Tax debt to SARS is a major stumbling block in many business affairs and we will look at how you can deal with SARS in your business. First we will look at some few and major causes of Tax Debt and secondly we will look at how can you deal with the debt if you are already in debt. Our first advice before we go into details is:Do not ignore SARS letters stating that you owe them this can be a very costly mistake for your business.
Once you receive a call or a letter that you owe SARS take serious and act immediately by contacting Tax Professionals like Bonmas Consulting.
Major causes of SARS debt:There several things that can cause you to be in debt with SARS and today we will only look at what we believe are the main causes of the unusual SARS debt.
1.Wrong Assessments and Supplementary information
Nil Return submissions (Tax Evasion)-There is practice from some small business owners to want to get their Tax Status to be Compliant at all costs so that they can bid for projects or get payment from their clients. These small business owners’ ends up dealing with bogus business consultants they find online or on the street who promise to do their Tax Clearance certificate within minutes and in most cases these bogus consultants submit nil returns telling SARS that your business is not generating any income.-
This bad practice may end causing you to owe SARS a lot of money if SARS can get hold of information from your bank or clients that your business is making money. This will lead SARS to issue an assessment plus penalties based only on your income and not taking into account your expenses. This practice can affect your business in future as it grows, SARS may obtain information that all your pasts returns were incorrect that your company was evading tax which is an illegal conduct.-
The practices in South Africa are still favorable for small businesses. Your business can generate millions or rand in revenue and pay R0 or very less in taxes if it qualifies for Small Business Corporation (SBC) Tax. You just need tax professionals like Bonmas Consulting to help you
ITR14 Mismatching PAYE, VAT and Customs information held by SARS-
Some companies ends up owning millions of rands to SARS because the information that they submit on ITR14 for income tax does not correspond to their other information sitting in SARS office on VAT, PAYE and customs. This is generally because of not using the right accountants and tax practitioners who reconciles all the information before the preparing the Annual Financial Statements and submit the Income Tax Return for your business.-
This leads SARS to issue the IT14SD (Supplementary Declaration) which gives you an opportunity to reconcile the ITR14 with VAT, PAYE and customs declarations and failure to it properly leads to SARS assessment and debt.-
As Bonmas Consulting we have dealt with several clients who owed SARS because of information mismatch on the ITR14 and other declarations made to SARS and in most even the IT14SD (Supplementary Declaration) was submitted the wrong way by their previous Tax Practitioners leading to debt.
2.Not disclosing all the information to SARS
We have indicated that submitting nil returns for your business which is operational is illegal and considered to be tax evasion and it may lead SARS debt in the near future. We have again indicated how information mismatch on your ITR14 with other declarations such PAYE, VAT and Customs may lead to debt. Now we will look at not disclosing all the information to SARS can affect your taxes and lead to debt.-
Some companies are not disclosing the all information to SARS sometimes unknowingly or even knowingly. Your company may have an investment then earn interest or dividend and this must disclosed to SARS as it may lead to debt if not disclosed. –
We have dealt with cases where the previous tax practitioners of our clients did not advise them which information to disclose to SARS and how to disclose the information then later SARS got hold of the undisclosed information by the taxpayer resulting in debt with SARS.
3. Inability to deal with VAT refunds-
Incorrect handling of VAT Refunds from SARS is one of major causes businesses end up owing SARS a lot of money. We are dealing with plenty of cases where taxpayers and their advisors submitted VAT 201 return for refund and SARS requested supporting information and they submitted insufficient information as per Tax Administration Act and VAT 404 and this led to SARS issuing an assessment and the taxpayer owing SARS of monies amounting to even millions of rands.-
If your business is registered as a VAT or if you import a lot you will be entitled to get a refund at times and this should be done in correct way because when assessing your refund SARS will always look for loopholes they can find in order for them not to pay the refund. They do this in order mitigate the criminal element in VAT refunds as there have been many criminals in the past trying to get money from SARS through VAT refunds illegally so.
