Property Practitioners, including Estate Agents, Candidate Estate Agents, and Property Managing Agents (“the Agents”), have for years been regulated by the Estate Agency Affairs Act, 112 of 1976 (“EAA”). However, as of 01 February 2022, this era has come to an end, with the enactment of the Property Practitioners Act, 22 of 2019 (“the Act”).
The Act, expressly requires that in order to continue practicing as an Agent, a valid tax clearance certificate (“TCC”) must be received from the South African Revenue Service (“SARS”), in order to procure or renew a Fidelity Fund certificate (“FFC”). A TCC confirms that a taxpayer’s tax affairs, on the SARS front at least, are in order, and that they are fully compliant from both a returns/documentary and liability perspective. In order to avoid this disqualification, it is of utmost importance that property practitioners ensure optimal tax compliance, both historic, and current.
This additional statutory requirement emphasises the importance of tax compliance, which if not in order, may result in the most unfortunate of temporary hiatuses, for the non-compliant Estate Agency.
When requesting a TCC, property practitioners may be caught off-guard in that SARS may have, in the interim, proceeded with the raising of an additional assessment, bringing with it, a concomitant tax liability due to the revenue authority. This may very well lead to a taxpayer owing SARS a large sum of money, and in some instances, SARS even levying penalties and interest!
Should this occur, it is important that property practitioners take the appropriate steps. Being frozen with fear or indecision will not aid your cause and will only lead to SARS commencing with collection procedures in terms of the Tax Administration Act, 28 of 2011 (“TAA”), leaving a taxpayer with little to no recourse.
A pragmatic property practitioner will be proactive and seek advice from a tax professional, as to the best strategy to be followed when attempting to reach a resolution and restore compliance. In the event of the Agent not being in agreement with an assessment and the manner in which their affairs have been assessed in a particular year of assessment, they may seek to lodge a dispute against the assessment.
Any historic or current non-compliance must immediately be remedied with the revenue authority. The knock-on effect of non-compliance with SARS can be far reaching, affecting not only the careers of the property practitioner, but also their personal lives should SARS opt to implement any collection measures against them, and their assets.
SARS’ approach of late clearly shows we are dealing with a competent revenue authority, which with the implementation of AI system improvements, and the additional power imputed by teaming up with the National Prosecution Authority, is fast gaining momentum in its collection drive.
Take the necessary steps now!
In order to protect yourself from SARS, it remains the best strategy that you always ensure utmost compliance. Where you find that you have incorrectly disclosed your earnings to SARS for whatever reason, the first step is to inform SARS that the prior returns filed are inaccurate, whether you may have under or over-stated your income.
This usually happens when income is a combination of a basic salary and commission. It appears that some taxpayers are under the mistaken belief that commission is taxed differently than basic salaries. What may be different is the source code used to inform SARS of the source of the income, but there is no differential tax rate than the normal SARS tax bracket calculations when it comes to the computation of tax payable on the normal employment income or the commission income.
It must be remembered that the substance of a dispute is tax law, which is well known for its fluidity and intricacies. Thus, the dispute process is the territory of astute tax professionals, who task themselves with understanding the nuances of tax law and know which strategy to employ in order to capitalise on the remedies afforded by the TAA to ensure favourable outcomes.
If a property practitioner disagrees with any aspect of an assessment, it is important to proceed strategically with the guidance of an astute tax attorney from the outset. Knowledge of the rules for dispute resolution under the TAA improves the probability of a positive outcome significantly, in order to achieve the goal of total tax compliance, leaving property practitioners to do what they do best!
Written by André Daniels, Legal Manager: Tax Controversy & Dispute Resolution at Tax Consulting SA