SARS COMMUNICATION TO STAKEHOLDERS:
- PIT: ESTIMATED ASSESSMENTS
- EMPLOYEES’ TAX: IMPOSITION OF ADMINISTRATIVE NON-COMPLIANCE PENALTIES
SARS issued a communication on Estimated Assessments and Penalties. Click here to read more.
Estimated assessments for individual income taxpayers
In the previous issues of the Tax Practice: Weekly Highlights, SAIT addressed the issuing of estimated assessments following the conclusion of the Filing Season, specifically, estimated SARS in instances where the taxpayer did not submit their tax return by the 15 February 2021 extended deadline.
Since the issuing of estimated assessments is still relatively new, we reviewed the position of a taxpayer that received an ‘auto-assessment’ but did not submit their tax return before the deadline. Read the review here.
In the communication, SARS addresses a number of questions flowing from having issued auto original estimated assessments. We provide more insight below:
- SARS: The estimated assessments have been issued in instances where a taxpayer had received an SMS that they were eligible for “auto assessment” and had failed to action by either accepting or first editing the return and then submitting.
- SAIT: Accepting an ‘auto-assessment’ means that the taxpayer stated that the information is sufficient to represent a complete and true tax return. An acceptance does not constitute a ‘submission’ of a return, rather, the tax return process is skipped. Instead, the third-party data is sufficient to go straight to the draft IT34 (the ‘auto-assessment’). Upon acceptance, the IT34 is moved from ‘draft’ to ‘final’.
- SARS: It must be noted that according to the public notice for submission of returns, a taxpayer is not required to submit a return if (1) selected for auto assessment (by receiving an SMS); and (2) the information at disposal of the Commissioner is complete and accurate. (our emphasis)
- SAIT: “The information at disposal of the Commissioner” would be complete and accurate if the third party data reported to SARS represented all the income streams of the taxpayer and was entirely accurate, and provided there were no exemptions or deductions applicable. In such instances, the taxpayer would be in a position to accept the ‘auto-assessment’ as complete and accurate.
- SARS: Should the taxpayer or tax practitioner submit a tax return after receiving the estimated assessment, the return will be routed for manual intervention and will be verified by a SARS official. Thereafter, the taxpayer will be informed of the outcome in due course. Please note that the usual turnaround times may be outside the agreed service charter timelines.
– A taxpayer that received an estimated assessment, must still submit a true and full return to replace the estimated assessment and to allow the taxpayer to dispute any of the information on the estimated assessment.
– The taxpayer remains eligible for administrative penalties until the tax return has been submitted.
– Once the tax return has been submitted, it will be routed for manual intervention and will be verified by a SARS official. Ordinarily, tax returns are verified electronically and a taxpayer may receive feedback within minutes. Only when a risk engine picked up a matter of interest may there be manual intervention.
– In the case of tax returns following estimated assessments, SARS has stated that the usual turnaround times may be outside the agreed service charter timelines.
Employees’ tax: Imposition of administrative non-compliance penalties
The period of submission of the EMP501 returns and the related IRP5 certificates by employers is anticipated to be gazetted for 1 April – 31 May 2021.
In terms of paragraph 14(6) of the Fourth Schedule of the Income Tax Act 58 of 1962, if an employer fails to submit the EMP 501 return by the relevant due date, the Commissioner may impose an administrative non-compliance penalty for each month that the employer fails to submit a complete return.
The penalty can be charged up to 10% of the total amount of employees’ tax deducted or withheld, or which should have been deducted or withheld by the employer from remuneration for that recon period.
SARS has taken a decision to impose this penalty for 2021/02 EMP501 return for employers who have not submitted the return by 31 May 2021.
However, the penalty will be imposed at 1% for each month that the employer fails to submit the complete return. For example, if the return is outstanding for three months, SARS will impose 1% penalty per month and a notice of penalty assessment (EMP 301) will be issued at the end of every month.