CentaTax

Importance of Regularly Updating an Entity’s Representative Taxpayer

Claudia Steyn — Tue, 12 Aug 2025 10:40:08 +0000

It is becoming increasingly crucial for entities to keep the details of their Representative Taxpayer updated with the South African Revenue Service (“SARS”), in line with the requirements set out in the Tax Administration Act, 2011 (“the TAA”).

In terms of the TAA, taxpayers are legally obligated to notify SARS within 21 business days of appointing a Representative Taxpayer, or of any subsequent changes made to such an appointment. For companies, this typically refers to the appointment of a public officer or equivalent official.

Failure to comply with these obligations constitutes an offence and may lead to administrative penalties, or in severe cases, criminal charges, including fines and/or imprisonment.

Understanding when to update your entity’s Representative Taxpayer is just as important as the update itself. Below are common and typical scenarios, often arising from standard business practices, that warrant such a change:

A change in directorship or company leadership, including resignation, retirement, or appointment of a new director or CEO;
Resignation or dismissal of the current public officer;
Mergers, acquisitions, or internal restructuring, which may shift responsibility to a new legal representative;
Changes in ownership or shareholding that necessitate an update in accountability structures;
Appointment of a new accounting officer or responsible tax function within the organisation;
Relocation of the business or change in registered business particulars;
Liquidation, deregistration, or business rescue processes.

These events are relatively common in the business lifecycle and make it imperative for taxpayers to consistently monitor and update their SARS records to remain compliant.

In practice, many entities face significant administrative and operational difficulties when the Representative Taxpayer information is not up to date. These limitations can severely impact business continuity, cash flow, and regulatory compliance. Some of the challenges include:

Inability to create new tax registrations via SARS eFiling;
Failure to transfer tax types, resulting in inaccessible or outstanding tax returns and blocked access to SARS Statement of Accounts and return history;
Impact on Tax Compliance Status (TCS);
Delayed or rejected dispute submissions, due to unmatched power of attorney documentation;
Delayed VAT and other tax refunds, due to outdated registered particulars.

These operational barriers can result in missed compliance deadlines, penalties and interest, cash flow disruptions, and delays in dispute resolution or refunds, all of which could otherwise be avoided through timely updates. This highlights the broader importance of maintaining up-to-date information and ensuring full compliance with the TAA.

Although SARS officially allows for a 21-working-day turnaround time for updating representative details, in many instances, taxpayers experience delays that exceed this period, often requiring escalation through internal or external support channels.

Keeping your Representative Taxpayer details current is not merely an administrative requirement , it is a strategic compliance necessity that directly impacts your entity’s ability to engage with SARS and meet its legal obligations effectively.

We strongly encourage all taxpayers to review and update their registered details regularly. For support with this process, please contact Claudia Steyn from CentaTax at claudias@centatax.com.

Tax Dispute Resolution Challenges and How to Avoid Them

Nico Grobler — Tue, 05 Aug 2025 10:38:05 +0000

Many taxpayers make the critical mistake of only seeking professional tax advice after their objection to a SARS assessment has been declined. Unfortunately, by then, significant damage may already be done. The tax dispute resolution process is complex, highly regulated, and time-sensitive. Success often hinges on procedural compliance, precise legislative referencing, and the taxpayer's ability to discharge the burden of proof. Engaging a qualified tax professional at the outset ,not as a last resort, can significantly improve the likelihood of a favourable outcome.

The dispute resolution process is governed by the Rules promulgated under the Tax Administration Act, 2011. These Rules outline strict procedures and timeframes that both SARS and the taxpayer must adhere to when lodging an objection or appeal.

One of the most common reasons SARS rejects objections is non-compliance with these procedural Rules, whether it's a late submission, a lack of supporting documents, or failure to follow the prescribed format. This makes it essential for taxpayers to be aware of, and comply with, the exact requirements set out in the legislation.

When preparing an objection, the taxpayer must provide a clear and concise legal basis for disputing the assessment, supported by sufficient factual evidence. This is not the time for vague statements or assumptions that SARS “should know” the assessment is incorrect.

Importantly, the burden of proof lies with the taxpayer. The success of an objection often depends on how well the grounds for dispute are formulated and how persuasively the supporting facts are presented. Poorly drafted objections that lack specificity or legal grounding are unlikely to succeed.

Should SARS disallow the objection, either fully or in part, the original submission plays a critical role in determining the strength of the taxpayer’s appeal or application for alternative dispute resolution (ADR). A well-drafted objection lays a strong foundation for further legal recourse.

