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IOL News
a day ago
- Business
- IOL News
Sars enforcement: the new era of tax compliance in South Africa
Tax Discover how the South African Revenue Service has transformed into a powerful enforcement agency with Project AmaBillions, and learn how to navigate the new landscape of tax compliance to protect your finances. The South African Revenue Service (Sars) is no longer the passive revenue service many South Africans remember. With the injection of R3.5 billion from the national budget and the ominous launch of 'Project AmaBillions,' Sars has entered its most aggressive phase of enforcement in years and is quickly turning into one of the most sophisticated, assertive, and unrelenting revenue authorities in the world. Welcome to the new high-stakes era of tax compliance, which marks the end of the era of any perceived leniency. It is now the time of relentless enforcement. If you've received a surprise assessment or an additional tax bill, doing nothing could be financially and legally disastrous. Sars has flipped the switch: compliance or consequences South Africa's budget is strained, and Sars has one clear mandate: collect at all costs. The days of informal engagement are over. Today, Sars is functioning as a well-resourced enforcement agency, driven by targets and backed by increasingly automated systems that flag non-compliance in real-time. Their legal tools of collection include: - Final demands; - Civil judgments; - Third-party appointments are issued directly to your bank without having to inform you; - Garnishee orders issued directly to your employer; - Instructing the Sheriff to collect; - Asset seizures; and - Criminal prosecution. If you disagree with an assessment, silence is surrender. Unless formally and timeously disputed, Sars will pursue recovery. And they don't knock, they act. From garnishee orders to default judgments, Sars is now executing collections swiftly and with minimal notice. Once the machine is in motion, it becomes significantly harder and more expensive to reverse. There's a process, but it's not forgiving Yes, there is a dispute process. And yes, it exists to protect taxpayers, but only if used strategically and correctly. You have 80 business days from the date of assessment to object. Miss this window, and you must beg Sars to condone your lateness, and they're under no obligation to say yes. Even if the assessment is wrong, Sars is entitled to collect unless and until a dispute is lodged and the debt is suspended. Without this, enforcement proceeds. Your bank accounts, salary, or even those who owe you may be targeted. Sars has shown no hesitation in using every legal mechanism at its disposal, and you must thus use every legal mechanism at your disposal to protect your interests. Disputes must be strategic - this is a legal battlefield This is not the time for 'DIY' tax disputes. In the enforcement era, objections need to be drafted like legal pleadings, not complaints. Sars doesn't respond to emotion; it responds to evidence, statute, and precision. A skilled tax attorney can mean the difference between a successful objection and irreversible enforcement. This is especially critical when multiple years are at stake or where Sars alleges serious non-disclosures. Sars Commissioner Kieswetter has made their philosophy clear: compliance will be facilitated; non-compliance will be punished. The playing field may be fair, but it is also ruthless to those who don't act timeously. Every single day counts, and delay is dangerous In today's enforcement climate, an assessment is not a suggestion; it's a trigger. It signals the start of Sars' collection clock. If you don't respond with speed and legal force, you may find your finances, assets, and reputation under siege. Every day you delay, Sars gains ground. An assessment isn't an invitation to negotiate. It's a legal action, and if you fail to act swiftly and strategically, Sars will act for you through your bank, your employer, or the courts. Dispute on time. Dispute strategically. Or prepare for the full force of Sars enforcement. Act now, those who wait, lose. * Daniels is the head of tax controversy and dispute resolution at Tax Consulting SA. PERSONAL FINANCE
IOL News
09-06-2025
- Business
- IOL News
Understanding Sars' crackdown on trust tax compliance
Sars is ramping up its enforcement on trust tax compliance, revealing alarming statistics about unregistered trusts and the potential penalties for non-compliance. Image: Supplied The South African Revenue Service (Sars) has reported a recent surge in trust tax return submissions, yet it says it remains concerned about the overall level of compliance within the trust sector. No wonder then that Sars is significantly increasing its scrutiny of trusts to ensure compliance with tax laws, focusing intensely on registration, accurate declarations, and timely payments. Figures for the 2024 tax year show progress, with 84,134 current-year returns and an additional 80,132 prior-year returns lodged— a total of 164,266 submissions. However, Sars believes compliance in the trust space could improve further. This sharper focus comes as Sars embarks on an ambitious campaign, known as Project AmaBillions, to collect an additional R70 billion over the next three years, signalling a new era of enforcement. Following the Budget Speech in May 2025, Sars said that in the current tough domestic and global economic conditions, the R1.986 trillion revenue target for the 2025/26 financial year is a challenging estimate and imposes the responsibility on Sars to implement revenue-raising initiatives. Sars intensified focus on trust compliance Trust tax compliance in South Africa is a multifaceted area governed by the Income Tax Act, the Trust Property Control Act, and various pronouncements and guidelines. The revenue service is leveraging technology and data analysis to identify non-compliant trusts, and trustees, notably, bear personal legal liability for their trusts' tax obligations. A critical challenge identified by Sars is the vast number of unregistered trusts. An estimated 60% to 65% of trusts registered with the Master of the High Court have yet to register with Sars for tax purposes. This represents