SARS assessment vs self-assessment
Self-assessment | SARS assessment |
| The taxpayer is required to report the basis of assessment (for example taxable supplies), to submit a calculation of the tax due and, usually, to simultaneously pay any outstanding tax due as calculated by the taxpayer. The onus is on the taxpayer to calculate the correct amount of tax payable. Currently Employees’ tax and Value Added Tax make use of self-assessment. | Where the taxpayer is called upon to submit information to SARS; the onus on the taxpayer is to submit a true and complete return of the information required. SARS is responsible for establishing the tax due, normally by means of an assessment, the assessment specifies the period within which the tax must be paid. Currently Income Tax is part of the SARS assessment system. |
Types of assessments:
Original assessment
An original assessment is the first assessment of a tax period.
The following are considered to be original assessments:
- Where a taxpayer submits an initial return which is a self-assessment e.g. VAT or Employee’s Tax return, such a self-assessment is processed by SARS and is considered to be an original assessment.
- Where SARS processes the information submitted on an income tax return from the information submitted in the return, SARS issues an original assessment to the taxpayer.
- If SARS requires a taxpayer to determine the tax liability and no return is required, the payment of the amount of tax due is an original assessment, e.g. payment of employees’ tax or provisional tax without submitting a return.
- An estimated assessment can also be an original return, this is where a taxpayer has not yet submitted a return and SARS raises an estimate; based on information at our disposal.
Additional assessment
If at any time SARS is satisfied that an assessment does not reflect the correct application of the tax Act to the prejudice of SARS or the fiscus, SARS must make an additional assessment to correct the prejudice. Upon verification, an audit or an investigation, SARS may be necessitated to raise an additional assessment with regards to income/turnover which was under declared or deductions/inputs which were overstated. The aggregate of under declarations and overstated amounts may result in an additional assessment.
Additional assessments could be estimated assessments where SARS raises an assessment based on information at our disposal or agreed an estimated assessment where SARS agrees with the taxpayer to raise the agreed estimated assessment (this occurs where the taxpayer cannot accurately determine his or her tax liability).
Where a taxpayer submits a return and wishes to amend such a return, due to figures that were incorrectly captured or omitted from the return which was filed, a request for correction (RFC) may be filed with SARS, which entails submitting a new version of the return previously submitted. In such a case SARS will process the return and an additional assessment may be issued to the taxpayer.
Reduced assessment
SARS may make a reduced assessment in the following instances:
- Where a dispute was lodged and SARS has either partially or fully allowed the dispute.
Where a dispute is resolved by reaching a settlement between SARS and the taxpayer and the tax liability needs to be reduced. - To give effect to a judgment pursuant to an appeal against a tax court decision and there is no right to further appeal;
favour of taxpayer. - Where SARS is satisfied that there is a readily apparent undisputed error in the assessment by SARS or by the taxpayer in a return i.e. to request a reduced assessment. This refers to a RFC, where a taxpayer submits a return and wishes to amend such a return, due to figures that were incorrectly captured or omitted from the return which was filed. It must be noted that the nature of the error anticipated here is clarified by the wording “readily apparent” (plain, clear, obvious), so as to prevent taxpayers from using the RFC to bypass the formal mechanisms and timeframes which are in place for an objection. Where a RFC is submitted, SARS will process the return and a reduced assessment may be issued to the taxpayer.
Jeopardy assessment
SARS may make a jeopardy assessment in advance of the date on which the return is normally due, if the Commissioner is satisfied that it is required to secure the collection of tax that would otherwise be in jeopardy. This would typically happen, where a taxpayer tries to place assets beyond the reach of SARS’s collection powers when an investigation into the taxpayer’s tax affairs is initiated or where a tax debtor is about to leave South Africa without satisfying tax debts.