This is another reason why early professional involvement is vital. A tax professional can help articulate legally sound arguments, reference the applicable statutory provisions, and ensure that all procedural requirements are met—greatly enhancing the chances of success in both the objection and any subsequent stages.

Changes to SARS VAT Verification Letters

Ruan Jansen van Vuuren — Tue, 17 Jun 2025 10:35:56 +0000

SARS has recently implemented notable changes in its approach to Value-Added Tax (VAT) verifications, indicating a more focused and detailed methodology.

Historically, SARS' VAT verification letters were typically automated notifications indicating a taxpayer’s selection for verification, accompanied by a standard information request, usually including input and output schedules, the top five input and output tax invoices, and a reason for the refund claimed. These engagements were largely generic and did not specifically relate to the details disclosed on the VAT201 return. Consequently, they often led to delays, as the information provided by taxpayers frequently fell short of SARS’ requirements, necessitating further requests and ultimately delaying the processing of refunds.

In contrast, the current verification approach adopted by SARS places increased emphasis on the specific data submitted on the VAT201 return. This has resulted in more comprehensive and tailored requests. While the traditional requests for output and input tax schedules and high-value invoices remain, SARS now often requires additional supporting documentation. This may include:

Evidence for zero-rated supplies (especially exports),
Documentation for VAT on imports,
Details on exempt supplies,
Explanations for credit notes or VAT201 adjustments,
Trial balances,
Bank statements,
Capital asset purchase documentation,
Reverse charge applications, and
Industry-specific data relevant to the taxpayer's operations.

For businesses involved in the export of goods, SARS now mandates detailed disclosures such as the names and contact details of recipients abroad, in line with Interpretation Notes 30 and 31, as well as the provision of corresponding export documentation.

Taxpayers procuring services from foreign suppliers—especially electronic services—must now submit a list detailing all such services received from offshore entities. In cases where exempt supplies are reflected on the VAT201, SARS expects a clear rationale for the non-application of input tax apportionment rules.

These enhanced verification procedures underscore the importance of meticulous record-keeping and proactive compliance. Taxpayers are encouraged to remain informed and to approach VAT verifications with thorough preparation.

Should you require support in navigating these evolving requirements, we invite you to contact our VAT specialists for professional assistance.

2025 Budget – Proposed changes to tax treatment of forex on specific foreign debt

Nadia van Aswegen — Thu, 17 Apr 2025 13:02:00 +0000

Does your company pay interest to an offshore group company? Have you considered whether you should limit your interest and forex deduction in terms of s23M?

In short, s23M limits the tax deduction that can be claimed on “interest” by a SA debtor company on debts owed to targeted foreign group creditors who are not subject to tax or fully subject to tax in SA on the interest received. “Interest” as defined in s23M includes foreign exchange losses on qualifying debt. The likely reason for forex losses to be treated in a similar way as interest is that they form an inherent part of the cost of borrowing.

The formula used to determine the allowable tax deduction for qualifying “interest‘ is calculated as: Interest received by the SA debtor plus 30% of its “adjusted taxable income” minus interest incurred on other debt (not subject to s23N).

From the 2025 Budget, two important proposed updates in relation to s23M includes the following:

Forex gains and losses to be excluded from “adjusted taxable income” calculation.It is proposed that the “interest” to be taken into account in calculating the “adjusted taxable income” would be s24J interest. The wider definition of “interest” in section 23M, which includes forex losses, will continue to be used to determine the deductions that may be limited using the 30% formula. This means that both the interest and forex element of the cost of borrowing on targeted foreign debt will be limited.
Clarification to indicate that forex losses can be limited even when there is no forex accrual in the hands of the foreign creditor.The 2025 Budget proposes clarification regarding the interest limitation rules that applies to the debtor when the interest income is not taxed in the hands of a foreign creditor.

It is proposed to make it clear that if the underlying debt is subject to section 23M, the forex losses in respect of the underlying debt will also be limited.

In other words, even if a loan is denominated in a foreign currency and no foreign exchange gain is therefore realised by the creditor, the foreign exchange losses recognised by the South African debtor will be subject to the limitation in section 23M.

It is advisable to take these proposals into account when performing interest limitation calculations in advance of filing your income tax returns. Early planning will enable you to effectively manage any implications arising from the anticipated changes.

Should you require guidance or support, please feel free to contact the CentaTax team.

VAT Changes Checklist 2025

Deon le Roux — Fri, 28 Mar 2025 13:21:05 +0000

The 2025 Budget Speech announced phased VAT rate increases in South Africa, with VAT rising from 15% to 15.5% on 1 May 2025 and to 16% on 1 April 2026. Additionally, certain food products will now be zero-rated. These changes require businesses to review their compliance measures, update systems, and ensure seamless transition in line with SARS regulations.

