Written by Debora Motana, MaxProf Auditor
Introduction
The South African Revenue Service (SARS) has been actively conducting verification audits and issuing estimated assessments under Section 95 of the Tax Administration Act (TAA). These assessments are issued when SARS is unsatisfied with the accuracy or completeness of a taxpayer’s submitted return across various tax types. To identify potential compliance issues, SARS has employed more specialists and uses advanced Artificial Intelligence (AI) systems to pinpoint risk areas, detect non-compliance, under-declaration, fraudulent claims, income understatement, and duplicate submissions.
Understanding Section 95 of the Tax Administration Act
Section 95 of the TAA authorises SARS to issue an estimated assessment if a taxpayer:
- Fails to submit a return;
- Submits a return or relevant material that is incorrect or inadequate; or
- Fails to respond to requests for relevant material, even after multiple reminders under Section 46.
What Is an Estimated Assessment?
Taxpayers should ensure full compliance by:
- Submitting accurate returns by specified deadlines.
- Providing all supporting documentation that aligns with their tax declarations, if requested.
- Responding promptly to SARS’ requests for additional information.
If any of these requirements are unmet, SARS may issue an estimated assessment, which is based on its own calculations of the taxpayer’s liability.
VAT-Specific Estimated Assessments
According to the SARS website, an estimated assessment function has now been implemented specifically for VAT. This means that if a vendor fails to provide the requested documentation during the VAT verification process, SARS can raise an estimated assessment under Section 95(1)(c) of the TAA. Key points include:
- Details of the estimated assessment are listed on the VAT217 notice sent to the vendor.
- Once an estimated assessment is raised for VAT, requests for correction for that period will not be permitted.
- Vendors have 40 business days from the date of the VAT217 notice to submit any relevant material if they disagree with the assessment.
- Vendors can submit material via SARS eFiling, at a SARS branch, or through the SARS Online Query System (SOQS).
- An extension request is possible if the vendor cannot submit the material within the initial 40-day period.
- If the assessment results in a payable amount, the vendor may request a suspension of payment for the period indicated on the VAT217 notice.
- A Notice of Objection (NOO) cannot be submitted as estimated assessments under SEction 95(1)(c) are not subject to dispute.
Conclusion
Taxpayers should be vigilant in adhering to the requirements outlined in Section 95 of the TAA. When an estimated assessment is issued, Section 102 of the TAA places the burden of proof on the taxpayer to demonstrate whether the assessment is valid or needs adjustment.
Relevant Cases
For further insights, taxpayers may review the case: Taxpayer RPC v Commissioner for the South African Revenue Service (VAT 1373 & 13862) [2023] ZATC 9 (3 July 2023).
Take Action Now to Ensure Tax Compliance
Understanding SARS’ requirements for estimated assessments under Section 95 can help you avoid penalties and stay compliant. Make sure your tax returns are accurate, complete, and backed by proper documentation. If you’ve received a VAT217 notice or have questions about your compliance, act now to gather the necessary materials and respond promptly.
Need Assistance? Contact us today for expert guidance on navigating SARS’ assessments process and ensuring your tax records meet all legal standards. Stay compliant and avoid costly errors!
