SARS (South African Revenue Services) is closing in on individuals who have purchased pricey cars or property in recent years if their declared income tax does not match this lavish lifestyle.
Recently, finance minister Tito Mboweni warned that SARS will be zoning in on individuals who have “wealth” and “complex financial arrangements”. The first group of individuals in this process have already been identified and would have received their SARS communication this past April.
Wealthier taxpayers may have received communication regarding a review of their international holdings and have been requested to complete a detailed lifestyle questionnaire. SARS is now looking into investments in foreign assets of high-net worth taxpayers, going as far back as 2014. These investigations are being conducted on the basis of information shared by overseas financial institutions as part of CRS (Common Reporting Standards), which compels institutions and tax authorities in 87 jurisdictions to share information.
It was also announced that SARS would be establishing a unit dedicated to the compliance of wealthier taxpayers and has asked for budgetary funding of R3 billion to be allocated, to help expand the units’ specialised audit and investigative skills. With this, SARS will be able to successfully conduct more lifestyle audits and harness alternative information sources to investigate discrepancies between individuals’ declared income tax in comparison to spending. This may include the use of NaTIS (National administration Traffic Information System) to detect owners of new and expensive vehicles. Property registries will also be utilised to identify taxpayers who have purchased expensive homes.
These questionnaires have already put some taxpayers on edge due to their detailed questions, including questions on how much is spent on specific groceries, such as meat. Furthermore, these letters urged taxpayers to make voluntary disclosures if they have been dishonest about their foreign income and interest.
It has also been advised that individuals under these investigations should secure an independent review of their disclosures to confirm their compliance, as the potential penalties for non-compliance are extensive. Should you require quality advisory of your income tax, feel free to contact our expert team.
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