Section 69 of the Income Tax Act, 1962 (“the act”) imposes an obligation on certain persons, if required by the Commissioner for the South African Revenue Service, to furnish information or returns within the time period as prescribed by the Commissioner.
These should reflect, among other things, interest earned by taxpayers, rent received by taxpayers or other specific information set out in section 69(1) of the Act.
On 29 February 2012, Government Notice No 173 appeared in Government Gazette No 35090, imposing an obligation on institutions to submit information to the Commissioner bi-annually with effect from the 2013 year of assessment in terms of Section 69. Historically, the Commissioner required certain institutions to submit returns and information reflecting interest derived by taxpayers in respect of the tax year on an annual basis.
The Commissioner has now decided that the information must be submitted bi-annually and that reporting institutions are required to submit returns of monies invested with, loaned to and deposited with those institutions and in respect of interest received by or accrued to or in favour of any person from the reporting institution or from any other business carried on by the reporting institution in South Africa for the period from 1 March 2012 to 28 February 2013.
The Government Notice defines reporting institutions as follows:
- Banks regulated by the Registrar of Banks;
- Co-operative banks regulated by the Co-operative Banks Development Agency;
- The South African Post Bank Limited (Post Bank;)
- Financial institutions regulated by officials of the Financial Services Board;
- Companies listed on the JSE and connected persons in relation to the companies that issue bonds, debentures or similar financial instruments;
- State-owned companies that issue bonds, debentures or similar financial instruments; and
- Organs of state, as defined in Section 239 of the constitution, that issue bonds or similar financial instruments.
|SARS's new reporting requirements are |
onerous and institutions need to upgrade
their systems to meet them.
The reporting institutions are required to submit the returns to the Commissioner by 31 October 2012 in respect of interest derived for the period 1 March 2012 to 31 August 2012, or by 31 May 2013 in respect of the period 1 March 2012 to 28 February 2013.
Previously, reporting institutions were only required to submit returns covering the tax year, that is generally from 1 March 2012 to 28 February 2013.
Affected institutions will need to upgrade their systems so that they can supply the information required bi-annually and comply with the provisions of Section 69 of the act and the government notice. It must be noted that the Commissioner requires that the returns are filed electronically with SARS.
The government notice also prescribes the information to be disclosed in the returns submitted to SARS in respect of natural persons and persons other than natural persons.
In the case of natural persons, the reporting institution is required to submit details of the person’s surname, address, identity number and tax reference number, as well as certain other particulars pertaining to the investment held by the person with the institution and the interest earned.
Reporting institutions are also required to indicate the account verification status of the investment in terms of the Financial Intelligence Centre Act. The institution must also report the monthly totals of all credits and debits to the account as well as the closing balance of accounts at the end of the return period.
In addition, SARS must be advised of the date on which the account was opened and the date on which it was closed.
Much of the information now required was not called for before and did not appear on IT3(b) certificates issued by banks to their clients. The requirement to disclose the monthly totals of all credits and debits to the account will enable SARS to identify taxpayers who should be subject to a tax audit.
In the case of companies or other persons, the registration number or reference number issued by the regulatory authority concerned must be submitted together with the tax reference number as well as interest derived by the taxpayer, and other information pertaining to the movements on the accounts.
The other information which is required for natural persons must also be submitted for other persons.
SARS and a reporting institution may agree to different periods and dates for the submission of returns for persons whose financial years do not end on the last day of February of each year.
The extent of the information required from reporting institutions is onerous and it is going to be important that institutions amend their systems so that they can comply with the reporting obligations now imposed in terms of section 69.
It remains to be seen if SARS will itself issue notices to taxpayers in respect of interest derived from the over-payment of tax, which used to be done historically, but does not appear to be the case currently.
This does create difficulties for taxpayers, as it is often unclear as to the amount of interest received from SARS as a result of the overpayment of income tax or value-added tax, and, more importantly, the date on which that interest accrued in favour of the taxpayer.
DR BERIC CROOME is a Tax Executive at Edward Nathan Sonnenbergs Inc. This article first appeared in the Business Day “Business Law and Tax Review” supplement, April 2012. Free image from ClipArt