Authors: Joon Chong, a Tax Partner, Nina Keyser, a Tax Partner, Nirvasha Singh, a Tax Partner
& Carryn Alexander, an Associate at Webber Wentzel.
SARS replaced the Tax Clearance Certificate (TCC) system with the enhanced Tax Compliance Status (TCS) system on eFiling in April 2016. The new TCS system is aimed at improving tax compliance as taxpayers can better manage their TCS and remedy any non-compliance through the “My Compliance Profile” (MCP) function on eFiling.
For some taxpayers, their tax compliance status is of utmost importance in ensuring that they are able to tender for new or continue with existing business with government institutions. National Treasury requires accounting officers and accounting authorities of certain government institutions to reject bids from a supplier without written proof from SARS that the supplier either has no tax obligations or has made arrangements to meet their outstanding tax obligations.
MCP now forms the basis for the overall compliance status issued by SARS with regards to TCS applications. The taxpayer’s compliance status on MCP depends on requirements such as their registration status; outstanding returns; outstanding tax debts with SARS for which payment arrangements have not been made; and whether there is a failure to submit information requested by SARS. Taxpayers are able to remedy a specific area of non-compliant status or they can log a request with SARS to rectify the non-compliant status on the MCP.
Taxpayers can request their TCS for a specific purpose (e.g. tender or bid) using the “Tax Compliance Status Request” functionality. When SARS approves the request, the taxpayer is issued with an overall TCS and PIN, which allows the taxpayer to authorise third parties to verify the taxpayer’s TCS online via eFiling. The PIN enables third parties to view the taxpayer’s overall TCS as at the date and time they check it. In addition to the PIN, the taxpayer is able to print a copy of their TCC from the MCP profile. This is a significant improvement from having to obtain original printed TCCs in person from SARS branch offices.
Parallel with the TCS on eFiling is the Central Supplier Database (CSD), which is an initiative of the National Treasury. The CSD is the single source of key supplier information and is aimed at providing consolidated, accurate, up-to-date, complete and verified supplier information (including the TCS status of the supplier) to procuring organs of state. National Treasury has instructed that since SARS no longer issues TCCs, the CSD and the tax compliance PIN are the approved methods that will be used to verify a supplier’s tax compliance.
We make the following observations on the MCP functionality on eFiling and the CSD initiative by the National Treasury. Both these parallel systems are meant to ensure that third parties are able to verify that taxpayers are tax compliant. However, due to certain administrative and procedural factors beyond a taxpayer’s control, the taxpayer may still be reflected as being non-compliant even though it may be compliant.
A taxpayer that has applied for relief under the voluntary disclosure programme (VDP) with SARS may have a non-compliant status even before the voluntary disclosure agreement has been signed. It appears that once SARS uploads the VDP assessments, the taxpayer will show as non-compliant despite the fact that the voluntary disclosure agreement allows for a later date for payment, or that the voluntary disclosure agreement has yet to be signed. To remedy the non-compliant status, the taxpayer’s only alternative is to make the payment before the outstanding debt becomes due and payable; or to apply for an instalment payment arrangement or a compromise.
Where a taxpayer disputes an assessment and has applied for a suspension of the debt, the taxpayer’s status will also reflect as non-compliant despite the fact that the Tax Administration Act 28 of 2011 (TAA) provides that a taxpayer is compliant if the debt is suspended.
The taxpayer could also have made a payment to SARS which SARS incorrectly allocated or failed to allocate, and the system on eFiling could still inaccurately display the taxpayer’s status as non-compliant despite the fact that payment has been made.
There could be an arrangement between the taxpayer and SARS on the outstanding tax debt. For instance, the taxpayer could have entered into an instalment payment arrangement or compromise with SARS. Notwithstanding the payment arrangement, the system on eFiling could display the taxpayer’s status as non-compliant, and in parallel, the CSD may correspondingly record the taxpayer’s TCS as non-compliant, without further information qualifying the non-compliant status.
SARS seems to think that this new system still protects the confidentiality of the taxpayer’s information because third parties (who are authorised to view the taxpayer’s TCS with the PIN issued by SARS) do not have access to any other information on the taxpayer’s eFiling profile, besides the overall TCS. However, the system provides third parties with a description of the taxpayer’s TCS, which includes a detailed statement of area and amount of non-compliance. This was not provided to third parties under the historic TCC system as the TCC only contains a statement that the taxpayer “is compliant” with a list of the tax registration numbers of the taxpayer. Taxpayers have to provide their PIN to third parties, which could be interpreted as the taxpayer impliedly giving consent for their confidential information to be disclosed in the description of their TCS.
Consequently, it is imperative for taxpayers to be aware that despite complying with their tax obligations in terms of the TAA and any arrangement that they may have with SARS, there is no guarantee that the new TCS system will reflect an accurate compliant status, and further, there is no guarantee that the CSD will record the taxpayer’s TCS accurately.
Taxpayers must therefore carefully monitor their TCS information on eFiling and manage their TCS on both the MCP and the CSD by ensuring that their TCS is up to date. Taxpayers should remedy any non-compliant status immediately before providing their TCS PIN to accounting officers or accounting authorities of government institutions for TCS verification.