COVID-19: Sundry Tax Developments

By Peter Cottrell CA(SA)

This communication will outline recent developments in the Covid-19 tax relief measures and will provide a further update on the South African Revenue Service (SARS) auto assessment system, while noting a caution regarding the abuse of electronic communication by scammers.

Recent Developments

On 31 July 2020 National Treasury announced an extension of tax relief measures as follows:¹

• The streamlined special tax dispensation for funds established to assist with Covid-19 disaster relief measures previously applied for a four-month period from 1 April to 31 July 2020.  This dispensation has been extended for a further two months and will now apply to 30 September 2020.
• The deferral of employees’ tax liabilities for tax compliant small to medium sized businesses previously applied from 1 April to 31 July 2020.  The deferral period is now extended by one month to also include the August 2020 payroll period. The deferred amounts will be repayable in equal instalments over the following six months.
• The deferral for payment of excise taxes on alcohol and tobacco has been extended.

Additional tax proposals are being considered and may be included in a second batch of amendments.

Auto-assessment update

In previous communication regarding the South African Tax Filing Season 2020, we advised that SARS would be implementing auto assessment for selected individual taxpayers.  SARS have implemented this new system with some enthusiasm, and by now many taxpayers will have received an SMS notifying them of the auto assessment. For reference, the auto assessment SMS message will read as follows:

Tax Ref: ******[NNNN]. Your 2020 Year of Assessment tax calculated results is RXXX.XX, based on the information at SARS disposal. You can accept or edit your return through the SARS digital channels. Failure to do so may result in SARS raising an estimate assessment. For more info, visit the SARS website on www.sars.gov.za/TaxTypes/PIT/Tax-Season/Pages/How-does-the-Tax-Calculation-work.aspx

(with “NNNN”) being the last four digits of your tax number)

While this system could save pressure on the tax system for salaried only taxpayers, there will be deficiencies, particularly for taxpayers who claim valid deductions, such as donations, business travel and medical expenses.  It is interesting that SARS have issued auto-assessments to directors of companies, who typically would be expected to make a declaration of assets and liabilities on their income tax return.

Clients who have received auto assessment notices are requested to please contact Jane Lotter (jane@bizsupport.co.za) and she will review the results and advise on further action required.

For taxpayers who handle their own tax affairs, the tax self-assessment process will work as follows:

1. Taxpayers will need to log onto SARS eFiling (www.sarseFiling.co.za) or use the SARS MobiApp. 
2. A notice will appear that you have been auto-assessed – 

3. Clicking on the “view” button will bring up a simulated tax calculation from SARS.  This calculation will have been prepared by SARS on the basis of the third-party tax certificates that they have on their system.
4. Taxpayers will then be required to review the calculation and to either “Accept” or to “Edit the Return”

We draw attention to the notes that appear at the footer of the self-assessment and that the onus is on the taxpayer to ensure that information is complete.

One of the practical challenges is that SARS shows the aggregate income for each income code, but not the detail from where this is derived.  For taxpayers who only have a single source of income – for example, a salary from a single employer – this is unlikely to be a problem.  However, for other taxpayers this will require some careful analysis to ensure that the information submitted by SARS is correct.

Beware the scammers

As a further practical caution, we advise taxpayers to be aware that the activities of electronic scammers have escalated significantly during lockdown and supposed SARS eFiling messages provide an easy hook for the unwary.  One problem is that many taxpayers will ignore valid SARS SMS’s, as set out above, as being a scam and may fail to take actions that are required for tax compliance.

However, a more serious issue is that scam messages may well cause taxpayers to divulge their personal details.  The scam emails can be fairly convincing, with an apparent “sarsefiling” email address, logos and other official-sounding wording.  More often than not, the email will advise of a refund due, which is another easy hook.  We have also seen emails that advise of audits or other adverse investigations.

The following are the usual give-aways that the message is a scam:

1. The actual email address (not what is displayed) will not be a real SARS email address.
2. There will be an attachment or a link requesting you to capture details.

Genuine SARS emails may have a PDF attachment, but will never require you to log-in to any site other than SARS eFiling.  We have no doubt that scammers will play on the auto-assessment process to draw in the unwary.

While auto-assessments will bring welcome simplification for certain taxpayers, most taxpayers will need to exercise a healthy dose of caution. 

References:
1 Treasury Media Statement: Publication of the 2020 Draft Tax Bills, Draft Regulations Prescribing Electronic Services, Venture Capital Company Survey to Give Effect to 2020 Budget and Extension of Some Covid-19 Relief Tax Measures