Have you made full disclosure in your tax return?

21 Nov 2019

With the deadline for individuals (who are not provisional taxpayers) fast approaching for submitting their tax returns, a question that is worth asking is whether full disclosure has been made in the relevant tax return. A taxpayer has an obligation in terms of the Tax Administration Act (“TAA”) to submit their return in the prescribed format by the specified date for the relevant year of assessment.

In addition, the taxpayer has the obligation to provide SARS with a return that contains information as specified in the relevant Act and such return must be full and true.

A “return” is defined in the TAA to mean “a form, declaration, document or other manner of submitting information to SARS”. The definition is widely phrased and implies that a “return” can comprise multiple documents. In practice, however, SARS has been noted to focus on the prescribed return form in determining if the taxpayer has duly submitted a return as required in terms of the TAA. The reason for this is that the actual form submitted by the taxpayer is utilised as the point of reference for the generation of any further queries by SARS. It is argued that, if for example, a block that is not ticked by the taxpayer, then the return will not be full and true, notwithstanding that there may be other supporting documents submitted simultaneously by the taxpayer that would evidence the correct tax position. It is further argued that it is not for SARS to necessarily inquire as to the correct position and the obligation rests with the taxpayer to take due care in completing and submitting any return. This narrow approach adopted by SARS can prejudice a taxpayer and is questioned for its procedural fairness.

The implications of failing to complete the standard form return accurately need not necessarily arise immediately. It is also important for a taxpayer to be aware that whilst there is a statutorily prescribed 3 year (or 5 years in the case of a tax which is self-assessed such as VAT) prescription period after which SARS cannot reopen an assessment, there is a proviso where the taxpayer has committed fraud, made a misrepresentation or there has been non-disclosure of material facts. In these instances, prescription will not be applied, and SARS has the right to reopen an assessment. The question that then arises is whether the failure to fully and truly complete the prescribed return form constitutes a material non-disclosure of facts. The answer according to SARS is in the affirmative. This can mean that where the taxpayer has provided sufficient supporting documents that do disclose all information, the failure to complete the prescribed form accurately results in a non-disclosure that can be considered material. SARS then has the right to reopen an assessment even if outside of the 3-year time limitation which can have a significant impact on the taxpayer.

The take home message is that taxpayers should therefore take due care in submitting their tax returns. A taxpayer must ensure that all information has been provided and that there is an accurate reflection of their tax affairs in not only the supporting documents but also the prescribed form used to capture the relevant details.

See also:

• Voluntary disclosure of undeclared foreign assets in offshore trusts
• How you can legally “revolt” against taxes
• When must a reportable arrangement be disclosed to SARS?

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)