SARS cracking down on one group of taxpayers

The South African Revenue Service (SARS) has increased its crackdown on high-wealth individuals (HWIs) by introducing a new initiative targeting these taxpayers.

This is according to Tax Consulting South Africa, which said SARS has introduced a new initiative for HWIs by sending out to each of these taxpayers an introduction note to their “Dedicated Relationship Managers”. 

“The note is framed as a shift in how SARS interacts with its high-value taxpayers, offering a more personalised approach to tax compliance and advisory services,” the organisation explained.

SARS defines an HWI as a person with gross assets worth R75 million or more. 

“This group of taxpayers plays an important role in South Africa’s economy and in sustaining revenue growth,” the revenue service explains on its website. 

Therefore, in line with global standards set by the Organisation for Economic Co-operation and Development (OECD), many foreign tax authorities have established units that serve high-net-worth clients, including SARS. 

SARS launched its High Wealth Individual Unit in April 2021 to provide clarity and certainty to HWI taxpayers and to make it easy for these individuals to comply with their tax regulations by offering a specialised service. 

“Our focus is to promote voluntary compliance, enhance revenue collection, and foster a fair tax environment,” SARS explained.

“As much as the HWI Unit is dedicated to assisting taxpayers with their legal obligations, we are equally committed to detecting and deterring non-compliance.” 

“The HWI Unit will act without fear or favour to make non-compliance hard and costly.”

Therefore, SARS’ HWI Unit’s mandate is to deal with the complexity of HWI taxpayers’ tax affairs and afford them a differentiated and dedicated end-to-end service. 

“By delivering an efficient service to HWI taxpayers, the HWI Unit aims to improve voluntary compliance.”

The HWI Unit prioritises individuals with complex financial arrangements and substantial wealth, often derived from multiple sources.

Tax Consulting SA explained that while introducing a dedicated manager appears to offer numerous benefits, the rationale, benefits, and consequences are unclear. 

“The specialised attention from SARS confirms that high-net-worth individuals are under closer scrutiny,” the organisation explained. 

“The HWI Unit has stated that they are not only about offering support but also ensuring compliance standards are met to the highest degree.”

Tax Consulting said it has seen increased attention from SARS on HWIs, which often involves in-depth reviews of their tax filings and financial activities. 

The organisation said it’s essential to maintain transparency and accuracy in all tax-related matters, as any discrepancies or non-compliance could result in significant penalties or further investigation. 

“One item our practice often sees that taxpayers get wrong, including lesser experienced tax practitioners and accounts, is the statement of assets and liabilities,” it said. 

“This goes to the heart of tax compliance and, once disclosed, is a permanent record that SARS can reconcile against.” 

This is especially true with the third-party data SARS receives, with any information mismatch triggering automatic attention.

While the dedicated manager can assist HWIs with inquiries and provide clarity, Tax Consulting warned that taxpayers should continue to be diligent in their tax planning and reporting. 

The personalised service is a double-edged sword – it offers direct assistance but also signals that SARS is keeping a closer watch on HWIs to ensure full compliance with tax laws. 

“We have also seen that relationship managers are often without real influence, and the moment a matter gets complex, they cannot really cause a matter to be better resolved than the formal processes,” it said.

“In summary, while the new service from SARS offers convenience and support, taxpayers should approach it with caution, ensuring that they maintain strict adherence to all tax obligations.” 

“The relationship manager is there to help, but the onus remains on the taxpayer to ensure their tax affairs are in order and above reproach.”