a substantial gap in the tax net, which Sarss is actively working to close by leveraging third-party data to identify and automatically register these entities. Furthermore, Sars places a strong emphasis on the accuracy and thoroughness of declarations. The introduction of the IT3(t) third-party data return is pivotal in this effort, aiming to enhance transparency and ensure that income distributed by trusts is correctly accounted for in the beneficiaries' tax returns. The requirement for trusts to submit beneficial ownership information to both the Master of the High Court and Sars is also of key importance, designed to ensure clarity regarding who ultimately benefits from trust assets and income. Sars enhances enforcement The tax authority is enhancing its enforcement capabilities. Sars is expected to start levying administrative penalties on non-compliant trusts for the non-submission of annual income tax returns and IT3(t) returns. Sars is making it clear that trustees bear personal legal liability for their trusts' tax obligations and will hold all trustees jointly and severally liable for non-compliance. In line with its ambitious collection targets, Sars is planning on hiring 1,500 recruits over the medium term to bolster its enforcement efforts. Trustees should be proactive To avoid penalties and ensure the smooth administration of a trust, trustees should be proactive in understanding and meeting their tax compliance obligations. Seeking professional advice from tax practitioners specialising in trusts is highly recommended. Here's a summary of the key requirements: Register the trust with Sars (in addition to the Master of the High Court) File the annual ITR12T tax return accurately and on time Accurately declare all income, expenses, and distributions Submit the beneficial ownership register to both the Master and Sars Submit the IT3(t) return by 30 September each year Ensure timely payment of any tax due Maintain accurate financial records Even dormant or inactive trusts still need to comply with Sars requirements. Why this matters Sars is not out to punish compliant trusts, but they are making it harder to ignore obligations. If the paperwork isn't in order or distributions are not declared properly, the consequences could be serious. Sars is determined to make it hard and costly for taxpayers who willfully fail to meet their obligations.
IOL News
06-06-2025
- Business
- IOL News
Why voluntary disclosure to Sars is crucial to avoid severe penalties
With R7.5 billion allocated for enforcement, Sars is intensifying its crackdown on non-compliant taxpayers. Image: File photo. The South African Revenue Service (Sars) is preparing to escalate its enforcement drive. With R7.5 billion in additional funding over the medium term and the implementation of a focused initiative known as Project AmaBillions, Sars now has both the mandate and the means to pursue non-compliant taxpayers with renewed vigour. Commissioner Edward Kieswetter's two-pronged approach — assisting those who comply and cracking down on those who don't — is no longer just rhetoric. Sars is making it clear that time is fast running out for those who have not regularised their tax affairs. The VDP: a last safe exit The Voluntary Disclosure Programme (VDP) offers qualified taxpayers a structured, legislated opportunity to correct prior non-compliance. It is not a loophole or workaround, but a legitimate mechanism designed to encourage voluntary compliance before Sars initiates an audit or investigation. Taxpayers who took this route early have protected themselves from reputational harm, potential financial ruin, and in some cases, criminal prosecution. Those who did not are now facing consequences that include public naming and shaming, civil judgments, and penalties that can reach up to 200% of the original tax debt. In more serious cases, individuals have faced prosecution, with imprisonment as a real possibility. VDP process improved, but not without risk Sars has made the VDP process more accessible for taxpayers acting in good faith. The application system has been digitised and streamlined, turnaround times have improved, and Sars has demonstrated a willingness to engage constructively with applicants, provided the disclosure is made voluntarily and before Sars begins any form of inquiry. While the process may appear simpler, the legal requirements remain stringent. A taxpayer must be registered and up to date with all tax returns, and the disclosure must be complete and accurate. Sars has successfully invalidated VDP relief where applications were rushed or failed to meet the statutory criteria, leaving those taxpayers exposed to both penalties and potential criminal liability. Legal privilege: a crucial but missing conversation What many taxpayers fail to appreciate is the importance of legal privilege, especially when the risk of criminal sanctions arises. In matters where potential prosecution is on the horizon, engaging a tax attorney ensures that communication and strategy discussions are protected by law. This privilege does not extend to accountants or consultants. Without it, sensitive disclosures and planning documents could be accessed and used by Sars in subsequent enforcement proceedings. When the stakes include imprisonment, legal privilege is not a luxury — it's a necessity. Sars is now faster, smarter, and sharper This new era of enforcement is underpinned by smarter systems and sharper tools. Sars has invested significantly in data analytics, automation, and inter-agency cooperation. Audits are no longer random — they are precise, data-driven, and often highly effective. Once an audit, investigation, or verification commences, the door to the VDP closes. This is not theoretical. Sars has in many cases already executed garnishee orders, asset preservation applications, and criminal prosecutions. Disclose before they come knocking The burden of proof lies with the taxpayer. Failure to maintain records, declare all income or keep tax affairs in order places individuals and businesses at real risk. The VDP is one of the few remaining proactive avenues allowing taxpayers to resolve historical non-compliance, avoid excessive penalties, and protect themselves against criminal liability.
