While SARS’ announcement of the removal of the supplementary declaration for Corporate Income Tax (CIT) for companies or close corporations – the IT14SD form – appears to indicate less paperwork, cost and time when a company is selected for CIT verification, the reality is that it will result in greater scrutiny during the verification process. Because being selected for verification poses significant risk to your company in terms of time, cost and effort, and the possibility of being referred for audit, the expertise and assistance of your accountant is highly recommended.
Companies must, within 12 months of their financial year-end, submit to SARS an Income Tax Return for Companies (ITR14), as well as supporting documents, declaring their full income tax responsibility to SARS. This declaration, return and supporting documents may be selected for verification by SARS.
A verification involves the comparison of the information declared on the return to the taxpayer’s financial and accounting records and other supporting documents. The purpose of a verification is to ensure that a declaration or return represents a taxpayer’s tax position fairly and accurately.
Previously, when companies were identified for a verification, SARS required them to submit the Supplementary Declaration for Companies or Close Corporations or IT14SD form. This is no longer required by SARS, but it will increase the scrutiny companies face when selected for verification.
What has changed?
The requirement to submit an IT14SD in a verification case is replaced by a letter requesting specific relevant documents based on the reason for verification.
SARS also says that as of September last year, companies are no longer required to submit any outstanding IT14SDs and that should taxpayers receive any further notification or final demand letter to submit an IT14SD, such request should be ignored. However, taxpayers should always check with their accountant before disregarding correspondence of any kind from SARS.
What’s still the same?
- The requirement to submit relevant documents upon submission of the ITR14.
- All correspondence will still be issued as before.
- The process of dealing with the verification case will remain the same.
- The submission of specific relevant documents will be required during the verification process.
- The verification of a company always requires the submission of a signed set of Annual Financial Statements (AFS), as well as a detailed Tax Computation and the underlying supporting documentation/schedules (e.g. Tax pack).
- When requested to submit specific relevant documents based on the reason for the verification, companies are still required to submit the documents within 21 working days.
How does this affect your company?
When a company is now identified for verification, it will be notified of the verification, as is the current practice and will be requested to:
- Submit specific relevant documents based on the reason for the verification, or
- Submit a revised Corporate Income Tax ITR14 return.
To comply with a request to submit specific relevant documents, the requested documents must be uploaded using eFiling, or any other submission channel, including SARS Online Query system (SOQS).
Once the relevant documents are uploaded, a SARS verifier will be able to action the case. If the relevant documents are deemed insufficient, or additional documents are required, this will be requested. The relevant documents must still be provided within 21 working days. If a company does not comply with the request for relevant documents, SARS will raise a revised assessment to resolve the verification case, and will add back the related expenses, dependent on the specific relevant documents requested.
Companies can comply with a request to submit a revised Corporate Income Tax ITR14 return through a request for correction (RFC). Companies have the option of submitting one correction, which may or may not resolve the verification. However, the revised ITR14 will also be subjected to a risk evaluation.
Seek professional assistance
Being selected for a verification entails significant risk to any business. In addition to the time, cost and effort to collate the information, documents and clarifications required, the taxpayer could still be referred for audit as part of the SARS compliance process, even if the verification process has been completed.
Whether submitting a Corporate Income Tax ITR14 return or facing a SARS verification with a request to submit documents or to file a correction, you would be well-advised to rely on the expertise of your accountant to ensure compliance.