Category Archives: Company Tax

Tax Dispute Cases Successfully Resolved!

Tax Feb

 

 

Many tax payers think that SARS, assessments and action cannot be challenged! Whilst most tax assessments are correct, it is a fact that SARS can, and do make mistakes. SARS will also overlook, wrong, inflated tax returns, and not audit, if the amount assessed is to their benefit.
Here follows some matters and disputes that were settled, to the advantage of the taxpayer client. For privacy, names of taxpayers are withheld.
Tax payer A- S11(a) Income Tax Act, allowable deductions
A taxpayer was assessed for R400 000.00. Deductions were not processed, we objected, corrected the return, and the tax debt was reduced to zero. In fact, the final result was a refund due to taxpayer of R20 000!
Tax payer B- S11(a) & S11(e)
The taxpayer received a final demand of R300 000.00 and a threat of legal action.We identified the following; Section 11(a)
(a)”Expenditure and losses actually incurred in production of income, provided such expenses are not of a capital nature.”
b) Municipal charges to the value of Rx, overlooked/included somewhere in the calculation. Either way it is not debatable. The municipal expenses were incurred, to derive income for the “rent collection, property investment company.
c) Project and contractual expenses.Information was furnished in this regard, but excluded, or only a portion allowed. It was not of a ‘capital nature”,
d). Wear and tear(Section 11e) read together with Practice Note 19. Completely overlooked, and “depreciation’’ used to calculate wear and tear, in complete violation of the Practice Note 19 Prescription. Our wear and tear calculation was Rx.
Taxpayer C-Judgement, unfairly obtained
A tax return was wrongly completed, resulting in a final tax, of R150 000.00. SARS obtained a judgement against the taxpayer.On perusal of the tax return, we noticed that the assessment was not relevant and the taxpayer was not liable. We duly objected and the amount was reversed! Judgement against taxpayer, rescinded!!
Tax payer D-(a) Income Tax Act, allowable deduction
A Taxpayer was assessed for R1000 000.00. All deductions overlooked, we motivated our case for deductions to be claimed, all of them were allowed, and the corrected, resulted in a nil assessment!
Tax payer E
Same scenario as above, but the amount was R500 000.00
Tax payer F-S179  of The Tax Administration Act Challenged
A bank was appointed as an agent in terms of section 179 of the Tax Administration Act.
R308 000, was debited, from taxpayers account. After Sars could not prove this debt, we advised our client to withhold taxes until SARS could explain this anomaly. Additional tax debt, shot up to R430 000.00 Total Liability, R738 000.00. After numerous letters and threats of High court action, SARS was forced to investigate its actions. The R308 000 was offset against the R430 000 debt. SARS had to concede the R308 000 debt never existed!
Taxpayer G-Capital Gains Tax
After a court settlement for a members share, the taxpayer was audited and slapped with a R3million tax bill. Our investigations revealed that ,whilst SARS correctly assessed the “capital gain” of the share gain, and understated income, SARS “double taxed the capital gain, and did not use the applicable under tstatement penalty prescriptions. Intense number crunching and negotiations resulted in SARS reversing the double taxation, and reducing the understatement penalty. Final reduction, R2000 000!

These are only a few examples. Space donot allow me to elaborate on all our cases.

If you find yourself in a similar predicament, don’t hesitate to contact us. We can take on any tax matter with the seriousness it deserves.
sgafc@mweb.co.za

Tax Compliance and Complex Tax Cases

Inc Tax

Tax Compliance and Complex Tax Cases

Tax Morality?

A “guilt trip” stick that government is whipping taxpayers with. Bullshit, we at The SGAFC Group say. Most people are law abiding, and gladly comply with their taxes.

Much research has gone into the necessity of taxes, and whether taxation of society can be justified. I tend to agree with such assertions, and believe that various  societies will revolt against these taxes.

The current status quo ,regardless , of your or my opinion, is that taxes should be paid! In the US, some proof has been availed that taxes are not legal. In South Africa , however, lawmakers covered their asses with laws in the Supreme Law,-The Constitution, The Income Tax Act and The Tax Administration Act. So there is just no getting away from taxation. New shitty laws , like e-toll and other levies can be challenged, and mass boycotts are encouraged. But I will NOT encourage individual negligence with Taxation Laws, for anyone, since SARS and the NPA , are on a conviction spree, and cannot wait to make examples out of errant taxpayers! A MUST READ , CLICK HERE!

