SARS Interest Rate Change - a Nasty Surprise
16 August 2017
By Brigitte Zegwaard, Senior Consultant, Corporate Tax Compliance
An administrative oversight to implement the amendment in the SARS official interest rate has resulted in severe consequences for previously tax compliant taxpayers.
On 1 July 2016 the SARS official interest rate changed from 10.25% to 10.50% (Government Gazette No. 39960 dated 29 April 2016) in respect of payments due to SARS. Similarly, the interest rate on refunds due by SARS to taxpayers also increased from 6.25% to 6.50%.
In practice, SARS official interest rate changes are fed through to SARS e-filing and all payments and refunds are automatically adjusted and updated. However, SARS e-filing was not updated on 1 July 2016 and, as a result, payments made to SARS were effectively understated due to an interest rate of 10.25% being applied. Consequently, in these instances an additional amount is due and payable to SARS retrospective to 1 July 2016.
This oversight may significantly impact certain taxpayers, for example:
- Tax clearance certificates previously issued by SARS will be withdrawn on the basis that there is an unpaid debt due to SARS (despite the fact that the debt, as previously notified by SARS, has in fact been paid). This will be of particular importance if the purpose for the tax clearance was to apply for a foreign investment allowance or to be used for a tender or a certificate of good standing, etc.
- Taxpayers who have been granted relief in terms of the voluntary disclosure programme (“VDP”) and the assessment issued by SARS pursuant thereto, may have to be revised retrospectively.
- Deferred payment arrangements and/or compromises entered into with SARS will also have to be re-calculated.
The Constitution of South Africa and other subordinate legislation, provide that organs of state, including SARS, must exercise their powers in a lawful, reasonable and procedurally fair manner. SARS’ failure to amend their internal systems may infringe on the taxpayer’s right to fair procedure and cause financial loss to the taxpayer.
BDO will endeavour to assist in identifying clients who may be impacted. Ultimately it remains the responsibility of the taxpayer to ensure they are tax compliant. Where identified, BDO will contact clients if additional payments are due to SARS. Clients who have been granted VDP amnesty or payment arrangements are strongly encouraged to contact BDO to implement the requisite corrective action.
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