Businesses are often required to provide, confirm, or share tax clearance information with another entity. This is because proof of tax compliance is an indicator of a company’s good standing in terms of its legal obligations and how well it is managed. There may be instances when an individual, a company or a government entity needs to verify their tax compliance status, for example, during prequalification as a supplier; for a tender application or bidding process; to confirm good standing and that their tax matters are in order with SARS; or for foreign investment allowances.
Tax clearance information is no longer confirmed via Tax Clearance Certificates. It has been replaced by SARS’ Tax Compliance Status (TCS) system, which verifies your tax status online in real time, which makes it important to ensure you and your company are always compliant.
How it works now
Instead of a manual tax certificate being issued as in the past, SARS’ new system allows individuals and businesses to obtain a TCS PIN (personal identification number).
Your accountant can help you to apply to SARS to obtain this PIN through eFiling. This will require, for example, activating the TCS for the business or individual, merging all the tax types into one registered profile, completing the Tax Compliance Status Request and selecting the correct type of TCS: good standing, tender, or – for individuals only - emigration and foreign investment allowance.
If all your tax affairs are in order, your PIN should be issued immediately via SMS or email. A unique PIN is issued for each TCS request submitted to SARS. This PIN, along with your tax reference number can then be given to a third party who needs confirmation of your or the company’s tax compliance status. To verify your tax compliance status, the third party submits your tax reference number and PIN via eFiling under “New Verification Request.”
Your current tax compliance status will appear and will be colour coded, indicating whether your tax affairs are currently in order or not. Green indicates that all your tax affairs are in order and that you are tax compliant while red means you are not tax compliant.
It’s important to note that the PIN is valid for a year and reflects the current tax status at the date and time the PIN is entered into the TCS system (not the compliance status at the time the PIN was issued). www.privateclientfinancial.co.za l Tel +27 21 671 1220
“Because your tax compliance status on the system can change during the year in line with your tax behaviour, which may include a late submission or missed payment, it’s important to continuously monitor your tax compliance status to ensure a non-compliant tax status does not impact your business and other opportunities,” cautions Sue Blake, head of the PCF tax team.
What is needed to be tax compliant?
Your compliance status reflects the following compliance requirements:
Registration for all required tax types
Submission of all required tax returns on time
All tax debt settled on time.
Relevant supporting documents submitted.
“In order to meet these requirements consistently across all the relevant tax types over the tax year, taxpayers should consider getting professional assistance,” says Blake.
Why is it important to maintain compliance all year round?
A TCS PIN is only valid for a year. Third parties with whom you share your PIN will see your current tax compliance status, so it’s important to monitor your status regularly and remain compliant to avoid any negative impact on your reputation and business opportunities.
A non-compliant status can affect the confidence of potential clients, stakeholders, and investors as well as competitiveness in the market.
Continuous compliance does involve costs or resources but will never be as expensive as the costs associated with non-compliance, which generally involves penalties and additional fees to rectify.
Non-compliance exposes taxpayers to wide and harsh collection or enforcement measures, such as the confiscation of property, business closure, garnishee orders and agency notices. Some tax offences are also subject to custodial sentences.
Ongoing and consistent compliance throughout the year means that when there is an instance of non-compliance, SARS is likely to be more accommodating, because a taxpayer’s track record is one of the factors SARS considers when making determinations.
Maintaining a compliant tax status prevents tax surprises, enables lawful tax planning and the ability to take advantage of relevant rebates and incentives.
If you need advice or assistance with your tax compliance, please contact the PCF Tax Team (Sue@privateclient.co.za) for advice and guidance.