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The reason for the recent dip in tax compliance might be as a result of perceptions about the state of affairs at you know where. But, this does not give us freedom to evade our tax obligations as citizens, after all it is our responsibility and duty to uphold and contribute to the well being of society. There are many ways to structure your taxes, legally to save money – non compliance is not one of them.
Here are 3 Reasons Why You Need to Be Tax Compliant:
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Reason No.1 To Buy or Sell a Property
If you want to buy or sell a property in the future, then you need to get your tax affairs in order now. The property transfer process is an excellent opportunity for SARS to ensure tax compliance, and they are making full use of it, don’t get caught in the cross fire.
The process requires both buyers and sellers to submit transfer duty declarations. Your Income Tax number and your Vat number (if you’re a VAT vendor) need to be included in these declarations.
Failure to adhere to the tax compliance as set out in the legislation can have a significant and costly impact on the transaction, but most buyers and sellers are completely unaware of this.
In the worst-case scenario, SARS can withhold the Transfer Duty Receipt until all tax issues have been resolved. For the seller it’s more troublesome, SARS can go as far as appointing a conveyancer to recover any outstanding taxes from the proceeds of the sale – if your deal still goes through.
Best case scenario is significant delays in the transfer process leading to increased costs, and of course there will be penalties from SARS.
Also keep in mind if you are not currently tax compliant and you decide to deal with your tax issues right before the deal, it can trigger an investigation by SARS, as it is suspicious that you are only now becoming tax compliant. This too will lead to more delays and increased costs.
The good news is tax compliance is a relatively simple process. Get advice from a tax practitioner and get your affairs in order, a clear record will always stand in your favour.
Reason No. 2 To Receive Your Retirement Or Severance Package
Hopefully you have received good advice from your financial advisor (or at least from your peers) and you have setup a retirement annuity, even if this is only for the tax benefits.
To receive any money at any stage from the retirement fund you will need to submit your tax returns every year. You might think you only need to worry about this when that retirement day eventually comes around, but you would be foolish to think this way.
In many cases people need to draw money out of their fund early due to unforeseen financial issues, such as medical surprises or business failures. If you need the money in a hurry (to pay your bond or school fees) your tax affairs need to be in order, otherwise the fund will not release any money to you. If you are employed and your employer retrenches you, the same goes for your severance package. Any tax returns that are not submitted will mean you won’t see any of that severance package until it is all resolved, after penalties. And it’s surely the last thing anyone wants to deal with at that point in time.
Getting a tax return filed each year means you will receive your payout from any fund at any stage – stress free.
Avoid the stress and ensure your access to your retirement or severance package, get your tax affairs in order. Remember a clean record always stands in your favour.
Reason No. 3: Avoid SARS Penalties & Prosecution
Unfortunately, SARS has found itself in the position of having to act against offenders with criminal prosecution. This is partly due to the manner in which some citizens choose to evade their tax obligations and partly due to the increased targets set for the Receiver of Revenue each year.
Here’s an article from 16 April 2018 detailing how SARS and the NPA are prosecuting non-compliant tax offenders;
Enforcement at this level is a last resort, and you will no doubt be contacted before it reaches this stage to remedy your outstanding returns. But the message is clear, SARS means business and it’s not taking any discrepancies lightly.
Although ending up with a criminal record might be the extreme, getting financially penalised for your non-compliance is fairly certain.
Furthermore it is the duty of every South African to pay taxes to contribute the upliftment of our society and enhance the financial position of government and thereby its citizens.
There are many legal mechanisms in place to better manage your finances and lower your tax burden whilst staying compliant. Start by getting your tax affairs in order and maintaining your compliance, then look to structure your income and business affairs to maximise your wealth according to the guidelines.
Your goal should be to have a clean tax record, every year.