In April 2016 SARS has replaced the manual tax clearance certificate system with an enhanced Tax Compliance Status (TCS) system on efiling. The new TCS system is set in place to improve the the tax compliance process as taxpayers can manage their compliance status and remedy any non-compliance directly on efiling through the My Compliance Profile.
TCS becomes more and more important as banks require compliance to open new bank accounts and it also a requirement for businesses to be able to tender with government institutions.
What has changed?
My Compliance Status (MCP) forms the basis for taxpayers’ overall compliance status with SARS with regards to TCS applications. There are several requirements that must be satisfied to be compliant, including registration status, submission of information requested by SARS, outstanding returns and outstanding tax debts. If any of the above is not up to date, you will not be issued with a TCS certificate.
When the taxpayer is tax compliant, you will be able to print your tax clearance certificate directly from efiling, or you can provide a third party with the PIN issued by SARS. The PIN enables the third party to view the taxpayer’s overall TCS. This is a big improvement from the old system where taxpayers had to obtain an original printed tax clearance certificate from a SARS branch.
How effective is the new MCP system?
The new system is a great initiative for third parties to b able to verify that taxpayers are tax compliant. However, the taxpayer my reflect as non-compliant even when compliant, due to certain administrative procedures beyond the taxpayer’s control.
Some of these factors include:
- Where a taxpayer applied for relief under the voluntary disclosure programme with SARS it may show as non-compliant before the agreement has been signed.
- Where a taxpayer disputes an assessment and has applied for suspension of debt, the status will be indicated as non-compliant, despite the fact that a tax payer is compliant if the debt is suspended.
- Incorrect allocation of payments can trigger a non-compliant status, despite the fact that payment was made.
- Where an instalment payment arrangement between SARS and the tax payer is in place, the status may still display as non-compliant.
It is therefor important for taxpayers to be aware that despite complying with the provisions of the Tax Administration Act and any arrangements they may have with SARS, there is no guarantee that the TCS will reflect this correctly.
What are the remedies?
The options to remedy non-compliance is limited and may not be the appropriate solution. The following options are available though their MCP:
- Update registered particulars
- Submit outstanding returns
- Make payments on outstanding balances
- Request payment arrangements
- Allocate unallocated payments
- Submit supporting documents
Taxpayers can select the “Challenge Status” option on their MCP if they are unable to remedy the non-compliance with the above options. If SARS is in agreement with the request by the taxpayer, SARS will override the taxpayer’s MCP. This will not change the MCP displayed, but it will have the effect of a “compliant” status being reported then third parties use the TCS PIN or when a tax clearance certificate is obtained.
For more information about the MCP, visit the SARS website.
Please note that the information provided in this article is based on generic scenarios and should not be taken as tax or financial advice. The circumstances of each individual and employer are different, requiring tailored advice and, where required, customized financial planning. Please contact us should you need any advice on this topic.