued. SARS can issue a review letter for each VAT period, even for periods where the vendor had made a payment to SARS.

During December 2011 SARS issued a number of limited scope audit engagement letters to various large companies, more specifically companies in the construction industry. The information requested was to be submitted within 21 days from the date of the engagement letters, which were issued between 12 and 20 December 2011. Many of the companies had already closed for the holidays, and had limited or no staff available. Unfortunately the legislation provides no relief in this regard, except that the notice period should be reasonable. The engagement letters focused in particular on:

  • the VAT treatment of indemnity payments received;
  • bad debts recovered;
  • creditors older than 12 months on which an input tax deduction was claimed;
  • the sale of fixed assets;
  • input tax claimed on deductions relating to “motor car” and “entertainment” expenses; and
  • input tax claimed on supplies that are defined as “financial services”.

Regardless of the care taken by vendors to ensure the correct treatment of VAT claims, errors may still occur. Basic errors made by vendors include the claim of input tax deduction on the use of a rental vehicle for business trips, if that vehicle is a “motor car” as defined. Year-end functions and staff refreshments are defined as “entertainment”, and no input tax deductions may be claimed. It is only when these supplies are consumed or used to make taxable supplies, that a valid input tax deduction may be claimed.

Amongst others, SARS focuses on the correct VAT treatment of the following during the performance of an audit:

  • validity of VAT invoices issued and received;
  • zero rated sales;
  • employee benefits as defined in the Seventh Schedule of the Income Tax Act;
  • insurance claims received; and
  • sale of capital goods.

It is very important that the staff responsible for the keeping of the accounting records should be adequately trained and informed in this regard, and sufficient controls should be in place to avoid these errors.

 

New Customs acts by SARS

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The South African customs environment has seen the introduction of two new customs Acts to replace the current Customs and Excise Act 91 of 1964, as well as a myriad of customs modernization initiatives:

1. Customs Control Act no 31 of 2014

The aim of the proposed Customs Control Act is to prescribe operational aspects of the legislative framework. This Act establishes a control system to be utilized for all goods imported into or exported out of South Africa. It is modeled on the WCO Revised Kyoto Convention. It now follows the scope of the global supply chain.

2. Customs Duty Act no 30 of 2014

The Customs Duty Act on the other hand provides for the imposition, assessment and collection of customs duties. This Act consists of three pillars (the customs trilogy: customs classification, valuation and origin determination) and two critical considerations namely:
Tax-free status; and
Tax-due status
This is a tax-levying Act which will be reliant on the proposed Customs Control Act No 31 of 2014 for its intended application.