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SARS Moshito Conference Downtown Jozi 02 September 2010.

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Presentation on theme: "SARS Moshito Conference Downtown Jozi 02 September 2010."— Presentation transcript:

1 SARS Moshito Conference Downtown Jozi 02 September 2010

2 JOH-RNS017-20091208-JvW-P1 | Content Setting the context SARS Mandate Tax System SARS Compliance Approach Way Forward Setting the context SARS Mandate Tax System SARS Compliance Approach Way Forward 1

3 JOH-RNS017-20091208-JvW-P1 | 2 Why are we talking today 1.SARS acknowledge that taxpayers in different groupings have different issues/problems in complying with the tax laws, and have different opportunities and reasons for not doing so 2.Understanding taxpayers needs and behaviour and the reasons for compliance and non compliance within the Music industry 2.Determining on that basis the appropriate strategy

4 JOH-RNS017-20091208-JvW-P1 | 3 Broad Mission of SARS Mission statements describe the strategic direction of the organization, common elements in mission statements include: 1.Improving (voluntary) compliance 2.Service providing in accordance with compliance goals 3.Strengthen public’s confidence in Tax Administration’s integrity and fairness 4.Ensuring fairness, equity and equality 5.Optimal prevention of fraud in society 6.Reducing the tax gap

5 JOH-RNS017-20091208-JvW-P1 | 4 SARS Mandate The South African Revenue Service (SARS) was established by the South African Revenue Service Act no 34 of 1997 as an organ of state within the public administration. It is responsible for the collection of tax and Customs revenue for national government. The revenue raised by SARS is used by government to supply health and education services; provide housing, electricity, water and sanitation. SARS’s efforts in trade facilitation and the regulation of trade at our ports of entry aim to protect the economy. In working to promote compliance with tax and customs legislation, SARS is aligned with the government’s drive to create a socially just society. *Source: Annual report South African Revenue Service 2008/09

6 JOH-RNS017-20091208-JvW-P1 | 5 SARS Strategy : Towards Improved Compliance

7 JOH-RNS017-20091208-JvW-P1 | 6 South African Tax System 1.The South African tax system is based on source. 2.Non-SA citizens who are permanently resident in South Africa are subject to the South African taxation laws. 3.Where a person is SA citizen and perform temporary duties in foreign countries s/he will be subject to South African tax law. 4.Where a person is permanently resident in a foreign country but remains a South African citizen, s/he will not be subject to South African tax on their income. 5.Where a person has assets in South Africa from which taxable income is derived (such as rent or interest), s/he will be required to complete a return in respect of that income only, and will be taxed thereon by SARS.

8 JOH-RNS017-20091208-JvW-P1 | 7 Tax Types Any citizen who earns income within a South African source : Standard Income Tax on Employees (SITE) / Income Tax / Provisional Tax 1.Registered employers Pay-as-you-earn (PAYE) / Skills Development Levy (SDL) Unemployment Insurance Fund (UIF) 2.Sole proprietors; Small and large businesses Value-Added Tax (VAT) Secondary Tax on Companies (STC) Retirement Fund Tax (RFT) Corporate Income Tax 3.Exempt organisations not-for-profit / Section 21 companies

9 JOH-RNS017-20091208-JvW-P1 | 8 SARS Compliance Approach 1.Compliance in its broadest sense is the willingness of taxpayers to register as a taxpayer; file their returns on time; provide the authority with accurate and complete information regarding their income and expenditure and to pay the amount of tax resulting from the calculation fully and on the due date. 2.Compliance in the realm of customs and excise refers to the accurate declaration of the nature, value and quantity of the imported or exported commodity and the payment of duties in accordance with rates and codes established by the revenue services.

10 JOH-RNS017-20091208-JvW-P1 | 9 Compliance Challenges SARS works to improve both technical and administrative compliances 1.Administrative compliance: Compliance with the administrative rules of lodging and paying on time Also includes reporting requirement Procedural compliance or regulatory compliance 2.Technical compliance: Tax calculated in accordance with the technical requirements of the tax laws, or Tax payers pay their share of tax in accordance with the provision of tax laws,

11 JOH-RNS017-20091208-JvW-P1 | 10 Challenges with Complex Entities 1.Complexities in individual income and business transactions: greater opportunity for tax noncompliance 2.Complex business transactions and multinational corporate structures hinder effective determination of corporate tax liability and the extent of corporate tax avoidance 3.multiplicity of personal income makes the determination of personal tax liability a challenge: different types of personal income 4.There are various business taxes in South Africa at present ▫ These are: profits taxes, Property taxes, Employment taxes, Indirect taxes and Direct taxes, Environment taxes, Other taxes

12 JOH-RNS017-20091208-JvW-P1 | 11 Some allowable deduction Only expenses incurred in production of income will be allowed as a deductions 1.Advertising 2.Stationary 3.Signage on Vehicle 4.Telephone and Fax 5. Cellular Phone 6. Entertainment Expenses 7.Casual Wages 8.Motor Vehicle 9.Home Office 10.Laptop Computer 11.Computer

13 JOH-RNS017-20091208-JvW-P1 | 12 Frequently Asked Question by the Industry 1.Differences between Freelancers and Independent Contractors 2.Should Artists/ Musicians be registered for provisional tax? 3.What expenses can be claimed? 4.How are musicians taxed on foreign income? 5.What is a directive and how do you apply for one? 6.Can Artists apply for a directive? 7.How are musicians taxed? 8.Are Musicians workers? 9.What preventative measures are put in place with regard to piracy? 10.Are taxes the same for smaller independent record labels (producer who works from home) compared to larger record labels? 11.Is losses taken into consideration by SARS? 12.Are the SARS raids effective? 13.How can artists prove to SARS that clothing bought is for business purposes (performances).

14 JOH-RNS017-20091208-JvW-P1 | 13 Annotations by the Industry 1.Musicians don’t have legal personas therefore in isolated situations no receipts are received on accrued income. 2.The music industry has no formal legal standing with regard to the exchange of service for payments i.e no standard law enforcing musicians and hirers of artists to produce a receipt or invoice of earnings received. 3.Some record companies keep 10% of income as holdings under the pretence of fulfilling the artists’ tax obligations. 4.SARS raids are not effective with regard to piracy. 5.Tax education is needed in the arts and culture industry.

15 JOH-RNS017-20091208-JvW-P1 | 14 Engagement within the Industry 1.Combat Counterfeit goods 2.Enforce actions against piracy 3.Strengthen awareness program through Education of artist about their tax obligation 4.Assist with the completion of tax forms 5.Combat copyright infringements 6.Improve the detection of counterfeit within our borders

16 JOH-RNS017-20091208-JvW-P1 | 15 Way Forward 1.Industry reception and co-operation 2.Continuous Media support 3.Political Support 4.Stakeholders Involvement 5.Commitment to change of attitude and Instill/ enforce Ethical integrity 6.Improved Communication networks, technological advancement like e-filing 7.Sharing of tax knowledge across various regional structures

17 JOH-RNS017-20091208-JvW-P1 | Thank you 16

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