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New Income Tax Return for Companies and Close Corporations

Sunel SwartA new income tax return, the IT14SD, was recently introduced by the South African Revenue Service (SARS) to enhance tax compliance by companies and close corporations.

Many of the amounts on a company’s IT14 income tax return can be checked and compared with its other declarations to SARS over the tax year. The IT14SD is a supplementary declaration in which companies and close corporations have to reconcile information declared on the IT14 with:

  • Value Added Tax (VAT),
  • Employees’ Tax (PAYE/UIF/SDL),
  • accounting profits and losses and tax profits and losses,
  • exported sales value per customs submissions and export sales per tax return,
  • importation values per customs submissions and imported costs per tax return.

At present the IT14SD will have to be completed only if a company’s annual income tax return (IT14), after having been submitted to SARS, is selected for verification by SARS.

The form requires the reconciliations to be accurate within R100 and has to be completed and submitted to SARS within 21 days.

SARS may, depending on the information submitted in the IT14SD, subject taxpayers to an audit of their tax affairs, or alternatively raise additional assessments in respect of unexplained differences in excess of R100.

The form essentially passes the burden of reconciling the information disclosed on the various tax returns onto the taxpayer and will provide a powerful tool for SARS to identify discrepancies for further investigation. The increased burden may result in unexpected tax costs in cases where various reconciling differences have to be disclosed to SARS.

Where a company or close corporation is subject to an audit or an independent review in terms of the Companies Act, these reconciliations will only be tested for reasonability during the performance of the relevant engagement. Unless there are material differences, the auditor or reviewer is not required to resolve any differences. It would remain the taxpayer’s responsibility to supply explanations should the taxpayer be selected for verification.

It is in their own interest that taxpayers reconcile the information regarding the various taxes with the information contained in their financial statements.

For more information contact Sunel Swart of Tenk Loubser & Associates at 021 915 6666 / sunel@exceed.co.za