Tax Law

Tax Law in South Africa is complex. In fact the number crunching involved in unraveling SARS Tax assessments and computations can be daunting. Not impossible. This unfortunately makes compliance expensive. Whilst certain electronic mechanisms like SARS Easy File, and SARS Efiling is in place , “for your convenience”, lay taxpayers will not be able to decipher new “entries” on tax forms like “journal payments, and “recon assessments”, which I suspect is a ruse , to befuddle taxpayers, and inflating taxes..

The situation has become so severe, that tax consultants and accountants, refuse to challenge tax cases, and just advise their clients to pay up.  I am shocked to learn that advisors at the big four audit firms, with all the expertise and resources are turning away legitimate  tax cases.

Our Passion

Out of a passion for helping beleaguered taxpayers, our firms Tax Division(SGAFC Group), is dedicated to assist taxpayers. We have a trained eye for serious flaws, in SARS tax computations, as well as violation of taxpayers rights. We can proudly state that we have and are in the process of resolving(winning), difficult Tax Cases that well meaning, established tax firms were unable to resolve. We make extensive use of Objections, Appeals, Tax Ombudsman, Tax Board, Tax Courts  and general courts. I re-iterate. Solving your tax matter, is not “hard work” or “stressful”. We enjoy it!(money is secondary, our love for the work comes first!!)

Stay with current tax advisors

You need not abandon your current advisors, we only interested in assisting with a specific matter. Areas covered;

  • Vat reconciliations
  • Vat Audits
  • Vat Assessments
  • PAYE
  • PAYE Audits
  • Income Tax Assesments
  • IT34(Assessments) queries
  • Legal defence for tax cases

 

For consultation we offer the following

  • A fully equipped office, with Board Room Facilities, Video conferencing, Wi-Fi and IT/ telecommunication equipment.
  • Meeting or representing you  at SARS offices  in the major centers, or  at court.

Expertise:

 

TAX SAVINGS WITHOUT LOOPHOLES!

“Loopholes” are gaps in tax legislation, which are used by tax practitioners, to circumvent tax laws, therefore making it easy to reduce tax. Beware; loopholes are a tightrope between tax avoidance (legal) and tax evasion (illegal) method of reducing taxes.

 

Over the last ten years or so, The South African Revenue Service (SARS) has clamped down on loopholes, thus making it next to impossible to use them. Rigid taxation laws can lead to greater risk, as far as the taxpayer is concerned. In short, the risk of using a particular loophole outweighs the benefits to be derived.

 

The question is, how does a taxpayer (company or individual), save taxes? Of course the answer is not easy. And every tax practitioner might have a different answer to this question.

 

Our advice is twofold.

 

  1. Proper tax planning/administration
  2. Vigilance

 

 

Proper tax planning;

Start with the basics, and maintain proper records for all financial/business transactions. As a small business or cash strapped individual, you might lack the resources for a tax department/ tax practitioner. So do it yourself, by recording transactions and filing and storing your own documents.

 

From these records you can determine the following;

  • Does the business qualify as a Small Business Corporation, taxable at a lower rate?
  • Were any new machinery purchased, which qualifies for legal tax deductions.
  • Can you claim wear and tear rates on all assets purchased?
  • Revalue assets never recorded on the books, and claim the appropriate wear and tear.
  • Reclassify as many assets used for business purposes and claim wear and tear allowances.
  • Do you need staff? Rather opt for a Learnership, and claim the appropriate deduction from your taxes.
  • Finance charges on HP arrangements, or lease payments should be checked, and considered for tax deductions.Read on Section 11(a) to (g) of the Income Tax Act, and you will notice that any expense in production of income is tax deductible. It might be that these expenses were not included on your expense accounts, but could legitimately been used in the production of income.
  • Pay provisional taxes on time, to avoid unnecessary interest and penalties, as well as benefiting from possible refunds from SARS.Vigilance

     

    It is surprising how taxpayers pay more tax, by overlooking simple errors on their tax assessments, as well as not staying up to date with pronouncements, such as the Budget speech and interim reports from SARS.

     

  • Review your tax assessments for mistakes. Who said SARS is perfect? They make substantial mistakes on assessments.
  • Compare tax assessments received, to a provisional calculation prepared prior to submitting a return.Here follows examples of common mistakes made by SARS on Assessments: 
  • The rebate has not been credited to the tax assessments.
  • A tax loss reflects as a taxable profit.
  • PAYE and SITE has not been credited to the tax assessments.
  • Provisional Tax paid, has not been credited to the tax assessments.
  • Income has mistakenly been included into the assessment, which the taxpayer has no proof for.
  • Interest and penalties have been raised, whereas the tax have been submitted and paid on time.
  • Tax deductions claimed have been overlooked.The list goes on. Contributing to the problems is a lack of skills at the South African Revenue Service. The taxpayer should either acquaint him/herself with tax procedures (Via SARS website and e-filing), or procure the services of a tax expert. It will have to be one of the two, other than that big trouble will inevitably be faced.Be aware that you can object or appeal against wrong taxes, and request that your tax affairs be reviewed.

