Corporate Tax Advisory Services
By Christel Brits
Taxpayers have always been required to keep original hardcopies of their records to satisfy SARS that their records are not falsified or altered. Taxpayers have however also been allowed to keep records electronically in the form and manner prescribed by the Commissioner.
The Tax Administration Act 28 of 2011 (“the TAA”) is more specific in the manner, form and place of record keeping. Generally records are required to be retained for a period of five years from the date of submission of the related return, although in certain circumstances a longer period is required, besides the longer retention periods, which could extend beyond five years, records must also be maintained in an orderly fashion. Longer retention periods may be required, for example, where a capital gain may be realised only in the long term, or where a particular tax liability is the subject of an objection and appeal.
Taxpayers are required to maintain their records at a place physically in South Africa. Only with specific authorisation from a senior SARS official may they be maintained in electronic format outside the country. In such case the records must be accessible from the taxpayer’s business premises in South Africa. A senior SARS official must be satisfied with the location, integrity and accessibility of the offshore records for the duration that the records must be maintained. The taxpayer must in some instance satisfy SARS by way of providing manuals detailing the accessibility of records, for example where the platform used is not commonly recognised in South Africa.
The records may also only be maintained in a country with which South Africa has concluded an international tax agreement for reciprocal assistance in the administration of taxes.
It is imperative that SARS approval is sought upfront. Hopefully SARS will apply a uniform policy in this regard so that taxpayers can enjoy legal certainty.
Taxpayers are urged to revisit their document retention policies to ensure compliance or face strictly enforced penalties and interest and even more stringent criminal sanctions.