S.Africa: SARS (IRS) is coming after your bank account

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South African taxpayers have been warned that the South African Revenue Service (SARS) is fully entitled to come after your bank account if you owe it money—and 2025 is likely to be a particularly tough year for non-compliant trusts.

While some taxpayers may be surprised or even shocked to hear that the taxman can target their bank accounts directly, experts have noted that this is nothing out of the ordinary.

Jashwin Baijoo, Associate Director and Head of Strategic Engagement & Compliance at Tax Consulting SA, said that SARS can instruct a bank to empty its accounts and pay a tax debt due without the account holder’s authorisation.

Court rulings in the Revenue Service’s favour have also repeatedly reinforced this.

A more recent matter involving a company entering into a business rescue showed that not even going that route can extinguish the debts owed to SARS, Baijoo said.

In that case, the company in question owed approximately R24 million in VAT to SARS. However, it did not enter into any formal agreement with the taxman to exempt this debt under business rescue proceedings.

Ultimately, the matter went to court, and the company was saddled with the full debt—where both the company’s banks, Nedbank and Investec, made direct payments to SARS.

Baijoo said taxpayers cannot simply ignore SARS or hope the problem will disappear.

“There can be no cutting corners, and SARS must be legally and correctly approached the first time around,” he said.

Where taxpayers don’t have a legal case to launch a dispute with SARS, they can approach the service for a tax compromise.

Compromises are intended to get the taxpayer and SARS on the same page about their finances and come to some sort of agreement. This includes a possible reduced tax bill.

However, this route requires that taxpayers get to SARS first—before SARS finds you—and for the financial situation to warrant it.

Baijoo said taxpayers need to show financial hardship and estimate their net worth.

“Where eligible, a taxpayer may seek the write-off on interest and penalties. The taxpayer then offers to settle, in part or in full, the capital amount owed to SARS, either by lump sum or instalment payments.

“This proposal, when accepted by SARS, must be reduced to writing,” he said.

Taxpayers who do not satisfy the requirements for a compromise but cannot afford to settle a tax debt in a lump sum payment still have the option to apply and enter into a payment arrangement with SARS, which is known as a deferral of payment.

A tax compromise can be applied to any form of tax debt and across all tax types, be it Personal or Corporate Income Tax, VAT and/or PAYE, regardless of whether it is for an individual, company or trust.

This should be of particular interest to trusts, which have become a major target for SARS.

Trust trouble ahead
The 2024 tax filing season for trusts closed a week ago, but tax experts are already putting up the red flags for what is to come in 2025.

A recent webinar hosted by tax and accounting services group, the CPD Consortium, warned trusts that they are squarely in SARS’ sights this coming tax year.

The Revenue Service has introduced a host of changes for trusts over the past two years, taking a much closer look into their affairs. These are aimed at bringing greater transparency to their ownership and their beneficial ownership in particular.

SARS aims to record all beneficial owners of registered trusts to ensure compliance with the Financial Action Task Force (FATF) requirements. South Africa is on the FATF Grey List and aims to get off as soon as possible.

In 2024, trusts were required to fill out more forms and give SARS a lot more information to become tax-compliant. This included deeper financial information as well as data on the persons linked to the trusts.

The bonus for trusts is that they were given a later tax filing window, and they were given some leniancy and ‘grace’ by SARS as they caught up with the changes.

However, the CPD Consortium said that this will be coming to an end for 2025, and the crackdown will begin in earnest.

While SARS will not impose penalties for the current year of assessment for non-submission of required trust IT3(t) returns, the industry expects that fines will start flowing in the new financial year, starting April 2025.

CPD said that SARS lays the tax compliance responsibility fully at the feet of trustees, and warned that the matter should not be taken lightly.

Source: https://businesstech.co.za/news/finance/808746/sars-is-coming-after-your-bank-account/



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