In addition to any rights to dispute, a review application against a jeopardy assessment may be made to the High Court on grounds that its amount is excessive or that circumstances that justify a jeopardy assessment do not exist. In such proceedings, SARS bears the burden of proving that the making of the jeopardy assessment is reasonable under the circumstances.
Estimated assessments
SARS may make an original, additional, reduced or jeopardy assessment based in whole or in part on an estimate in the following circumstances:
- If the taxpayer fails to submit a return as required.
- If the taxpayer submits a return or information that is incorrect or inadequate.
- does not submit a response to a request for relevant material under section 46, in relation to the taxpayer, after delivery of more than one request for such material.
SARS must make the estimate based on information readily available to it.
The taxpayer may not lodge an objection or appeal against an estimated assessment. The taxpayer may submit a complete and correct return within 40 business days from the date of the assessment, which may result in a reduced or additional assessment. After which a dispute may be lodged if required
Agreed estimated assessments
If a taxpayer is unable to submit an accurate return, a senior SARS official may agree in writing with the taxpayer as to the amount of tax chargeable and issue an assessment accordingly. Such an assessment is not subject to objection or appeal as the assessment is considered as being final due to the agreement reached. The taxpayer will also not be able to submit an original return (if applicable) or a RFC with regards to such an assessment.
SARS Auto Assessment
Frequently Asked Questions
1. What is a SARS assessment?
- Answer: A SARS assessment is a determination made by the South African Revenue Service (SARS) to establish the amount of tax due by a taxpayer. This involves processing the information submitted by the taxpayer in their return, such as the ITR12 for individuals or ITR14 for companies. The assessment specifies the period within which the tax must be paid.
2. What are some examples of self-assessments?
- Answer: Examples of self-assessments include VAT201 (VAT declaration) and EMP201 (payment declaration for employees’ tax purposes). These returns are completed by the taxpayer, who determines their own tax liability.
3. What is an original assessment?
- Answer: An original assessment is the first evaluation of a tax period. It includes self-assessments like VAT and Employee’s Tax returns processed by SARS, as well as assessments from returns like ITR12 or ITR14. It can also occur when no return is submitted, but tax is paid based on an estimate from SARS.
4. What is an additional assessment?
- Answer: An additional assessment is made by SARS if they find that an initial assessment does not correctly apply the tax law, to the detriment of SARS or the fiscus. This can result from audits or investigations that reveal under-declared income or overstated deductions.
5. When would SARS issue a reduced assessment?
- Answer: SARS may issue a reduced assessment if there is a dispute resolution where the taxpayer’s liability is reduced, a judgment from a tax court that necessitates a reduction, or if a readily apparent error is found in the initial assessment.
6. What is a jeopardy assessment?
- Answer: A jeopardy assessment is issued when SARS believes that there is a risk of not collecting the tax owed. This can happen if a taxpayer is attempting to hide assets or is about to leave the country. Jeopardy assessments are made in advance of the normal return due dates.
7. What are estimated assessments?
- Answer: Estimated assessments are made when a taxpayer fails to submit a return, submits incorrect information, or does not respond to SARS’s requests for information. These assessments are based on information SARS has available and cannot be disputed; however, a complete and correct return can be submitted within 40 business days to potentially adjust the assessment.
8. What are agreed estimated assessments?
- Answer: Agreed estimated assessments are issued when a taxpayer and SARS agree on the amount of tax due, usually when the taxpayer cannot provide an accurate return. These assessments are final and not subject to objection or appeal.
9. Can I request a correction to an assessment?
- Answer: Yes, you can request a correction if you have identified a readily apparent error in your return or assessment. This involves submitting a new version of the return, which may lead to a reduced assessment if the error is accepted by SARS.
10. What should I do if I cannot meet the deadline for submitting my return?
- Answer: If you cannot meet the deadline, it’s important to communicate with SARS as soon as possible. You may be able to arrange for an extension or discuss your situation with them. Failing to submit a return on time can lead to estimated assessments or other penalties.
- September 12, 2024
- 2:19 pm