IOL News
05-06-2025
- Business
- IOL News
Sars launches Project AmaBillions: expect a surge in VAT audits
Discover how Sars' new initiative, Project AmaBillions, is set to increase VAT audits significantly, impacting businesses across South Africa. Learn what steps you can take to ensure compliance and avoid penalties Image: Ziphozonke Lushaba / Independent Newspapers According to recent media reports, Sars has launched a new initiative — Project AmaBillions — as part of its broader strategy to boost revenue collection by an additional R70 billion over the next three years. To support this objective, Sars has reportedly already recruited 500 new staff members, with an additional 1,000 to 1,500 appointments anticipated. While this expanded capacity will enhance Sars' ability to collect, across multiple tax types, Value-Added Tax (VAT) remains an easy target, with a notable increase in VAT-related audits, verifications, and additional assessments already being observed. In this evolving compliance landscape, businesses, particularly those operating in complex or high-risk sectors, are encouraged to revisit their VAT positions and ensure that both legal interpretation and supporting documentation are up to standard. VAT as an Easy Win for Sars The government's recent proposal to raise the VAT rate met significant public resistance and was ultimately shelved. However, the fiscal demands that prompted the proposal remain unchanged. In the absence of a rate increase, an easy target is the enhanced enforcement of existing VAT obligations as a more immediate mechanism to protect the tax base. Given the transactional nature and extensive reach of VAT, it remains one of the most active areas of Sars enforcement, and from a tax collection standpoint, is second only to Personal Income Tax, per Sars' Revenue Announcement for the 2024/25 Financial Year: Except from the 2024/25 Revenue Announcement presentation: Recent trends confirm an increase in audit activity, particularly where VAT positions rely on complex interpretation or are not fully substantiated by documentation. Certain areas are particularly at risk: Input tax deductions , where Sars may challenge the deductibility based on the nature of the underlying expense, its link to taxable supplies, or the quality of supporting invoices; Zero-rated supplies , especially exports, where documentary proof and timing requirements are closely examined; and Apportionment calculations , in cases where businesses make both taxable and exempt supplies, and Sars queries the method used to determine the deductible portion of input VAT. In addition to heightened audit activity, input tax deductions have become increasingly the subject of legal proceedings, with courts being asked to assess whether deductions meet the requirements of the VAT Act. Often, the success or failure of a claim rests both on the commercial reality of the transaction and on whether the taxpayer can demonstrate compliance with the relevant documentary and legal criteria. Discharging the burden of proof As a self-assessment system, VAT places the burden of proof squarely on the taxpayer. Sars does not need to prove a taxpayer is incorrect; rather, it is the taxpayer who must prove that the tax position adopted is correct. Documentary shortcomings that can result in adverse audit findings may include: Incomplete or non-compliant tax invoices; Missing or outdated export documentation; Contracts or agreements that do not support the VAT treatment applied; and A lack of internal policies governing apportionment or exempt supply treatment. Even businesses with reputable systems or historic Sars engagements should not assume automatic compliance. Audit readiness requires continuous alignment with Sars' current expectations and the evolving interpretation of the VAT Act. High-risk for high reward: which businesses are most scrutinised? While all VAT-registered vendors are subject to review, recent enforcement trends suggest that the following types of businesses may be more susceptible to VAT scrutiny, especially in light of the looming 'Project AmaBillions': Exporters of goods and services , particularly where zero-rating is applied; Foreign suppliers of electronic or remote services to South African recipients; Property developers and investors , due to the complexity of VAT on construction, disposals, and mixed-use properties; and Enterprises with substantial input tax deductions or recurring VAT refunds . In these cases, a proactive review of VAT compliance and risk report may assist in identifying and addressing potential