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VAT estimated assessments

Since the introduction of the Tax Administration Act (TAA) in 2011, SARS has been empowered to issue VAT estimated assessments against taxpayers who fail to respond to requests for supporting documentation to substantiate VAT returns.  Until recently, lacking the operational capability to issue these estimates, this has recently changed, resulting in SARS now being able to issue these against unresponsive taxpayers.  Whereas VAT vendors have had up to 5 years to submit a request for correction, this will potentially no longer be available to taxpayers presented with such estimates.

Understanding the new timelines

  • Taxpayers issued with a VAT verification letter have 21 business days to submit the documentation required by SARS.
  • For taxpayers that fail to meet this deadline, the VAT estimated assessments will be issued by SARS.
  • Taxpayers will have a further 40 business days to challenge the estimate.
  • Objection and appeal rules are available to taxpayers, in particular those who have submitted the requested documentation within the required period.

Alternatives available to the 40-day deadline

Taxpayers are cautioned to note the deadlines set by SARS in the estimated assessment.  If it is impossible to meet the 40-day deadline, the taxpayer is encouraged to request an extension, as well as request a suspension of payment.

One should similarly exercise diligence in frequently checking on SARS correspondences issued via the eFiling notifications platform.  We cannot over-emphasize the importance of not ignoring SARS correspondence.

Why the move from SARS?

Although SARS has had the legal powers to determine estimated assessments for more than a decade, it has simply not had the operational capability to use it.  SARS had been extremely vocal about taxpayers that frustrate the verification process by failing to respond to legitimate queries on VAT inputs claimed, resulting in protracted VAT queries that consume manpower to ultimately resolve.  Desirous to complete tax matters and be able to “move on”, this is simply a case of SARS now using the legal muscle that it has available to achieve this objective.

Closing thoughts

Taxpayers choosing to ignore SARS correspondences (on any taxation matter) do so at their peril.  The denial of an input VAT claim can have devastating effects on business cash flow.

If your company is selected for VAT verification, we encourage our clients to liaise with their MMS Group contact to ensure a timely response and limited likelihood of a repudiated claim.