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As Bonmas Consulting we have helped lot of VAT Vendors who qualifies for Vat Refund to ensure that tick all boxes with SARS for them to get much needed refunds which can at times help with the business cashflow. To get help with VAT refunds or debt as a result of refund submission email: tax@bonmas.co.za
4.Understatement Penalties and assessments
SARS can charge up to 200% in understatement penalty if taxpayer has understated their Income or VAT Output. As result most taxpayers end up owing millions of Rands to due to their Tax Practitioner or Accountants not declaring all the information to SARS.-
As Bonmas Consulting we have dealt successfully with disputes of understatement penalties and we also help our clients to ensure that they do not get to a position of being charged understatements penalty.- SARS can get information from your clients and banks about your undisclosed income and issue an assessment as well as the understatement penalty assessment amounting to millions. Again when you issue an invoice to a client that invoice may end in SARS hands due to your client submitting it to SARS as a supporting document to for their business if you did not disclose such information on returns then this may result to debt plus 200% added on top as understatement penalty. ‘
How to deal with SARS debt?
Now we look at how you can deal with SARS debt. Most people think that you can ignore the SARS debt the same they do with other creditors. Our advice is that you must never try to ignore SARS debt collectors this can be the biggest mistake which can affect your business in negative way and impact your business cashflow as SARS can go into your business account and serve themselves with your money. Once you receive a call or a letter stating that you owe SARS take it serious and act immediately by contacting Tax Professionals like Bonmas Consulting to deal with it either by challenging it, reducing it legally so or finding a best solution for your business.
SARS is not one creditors that you can just ignore and SARS generally enjoys when you ignore them because time is a very crucial factor when dealing with SARS debt. If you wait too long then there is less you can do to resolve the SARS debt and it gets even more complicated to resolve your tax problem if a lot of time has passed. Our advice is that you have to act immediately if you have any SARS debt. You can contact us by emailing your business details to tax@bonmas.co.za we have resolved complex tax problems for businesses and our success rate it 100% to date.
Below are the general ways to resolve the tax problems with SARS debt
1. Lodging an objection and dispute process
The first step to addressing the debt if you believe that you do not owe SARS is to lodge a dispute or an objection with SARS. This requires professionals who understands the Tax Administration Act like Bonmas Consulting otherwise it may create even more problems for your business because the reason you owe SARS in the first place in most cases is because you and the your tax adviser failed to understand and apply the tax laws. As Albert Einstein once said that: “We cannot solve our problems with the same thinking we used when we created them.”-
Lodging an objection or dispute must be done within 30 days of the assessment failure to do so may result the tax debt to stand and SARS to serve themselves with money in your bank accounts.-
You can contact us if your business is already in debt with SARS to get help even if 30 days has passed.
2. Complaint to SARS and Tax Ombud
The Office of the Tax Ombud was opened in 2013 October to assist taxpayers who are not happy with the service that they get from SARS.- If you have already lodged a complaint with SARS about your debt resulting from SARS administrative issues, your dispute handling, VAT Refund and etc. Then the Tax Ombud may be a place to take your matter to.
3. Tax Court-The Tax Court may also be a solution to your tax debt.
The Tax Court is more of an administrative tribunal created under the Tax Administration Act, 2011- The Tax Court has jurisdiction over tax appeals lodged- To win with the Tax Court you need professional like Bonmas Consulting with full understanding of the Tax Administration act.
4. Litigation with Magistrate courts and High Courts
Litigation can be very expensive and generally if you cannot prove your case through SARS dispute and Tax Court it will be even more complicated to prove it with litigation unless you were not getting right tax advice from the beginning and litigation is the only way to prove your case.-We do not advise you to go this route unless you explored all other avenues or unless you are dealing with a case where SARS is breaking their own regulations or you have a strong believe that SARS interpretation of the law is incorrect and this may be expensive.
Time is a crucial factor and it can determine what is possible when dealing with SARS debt and this may impact your business cashflow sometimes even the survival of your business, therefore you must act immediately. PLEASE do not ignore SARS notifications that you owe them money seek help immediately from BONMAS CONSULTING or other tax professionals. To get your free tax report email: tax@bonmas.co.za or visit www.bonmas.co.za