exposure, before they are raised by Sars. A Coordinated Tax Debt Collection Strategy 'Project AmaBillions' is more than a revenue slogan — it reflects a deliberate shift by Sars toward coordinated and data-driven enforcement, leading to increased tax revenue collections. This includes the use of Artificial Intelligence tools, targeted audit selection based on risk modelling, and specialised teams focused on high-yield areas such as VAT, High-Net-Worth taxpayers, and Cryptocurrency. With the recruitment of up to 1,500 additional staff, Sars is positioned to expand its enforcement reach significantly over the coming months. Proactive compliance is key While increased audit activity may place pressure on internal finance and tax teams, early intervention and strategic review can help businesses avoid prolonged disputes or unintended liabilities. A targeted VAT review can assist in confirming that: Zero-rated supplies are supported by adequate and compliant documentation; Input tax deductions meet all legal and documentary requirements; Invoicing and contractual frameworks comply with SARS standards; and Internal VAT procedures, including apportionment and record-keeping, are robus t. Early action prevents future exposure Where there is uncertainty around VAT treatment, and businesses find themselves in a potentially precarious position of now facing Sars scrutiny, the best practice is to seek the assistance of a tax professional, ensuring the best compliance strategy is followed. Early assessment can help prevent future challenges, reduce the risk of penalties and interest, and ensure Sars readiness in an increasingly vigilant digitized environment.
IOL News
13-05-2025
- Business
- IOL News
SARS said to be planning ‘AmaBillions' blitz to collect outstanding tax, plug fiscal hole
SARS is reportedly planning a renewed clampdown on outstanding tax debt. Image: Ziphozonke Lushaba / Independent Newspapers The cancellation of Treasury's controversial Value Added Tax (VAT) increase has left a fiscal hole of around R75 billion in South Africa's medium-term budget, and this will reportedly see a renewed focus on tax dodgers. According to unnamed sources, the South African Revenue Service (SARS) is planning to recruit at least 500 new employees to pursue outstanding tax revenue. The initiative, which reportedly goes by the name of 'Project AmaBillions', will aim to recover at least R70 billion in tax revenue. It will target 'low hanging fruits' such as undisputed tax debt. It is believed that outstanding taxes owed to the revenue service currently amount to around R300 billion. Although SARS has not officially announced such a project, it does potentially tie in with the new Compliance Programme outside of the normal revenue collection stream, which was announced by Commissioner Edward Kieswetter during the preliminary Revenue Collection Announcement on April 1. He said SARS would target uncollected tax debt as well as people above the threshold who are currently not registered for tax. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Keitumetse Sesana of the SA Institute of Taxation said that although she was not aware of a 'special project' at SARS, Kieswetter's remarks made it clear that the revenue service would use its additional budget allocation of R7.5 billion to focus on debt cash collection and pursue over 5 million outstanding returns, as these would be 'easy wins' for closing the tax gap. 'For many years the SAIT has said that introducing new taxes is not the way to strengthen the state coffers,' Sesana added. 'We must go after the money in the system, owed to the fiscus but not reaching SARS. Non-compliant taxpayers must be made to pay their fair share. Only thereafter can South Africa consider introducing new taxes.' Sesana said it was likely that many new recruits would be brought into SARS, with a focus on manual phone calls as this method is believed to be the most effective way of nudging taxpayers to settle their debt. But what does this mean for South Africans who find themselves in the crosshairs? Jashwin Baijoo, Associate Director at Tax Consulting South Africa says: 'In practice, what we have seen, is SARS increasing its collection drive on outstanding tax debts, in an effort to eradicate tax non-compliance. That being said, SARS remains open to discussions on payment arrangements and tax debt write-offs where taxpayers face financial hardship.' Baijoo said SRS has written off R36.15 billion in the 2023/24 financial year. Get your news on the go, click here to join the IOL News WhatsApp channel IOL