     

    Through proper tax planning and vigilance, you can save yourself the risk of court action, and substantial costs, and taxes! The best way out is preparing/budgeting for taxes, and then paying, what is only due, nothing more!

    Let SARS pay for consultation, Not YOU! Were you overtaxed, but your cash flow is low?Solution:  Service at No COST to You. We negotiate a % of Tax refund!Email: info@sgafc.co.za

     

    Sean Goss

    www.sgafc.co.za

    email: info@sgafc.co.za

     

SARS Update : DO YOU HAVE A TAX JUDGEMENT AGAINST YOUR NAME?Is Section 91-Civil Judgement, of the Income Tax Constitutional?

We aware that this act is draconian, and quote some case law and opinions on it;

“There is some doubt as to whether this provision, which allows for the unilateral entering of a judgement against a taxpayer, without notice, complies with Chapter 2 the Constitution of the Republic of South Africa, Act 108 of 1996, in particular s9, 33 and 34JTLR 75, the taxpayer of the case disputed on the facts of the case SARS’ power to invoke the certificate procedure. In this, Singh was not granted an audi prior to the procedure being invoked, and his constitutional right to administrative action which is lawful, reasonable and procedurally fair as guaranteed under section 33 of the Constitution was violated.The Court was asked to rescind the judgement obtained by filing of the certificate on the basis that the vendor was NOT given notice of the assessment prior to the filing. A constitutional issue is raised to the effect that failure to give notice to the taxpayer of the assessment before the certificate procedure was invoked, infringed upon the vendor’s right to a fair administrative action guaranteed under section 33 of the Constitution and section 3 of the Promotion of Administrative Justice of 2000. “

We support SARS right to collect revenue for the state, and we not arguing against any of their other rights , but the Constitution reigns supreme!

Making Taxes Easy for Small Business

Many economic scholars see small businesses, to be the largest contributor to economic growth and employment creation on the planet. The ratio of small business, to big business in different countries varies. It is predicted that small business as a collective, will eclipse big business as a force in the economic landscape in future years. Be that as it may, fact remains that small business, is crucial to every countries economic development.

Limited research however, has been conducted on a variety of issues affecting small business. The global small business failure rate remains high, at an unacceptable rate of 80%(some say 95%), within the first year of formation. Common concerns about small business are confined to only cash flow problems, and under capitalization. Whilst these two, are major culprits in business failures, they not the only factors. Weak marketing, skills shortages, bad management, capacity are other factors, contributing to business failure. Taxes can also be added to the list as a cause of business failure.

Since many start-up businesses cannot afford to procure the services of a tax consultant/ advisor, they eventually fall foul of the taxation requirements of their respective tax authorities.
A small business is treated no different from a huge multinational corporation in many tax regimes around the globe. This treatment comes with its own set of problems. The one being the failure of the small business. Tax authorities, vigorously pursue errant taxpayers, be they big or small. In fact, it can be proven that harsher enforcement by tax authorities are reserved for small businesses!

Governments have yet to honestly acknowledge the role of small business and stop paying only lip service to its promotion. The current tax system for small business, in most countries will have to be revisited. No one is suggesting that tax authorities should grant small businesses “special treatment” forever. Just a breather, so as to enable them to grow at a faster pace.

To accommodate a small business and its growth, whilst being fair, a concept known as “thresholds tax”, can be implemented for small business. It is in place for individuals, and also known as progressive taxation. Simply put, it means, the more someone earns, the more they taxed. Many countries levy a fixed percentage tax on “profits” of businesses, big or small. This tax is not fair, and fairness is a prerequisite for a good tax system. Even the slightly different tax regime for “Small Business Corporations”, in most countries still does not address the problem.

The controversial “profit” in business accounting, especially small business has not been thoroughly researched by tax lawmakers. Profit does not always equate to positive cash flow.
The working capital factors tied into profit, results in severe cash flow setbacks for small business. It is therefore unfair to tax the small business on profit, like the bigger companies,

SARS Audit Procedures and The Tax Administration Act(“TAA”)

Herewith a perfect example of the blatant disregard of South African Revenue Service to the rights of taxpayers, as enshrined in the PAJA Act, as well as the Constitution.
In this real example, we give you an excerpt of a real objection, to an audit from which we quote the relevant legislation.
The Tax Administration Act, is a vicious piece of Tax Legislation, and I do not in any way encourage falling foul of this act. But please be vigilant, and know your rights.
(Names and amounts not included.)

