When SARS comes knocking on your door
The Tax Administration Act, No. 28 of 2011, which came into effect on 1 October 2012, has given the South African Revenue Services (SARS) certain information gathering powers. This article gives a broad overview of the rights and limitations to the powers of SARS when visiting a taxpayer’s premises without prior notice.
When may SARS visit a taxpayer’s premises without prior notice? And what is such SARS official entitled to do?
Section 45 of the Act gives SARS officials the power to visit a taxpayer’s premises if they have a reasonable belief that a trade or enterprise is being carried out on the premises. However, their powers are limited: Section 45 specifically lists the actions SARS officials may take under these conditions, viz. they may:
- identify the person occupying the premises,
- verify whether that person is registered for tax, and
- establish whether there is compliance with Sections 29 and 30 of the Act regarding record keeping.
Section 45(2) provides that a SARS official may not enter a domestic dwelling, except the part of it, if any, that is used for purposes of trade.
What should a taxpayer do if a SARS official visits his premises without prior notice?
The taxpayer should allow the official to carry out the three actions provided for in Section 45 of the Act:
- First ask the SARS official for his identity card. In terms of Section 8 of the Act SARS must issue an identity card to SARS officials. This Section is in the process of being amended so that SARS only needs to issue an identity card to SARS officials who perform their duties outside of the SARS premises. Should the official be unable to produce the card upon request, a taxpayer may assume the person is not a SARS official and therefore refuse him entry to the premises.
- Once the official has produced his identity card, the next step is to call SARS and verify the identity card. Even though the Act does not provide for a way to verify the identity card, SARS has indicated that a dedicated telephone number, tel. 012 422 7435, will be made available for verification purposes.
- If everything is in order, a taxpayer is required to allow the official to identify the person occupying the premises. This could be, for instance, the natural person that is using the premises for trade in his own name, or the company carrying on its business at that premises.
The SARS official may then establish whether the person, whether the natural person or the company, is registered for tax. Showing the SARS official the relevant tax number on an official SARS document should suffice.
The first two steps have not required the SARS official to go further than the reception area of a taxpayer’s business premises. However, to establish whether there is compliance with Sections 29 and 30 of the Act – which describes what records must be kept and in what manner and form – the SARS official will have to be shown where and how the taxpayer’s records are maintained. Do not allow the official to abuse this power and conduct a search of the records: the Act does not enable him to inspect the contents of the records. He may only establish that the appropriate records are kept for the required period and that they are kept in an orderly fashion.
A SARS official visiting business premises without prior notice is only entitled to carry out the above-mentioned actions. Should SARS require anything else from the premises, Section 48 of the Act provides that the taxpayer must be given 10 business days’ notice to make available, at his premises, the relevant material specified in the notice.
A SARS field audit or investigation at a taxpayer’s premises:
This would usually follow a Section 46 request for relevant material, providing the taxpayer with a reasonable period to respond. This period will most likely be 21 business days.
In terms of Section 41 a SARS official has to be authorised by a senior official to conduct an audit or investigation. The first step should therefore be to request to see the identity card and authorisation letter of the SARS official.
The person on whose premises the audit or investigation is taking place, is required to give SARS reasonable assistance (as per Section 49 of the Act), including making available the appropriate facilities. This includes photocopy facilities, if available, answering questions and submitting relevant material. Section 49 is being amended to also include assistance from other persons on the premises. A taxpayer’s employees can thus be required to give reasonable assistance.
Section 48 does not allow a SARS official to enter a domestic dwelling without permission unless a part of the dwelling is used for trade. In this case, the official may access the relevant part only.
Exceed presents practical in-house training workshops about the powers of SARS and taxpayers’ rights under the Tax Administration Act. For more information, contact Sonja Frank or Estian Haupt of Exceed Tax and Advisory Services, tel 021 882 8140 or firstname.lastname@example.org