To assist you in navigating these changes, CentaTax has developed a VAT Change Checklist—a practical guide to help you assess key areas of focus for compliance and operational readiness.

Beyond this, our team is ready to assist with:

Comprehensive compliance reviews;
System audits & updates;
Contract evaluations; and
Staff training tailored to your business needs

By completing the checklist, you’ll gain insights into your preparedness, and we can work with you to address any potential gaps.

To access the VAT Change Checklist kindly request a copy by e-mail to info@centatax.com.

Corporate Income Tax in South Africa: A Strategic Approach in the 2025 Budget

Claudia Steyn — Thu, 13 Mar 2025 13:23:00 +0000

The 2025 Budget proposes a balanced Corporate Income Tax (“CIT”) strategy, prioritising revenue stability without raising the 27% rate, which could undermine South Africa’s competitiveness. Ranking 13th globally for CIT as a share of GDP, above OECD and African averages, the country opts for alternative revenue measures like a VAT increase to avoid deterring investment amid commodity-driven volatility. Here’s a concise look at the key proposed changes and their business implications.

Key Developments

Steady CIT Rate: Maintaining the rate signals caution, preserving South Africa’s investment appeal despite revenue pressures.
Global Minimum Tax Act (2024): Effective since 2024, this OECD-aligned reform mandates a 15% minimum effective tax rate for multinationals with revenues over €750 million. Top-up taxes to SARS start in 2026/27, projected to add R8 billion, curbing profit-shifting without altering the headline rate.
Revenue Resilience: Despite a 28% mining sector drop in 2024/25, CIT collections exceeded forecasts, buoyed by financial and manufacturing profits. Projections show growth from R316.4 billion in 2024/25 to R391.1 billion by 2027/28, though volatility persists.

Technical Adjustments

The Budget proposes several CIT-related proposals to address loopholes, enhance clarity, and align with international norms. These include:

Anti-Avoidance Enhancements: The government targets structures exploiting third-party backed shares, where dividends are reclassified as taxable income unless used for qualifying purposes. New measures will counter circumvention, ensuring these arrangements don’t erode CIT revenue. Similarly, the definition of “hybrid equity instruments” (e.g., preference shares with debt-like features) will be tightened to prevent taxpayers from dodging anti-hybrid rules, reinforcing tax base integrity.
Interest Limitation Rules: Clarifications to sections 23M and 23N refine interest deduction limits. The definition of “interest” will align with section 24J for consistency in calculating “adjusted taxable income,” while carve-outs will extend to back-to-back lending without controlling relationships. Foreign exchange differences on restricted debts will also be addressed, ensuring limits apply when no creditor accrual occurs. These changes curb excessive deductions and provide clearer guidelines.
Controlled Foreign Company (“CFC”) Adjustments: Gaps in CFC rules are tackled by ensuring the section 9H exit charge triggers when CFCs acquire shares in South African holding companies, closing a loophole. The comparable tax exemption—waiving CFC income imputation if foreign tax is at least 67.5% of South Africa’s—will now factor in shareholder tax refunds, aligning with global anti-profit-shifting efforts and complementing the global minimum tax.
Corporate Reorganisations: Special rollover relief for listed shares in asset-for-share transactions will be restricted to shareholders owning less than 20% of the target company’s equity, aligning with the 2010 policy intent. A review of tax-free transfers to collective investment schemes (“CISs”), flagged in a 13 December 2024 discussion document, aims to curb unintended tax avoidance where gains remain untaxed on disposal.
Financial Sector-Specific Measures: For “covered persons” (e.g., banks) under IFRS 9, dividends hedging tax-deductible liabilities will be taxed to match accounting treatment, closing an arbitrage gap. The tax treatment of first loss after capital (“FLAC”) instruments, mandated by the Prudential Authority, will be clarified to ensure compliance and support financial sector stability.
Assessed Loss Set-Offs: Since 2023, assessed losses are capped at 80% of taxable income (or R1 million, whichever is higher). Uncertainty around their sequencing with deductions like donations (section 18A) or insurer policyholder fund transfers prompts a proposed clarification. This aims to ensure a logical order—likely applying losses before other deductions—reducing ambiguity and aiding companies in tax planning, especially those recovering from prior losses.

The 2025 Budget avoids rate hikes, favouring long-term stability through global tax reforms and detailed technical enhancements. By integrating the global minimum tax and addressing domestic loopholes, South Africa safeguards revenue without inhibiting growth, challenging businesses to adapt to a shifting tax landscape.