OBJECTION TO THE ASSESSMENT AND PENALTY IMPOSED ON XXXXXXXXX CC
CASE/REFERENCE XXXXXXXXXX

You are referred to Chapter 2.3 of the Tax Administration and PAJA. It relates:
“The right to administrative justice under the constititution is given effect to in the Promotion of Administrative Justice Act(PAJA). In short this regulation mandates in the context of tax administration, that tax administrative actions that materially and adversely affect taxpayers right must-give clear grounds for the decision.”
Various emails were send requesting clarity, and nothing has been forthcoming. Herewith an excerpt of one of the emails, with the relevance to this case;

Objectionable points;1. Deductible expenses(Rx) totally overlooked.
2. The Rx reversal and the Rx “ deduction” was may I respectfully point out to befuddle and confuse. Refer to(PAJA clause in Tax Administration Legislation), “ that tax administrative actions that materially and adversely affect taxpayers right must-give clear grounds for the decision.”
3. Section 11(a)”Expenditure and losses actually incurred in production of income, provided such expenses are not of a capital nature.”
a) Municipal charges to the value of Rx, overlooked/included somewhere in the calculation. Either way it is not debatable. The municipal expenses were incurred, to derive income for the “rent collection, property investment company.
b) Rental, Agents commission, deliberately overlooked, and “hidden” in findings.
c) Project and contractual expenses.Information was furnished in this regard, but excluded, or only a portion allowed. It was not of a ‘capital nature”,
4. Wear and tear(Section 11e) read together with Practice Note 19. Completely overlooked, and “depreciation’’ used to calculate wear and tear, in complete violation of the Practice Note 19 Prescription. Our wear and tear calculation was Rx.
5. Total deductible expenses Rx.We acknowledge that SARS could uncover other “non deductible” amounts, but the difference between Rx and X) is just too huge, and warrants serious attention.

Concluding remarks
Whilst we co operated fully with the audit procedure(that arrived at these questionable amounts) we are extremely concerned that this will be the trend of TAA.

Let SARS pay for consultation, Not YOU! Were you overtaxed, but your cash flow is low?Solution:  Service at No COST to You. We negotiate a % of Tax refund!Email: info@sgafc.co.za

 

 

If you ,the taxpayer, feel at any time, that your rights have been violated, or you aware of unfair practice, on the part of SARS. Kindly drop us a mail. info@sgafc.co.za

TAX AUDITS AND TAX COURTS

 Let SARS pay for consultation, Not YOU! Were you overtaxed, but your cash flow is low?Solution:  Service at No COST to You. We negotiate a % of Tax refund!Email: info@sgafc.co.za

The South African Revenue Services will conduct audits on your tax affairs, with or without your knowledge.

Types of Audits:

  1. Desk top Audit

SARS will compare all information they can access about you and/or your company, with Vat returns submitted, PAYE etc, and raise assessments for any discrepancies.

      

  1. Physical audit

You will be notified in a letter, delivered at your place of business, that an audit will be conducted on your affairs.

 

 

This then begs the question, are we compelled to co-operate with SARS, and furnish all the information?

 

The answer is not straight forward, but I normally instruct client not to panic, and succumb to the pressure. Ask for an engagement letter from the SARS official concerned. Contact your tax practitioner or attorney before co-operating.

 

Bear in mind, that SARS is mindful of their mistakes, and will treat the matter with care. You are however not obliged to cooperate if the officials are rude and intimidating. Do not also incriminate yourself. Remain silent (remember that right)

 

Whilst the officials will claim that you are audited in terms of the Income Tax Act of 1962, they might be in violation of the Constitution or the Criminal Procedure Act, if inference of a crime is made.

 

If SARS are in violation of the Constitution, the audit cannot proceed!

 

 

Summoned to Tax Court

 

A summons is only valid, if its delivered by hand, to the business/person concerned. It looses it relevance if the above procedure is not followed.

The tax courts, due to simple mistakes, issue many summonses. I.e.

Returns and assessments could have been paid, but not recorded by SARS. Scrutinize bank statements carefully, find receipts and proof, and furnish the documentation.

Again, it’s important, not to panic.

For more serious cases, you can use your right as a taxpayer, to request that your affairs are re-examined.

If you have applied for tax amnesty, make sure you are not subjected to enforcement action, when Tax amnesty has been applied for.

In many instances, the cases can be settled with the prosecutor, and never really reach court, save for criminal cases like fraud or money laundering.

 

Author: Sean Goss  sgafc@mweb.co.za