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18 July 2018 South Africa: Insights on Draft Tax Administration Laws Amendment Bill proposals On 16 July 2018, South Africa's National Treasury published the 2018 Draft Taxation Laws Amendment Bill (DTLAB) and the 2018 Draft Tax Administration Laws Amendment Bill (DTALAB) for public comment. Comments are due by the close of business on 16 August 2018. The DTALAB proposes to amend the Income Tax Act, the Customs and Excise Act, the Value-Added Tax Act, the Securities Transfer Tax Act, the Tax Administration Act and the Customs Control Act. Key changes to these Acts are summarized below. A tax return will no longer be required to be submitted to the South African Revenue Service (SARS) in respect of dividends received that are exempt or partially exempt in terms of section 64F or 64FA of the Income Tax Act. The provisions of the TAA contained in Chapter 14 relating to the compromise or write-off of debt will be included in the Customs and Excise Act and apply mutatis mutandis to customs duty, interest, penalty or forfeiture incurred under that Act. Section 20 of the VAT Act will be amended to include specific provisions relating to the process of correcting material errors on a tax invoice in order to make use of the date at the original time of supply. It will no longer be a requirement for a vendor to submit a special return for VAT for goods deemed to be supplied in terms of section 8(1) of the VAT Act. The vendor will however be required to obtain and retain the information and to deliver such information to the owner. Section 44 of the VAT Act will be amended in respect of a refund paid erroneously by a vendor as contemplated in section 190(1)(b) of the TAA. It is proposed that a refund will only be made by SARS it is if claimed by the vendor within five years after payment and if the banking details have been submitted to SARS prior to or together with the claim for the refund. Request for VAT refunds will be deemed not to have been received without confirmation of banking details prior to or together with the request for a refund being submitted to SARS. There is also a proposal to amend section 50 of the VAT Act relating to refunds due to separate enterprises, branches and divisions registered separately for VAT to allow for a set off of a refund against outstanding debt between these entities that have separate registration. Section 42(1) of the TAA currently only makes provision for progress reports on the stages and completion of an audit. The DTALAB proposes an amendment to section 42(1) of the TAA, to include an obligation on SARS to provide the taxpayer with an audit engagement letter to notify the taxpayer of the commencement of the audit process. The current wording of section 44(3) allows SARS to use "relevant information" obtained during a criminal investigation for purposes of an audit as well as in subsequent civil and criminal proceedings. The DTALAB proposes a technical amendment to section 44 (3) of the TAA to delete the word "information" and substitute it with the word "material." This means that SARS will be limited to using only documentary evidence obtained during a criminal proceeding for purposes of an audit or any other civil or criminal proceedings against a taxpayer. The replacement of Financial Service Board (FSB) the with the Financial Sector Conduct Authority (FSCA) in section 70 (3)(b) of the TAA. The proposed section will read as follows: a senior SARS official may disclose to – the Financial Sector Conduct Authority the information as may be required for the purpose of carrying out the Financial Sector Conduct Authority's duties and functions under the Financial Sector Regulation Act.
The DTALAB proposes to extend the tax court's discretion to include making an appropriate order in respect of procedural matters. Currently section 170(b) of the TAA provides that the production of a document issued by SARS purporting to be a copy of or an extract from an assessment is conclusive evidence, except in the case of proceedings on appeal against the assessment. The DTALAB proposes an insertion under section 170(b) of the TAA to include in the provision, "proceedings on appeal instituted under Chapter 9 of the TAA." The amendment is a clarification that this is an appeal instituted under Chapter 9 of TAA and not any other appeal. Currently section 190 (4) of the TAA states that an amount erroneously paid in respect of an assessment in excess of the amount payable is payable to the National Revenue Fund unless the amount erroneously paid is refunded in the case of an assessment within three years from the later date of the assessment or the erroneous payment or self-assessment within five years of the later date the return was meant to be submitted. The DTALAB proposes the insertion of section 190(4)(c) stating erroneous payment claimed by a taxpayer within the period referred to in subparagraph (a) or (b), but not paid by SARS within the period. The aim of the proposed amendment is to clarify that the amount will not be regarded as a payment to the National Revenue Fund provided that the claim submitted prior to the expiry of the three or five year period and allow SARS to effect payment thereof after the expiry of the three or five year period concerned. Currently section 221(a) of the TAA provides that an understatement means any prejudice to SARS or the fiscus as a result of a default in rendering a return. The DTALAB proposes a substitution of "a default in rendering" with "failure to submit" and further adding in section 221(a) "as required under a tax Act or by the Commissioner." The proposed amendment aims at alleviating confusion between the old wording under section 76 of the Income Tax Act 1962, but rather to refer to a return not submitted under the TAA. Currently section 222(2) of the TAA states that the understatement penalty percentage should be applied to each shortfall in relation to an understatement. The DTALAB proposes that the understatement penalty should be applied to each shortfall in respect of an understatement irrespective of whether it is contained in a return or not. A further amendment to section 222(3) (a) is to include a provision deeming the amount of tax declared to be nil in instances where no return has been submitted. In the alternate, an amendment to section 222(4) is to deem the amount return as nil in respect of a default in rendering a return to be considered as nil for the purpose of calculating the difference between the tax amount disclosed and the tax amount payable under a tax Act.
The amendment proposes that if a registered tax practitioner has been non-compliant repetitively or for a continuous period of at least three months in respect of his own tax affairs and does not remedy such non-compliance that he will be disqualified from registering as a tax practitioner for purposes of section 240 of the TAA or will be deregistered as the case may be.
Document ID: 2018-5876 |
