Corporate taxpayers are sure to welcome the decision by the South African Revenue Service (Sars) to scrap the supplementary declaration form, the IT14SD. However, they should be aware that although the IT14SD has fallen away, Sars’s verification of their tax returns remains largely unchanged.
At the end of August, Sars announced that will no longer issue or accept IT14SDs with effect from 16 September. This includes IT14SDs outstanding at that date.
The decommissioning of the IT14SD follows ongoing engagements between Sars and large corporates, which found the supplementary declaration an expensive and time-consuming administrative burden.
Sars has decided that the form was not achieving its intended purpose.
Sars introduced the Supplementary Declaration for Companies or Close Corporations (IT14SD) in 2011. The IT14SD required entities selected for verification to reconcile income tax, value-added tax, Pay-As-You-Earn and Customs declarations after the submission of their corporate income tax returns.
Transitional arrangements
Sars said the following should be noted in relation to the decommissioning of the IT14SD and the introduction of risk-specific letters:
- If you have already submitted an IT14SD, Sars will deal with the verification using the IT14SD. If you receive a letter from Sars to submit documents in respect of the submitted IT14SD, those documents must be submitted.
- If an IT14SD has not been submitted, Sars will issue a letter, in terms of the new verification process, requesting the submission of specific relevant documents, and the requirement to submit the IT14SD will fall away.
- As Sars will be issuing letters requesting relevant supporting documents in respect of any outstanding IT14SDs, as well as for any new verifications, any IT14SD forms outstanding on 30 August do not have to be submitted. If a taxpayer receives a further notification or final demand letter to submit the outstanding IT14SD, such request may be ignored.
What’s new and what stays the same
The verification process, now that Sars will no longer use the IT14SD, remains largely unchanged in other respects. Sars will continue to issue a Verification Notice setting out the timelines, says Tsanga Mukumba, an associate in Cliffe Dekker Hofmeyr’s tax and exchange control practice.
The main difference under the new verification regime is that in the Verification Notice, Sars will request specific supporting documents targeted at addressing the particular risks that were the underlying reason for the taxpayer being selected for verification.
The taxpayer retains the ability to submit a Request for Correction, allowing for the submission of a revised ITR14 return, Mukumba says. The revised ITR14 will also be subjected to a risk evaluation.
Tax experts at PwC point out that, in addition to the specific relevant documents requested, the verification process requires the submission of a signed set of annual financial statements (AFS) or supporting accounting records (where AFS have not been prepared), as well as a detailed tax computation, accompanied by the underlying supporting documents or schedules.
The requested documents must be uploaded using eFiling or any other submission channel, including the Sars Online Query System. The taxpayer will have 21 business days to submit the requested supporting documentation/information.
Once the relevant documents have been uploaded, Sars will action the case.
If the relevant documents are deemed insufficient or additional documents are required, further information will be requested.
Failure to comply with the request to provide the relevant documents may result in Sars raising a revised assessment to resolve the verification case, dependent and based on the specific relevant documents requested.
PwC says although the verification process in the form of the IT14SD has fallen away, Sars’s verification of the ITR14 return has not.
“Corporate taxpayers should be aware that the requirement to maintain a robust record-keeping system, across all tax types, is therefore necessary in the event that Sars should request information in support of the disclosures made in the ITR14 return.”
