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New SARS rules for the electronic storage of records

One of the draft regulations to the new Tax Administration Act deals with the keeping of records in electronic format. Should these regulations come into force, taxpayers might be well advised to seek the assistance of an IT specialist when compiling certain documents.

The Act prescribes the form in which records have to be kept or retained. According to Section 30(1)(b) of the Act:

“…records, books of account, and documents must be kept in the form, including electronic form, as may be prescribed by the Commissioner in a public notice;…”

The draft regulation prescribes that electronic records have to be kept in an “acceptable electronic form.” This means that the records not only have to satisfy the standards of integrity, but that they have to be in a format that SARS can readily access, read and correctly analyse. One should also be able to send the records to SARS, while providing them with paper copies within a reasonable time. The regulation further specifies that the location of the records must physically be in South Africa unless a senior SARS official has directed otherwise.

The part of the draft regulation pertaining to system documentation which taxpayers should have raises concern. This documentation includes computer and software manuals describing how to access and understand the records. (Usually this will be provided by the software developer when you buy the software.) One is required to keep a written document that must, amongst other things, contain a description of:

  • how transactions are created, processed and stored and how often they are stored;
  • the format used to store and archive records including a description of the media, software and hardware used in the process;
  • a data dictionary that explains how records are indexed when created, processed, stored or backed-up;
  • the procedures and protocols in place to prevent the unauthorised deletion, alteration and destruction of record and reports.

If these regulations come into force, taxpayers should consider seeking the assistance of an IT specialist when compiling such documents.

The draft regulations also specify that when electronic records are kept, measures to ensure the adequate storage thereof have to be put in place, including:

  • the appropriate storage of the media on which the records are recorded (e.g. the back-up hard drive);
  • the storage of all electronic signatures, log-in codes, keys, passwords or certificates required to access the records; and
  • procedures to obtain access to any encrypted records.

All of the above records should be readily available for inspection by SARS at all reasonable times and at premises physically located in South Africa. Section 45 of the Act empowers a SARS official to visit one’s business premises, without prior notice, to inspect one’s record keeping. A failure to retain records as required by the Act is a criminal offence in terms of section 234(e) of the Act.

  • There are several other draft regulations that fall outside the scope of this article. For a better understanding of the new Tax Administration Act and the regulations, a seminar (in Afrikaans) will be held on 10 October 2012 at the golf club house of Boschenmeer Estate in Paarl. We also provide in-house training workshops with a practical approach.

For more information contact Sonja Frank or Estian Haupt of Exceed Tax and Advisory Services on tel. 021 882 8140 or e-mail estian@exceed.co.za