Nobody looks forward to a SARS audit. The process of gathering documents takes time, money, and effort. Worse still, it can lead to penalties of up to 200%. Repeat offenders or obstructive taxpayers face the harshest penalties. With SARS ramping up enforcement, audits are becoming more frequent and rigorous. However, our experienced team can help you navigate this process smoothly, saving you time and ensuring compliance.

“The aim of a tax audit is to determine if the taxpayer has complied with the relevant legislation administered by SARS.” – SARS

During a tax audit, SARS reviews financial statements, accounting records, and supporting documents to verify your tax declarations. If you didn’t submit a return, an audit will check if your actions complied with tax law. Being selected for an audit – whether for income tax, VAT, employees’ tax, or capital gains tax – carries significant risks.

Risks of a SARS Audit

A SARS audit requires substantial time, cost, and effort to gather the necessary information, especially if the audit covers several years. If you fail to submit the requested documents, SARS will raise a revised assessment based on available or third-party information, even if incomplete. Audits can result in penalties of up to 200% for understatement of taxes, particularly for repeat offenders or obstructive taxpayers.

Worst-Case Scenario

An audit can lead to criminal proceedings. It’s a criminal offense to refuse or neglect to supply relevant materials requested by SARS without just cause. SARS no longer needs to prove intentional tax evasion – mistakes or negligence can result in criminal charges.

Increasing Audit Risk

SARS audits are becoming more common. Any taxpayer can be selected for an audit based on various criteria, including random selection, cyclical audits, or risk assessments. Even tax-compliant individuals and companies with clean audits are regularly audited. Taxpayers are flagged through SARS’ sophisticated case selection methodology. Those most likely to be audited include individuals with additional income and those with discrepancies between their tax returns and other sources, such as mismatches between annual turnover and VAT declarations.

The Audit Process

1. Notification of Audit: This letter outlines the initial scope of the audit, required documents, and details of the SARS auditor.
2. Additional Requests: SARS can request more material at any time, including information from third parties.
3. Submission of Documents: Preferably via eFiling or at a SARS branch. Collection or delivery can also be arranged.
4. Audit Duration: Typically between 30 business days and 12 months, depending on case complexity.
5. Progress Reports: SARS provides updates every 90 days.
6. Finalisation of Audit: If SARS agrees with your tax position, they will issue a Finalisation of Audit Letter.
7. Audit Findings: If there are issues, an Audit Findings Letter will detail the assessment, amounts due, and payment deadlines.
8. Disputes: You have 21 days to respond to disagree with SARS’s findings and must provide supporting evidence.
9. Refunds: Issued only after the audit concludes.

Breezing Through the Audit Process

Most audits end positively with the right approach. Here are some tips to ensure your audit goes smoothly:

• Keep Accurate Records: Ensure all records are up-to-date with legislative requirements. Speak to our team for assistance.
• Act Immediately: Contact us as soon as you receive a Notification of Audit letter. We can manage communications with SARS and collaborate with the auditor to avoid penalties.
• Rely on Expertise: Our team will guide you through the process, from clarifying required documents to managing the next steps. We’ll ensure a successful audit.
• Protect Your Rights: SARS must follow legal procedures. We will ensure you receive fair treatment and audit outcomes.

SARS audits are a reality, but with proper preparation and support, they needn’t be daunting.