On 29 February 2012, the South African Revenue Service
(SARS) issued a notice in Government Gazette No 35090 (Notice No
173) relating to the liability of certain institutions, most
notably banks, to furnish SARS with financial information about
The notice was issued in terms of s69 of the Income Tax Act, No
58 of 1962, which section has been superseded by s26 of the Tax
Administration Act, No 28 of 2011 (TAA).
In terms of the notice, banks are obliged to furnish financial
information to SARS relating to the period 1 March 2012 to 28
February 2013, being the 2013 tax year for taxpayers who are
Since natural person taxpayers are currently submitting their
returns for the 2013 tax year, it means that SARS will, for the
first time, have such financial information available for purposes
of verifying information submitted in returns, or for other
The specific information that banks will by now have had to
report to SARS in terms of the notice, for both natural and
juristic person taxpayers, includes:
Names, Surname, date of birth/Registered name if juristic
Address, identity number/registration number if juristic
person, tax number
Bank account number and dates account was opened/closed
Closing balance of account at end of period
Monthly totals of all credits and debits to the account
FICA status of the taxpayer
The said information has to be reported to SARS in electronic
Assuming that all banks have complied with the notice, SARS will
by now have an enormous electronic database of financial
information about taxpayers in respect of the 2013 tax year.
Perhaps one of the most striking pieces of information that
banks have to report to SARS, is the monthly credit and debit
totals on taxpayers' bank accounts (one step short of handing
over a detailed statement).
It is however not entirely certain how SARS will be able to use
all this information in a meaningful manner. At first glance one
might assume that SARS will compare the aggregate credit totals of
a taxpayer's bank accounts for a relevant period, with the
income that the taxpayer has declared in his/her/its return, and
that if there is a mismatch, the taxpayer will be seen as having
under-declared his/her/its income.
However, on further consideration, it is quite evident that the
aggregate credit totals of a taxpayer's bank accounts for a
period will not necessarily equate to that taxpayer's gross
income for the period, as defined in section 1 of the Income Tax
Act No 58 of 1962.
Amounts reflected in credit totals could for instance be capital
in nature, double counted, or held in trust for another. For
Where a taxpayer has multiple accounts, receives money in one
account (salary) and transfers an amount to another account
(savings account), the same amount will be reflected in the credit
totals of both accounts, and sufficient information will not be
available in SARS's database to match the corresponding debit
amount (only totals are reported).
Where a taxpayer sells a capital asset (car or other business
assets – assuming no recoupment) the amount reflected in the
credit total will actually be capital in nature.
Where a taxpayer receives money from a spouse to settle
household expenses, the amount reflected in the taxpayer's
credit total will arguably be an amount to be disbursed on behalf
of another (the spouse).
Even where a taxpayer receives a refund from SARS, the amount
will arguably be capital in nature, and the credit total will be
inaccurate for purposes of determining gross income.
For purposes of the 2014 tax year, a similar notice was
published in terms of section 26 of the TAA (Government Gazette No
36346, Notice No 260, 5 April 2013). This notice requires banks to
submit similar information in accordance with SARS's IT3 data
In addition to the above, s179 of the TAA gives SARS sweeping
powers to instruct a taxpayer's bank to transfer funds from
that taxpayer's account to SARS in circumstances where there is
an alleged tax debt owed to SARS (whether disputed or not). A
taxpayer, whether a salaried natural person or a large corporate
conducting business, may very well find itself with an empty bank
account on any given day.
In light of the above, it will not be surprising to find that
some taxpayers may be tempted to revert to a system of keeping
their cash under the mattress, as opposed to handing it over to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In Star Deep Water Petroleum Ltd v. Lagos State Internal Revenue Service, the Tax Appeal Tribunal (TAT) Lagos division held that an assessment that is not compliant with the law cannot become final and conclusive.
Section 27(i) of the Companies Income Tax Act disallows "any expense of any description incurred outside Nigeria for and on behalf of any company except of a nature and to the extent that the Board ("FIRS") may consider allowable".
On the 27th of October, 2015, the Tax Appeal Tribunal, Lagos Zone delivered a judgment in favour of the Shell Petroleum Development Company of Nigeria Limited in the above stated case.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).