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Help business cope with a turbulent 2013, by making SARS return process simpler, Deloitte asks Minister

Johannesburg, 10 January 2013 - “With local companies facing major economic challenges, a drop in GDP and the mining sector expected to begin a major retrenchment programme early in 2013, the Minister of Finance should consider assisting the hard-pressed corporate sector by reviewing the onerous requirements of the SARS IT14SD return on companies,” says Deloitte.

The call, made as part of the Deloitte Budget campaign, is intended to increase the focus on the impact of economic and tax proposals on local business against a background of slowing global economic growth; declining growth prospects in Africa, the BRICS region and a deteriorating domestic environment.

Clinton Eidelman, Associate Director, Tax Technology at Deloitte, said that “while Deloitte appreciates the long-term benefits to be derived from the IT14SD to SARS and companies, some relief on the practical aspects of completing and submitting the onerous form would be welcomed if announced in the Minister’s Budget statement on 27 February 2013.”

“The return requires an extensive reconciliation of payroll taxes, VAT, income tax and customs and may be issued to companies and close corporations subsequent to their tax returns having been filed,” says Eidelman.

Specifically, the form requires:

  • A reconciliation of total employment costs per the IT14 to the total employment cost on which PAYE was calculated and disclosed per the corresponding EMP201 returns;
  • A reconciliation of accounting profit/loss to calculated profit/loss per the IT14;
  • A reconciliation of total output VAT supplies for the year per VAT201 returns to the disclosed turnover per the IT14;
  • A reconciliation of total acquisitions for the year in respect of input VAT per VAT201 returns to disclosed cost of sales per the IT14;
  • A reconciliation of the value of imported goods between customs declarations, cost of sales per the IT14 and VAT201 returns;
  • A reconciliation of the value of exported goods between customs declarations, turnover per the IT14 and VAT201 returns.

“As most of these reconciliations are not performed regularly, the completion of the IT14SD is proving to be difficult. In addition it often generates significant unreconciled differences. A typical example relates to timing differences because the income tax year of assessment does not correspond to the PAYE year of assessment or the VAT periods.”

 “SARS requires companies to submit the IT14SD within 21 calendar days of it being issued, with a further extension of 21 days allowed. Unreconciled differences of not more than R100 are allowed. It also requires that companies manually check their efiling profile in case an IT14SD has been issued.”

“Unfortunately, the reconciliation process is not simply a matter for the tax department. The process requires a deep understanding of the data and transaction flows between the general ledger and sub-systems, as well as the manual and automated processes and controls related to this data.”

“It will therefore require a joint effort by finance, tax and IT functions.”

“The result is that complying with the IT14SD will require companies to invest heavily in updating their financial systems so that the level of detail required to perform these reconciliations on a regular basis can be achieved.”

This will place additional resource and financial burdens on companies already facing major challenges in a year where there will be further declines in GDP, dwindling consumer demand for products, rapidly escalating electricity costs and other major issues on the business agenda.

“We are therefore hoping that Minister Gordhan will provide some relief in his Budget statement regarding the practical aspects of completing and submitting the IT14SD return,” says Eidelman.

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Contacts

Name:
Kerri Lurie
Company:
Magna Carta (PR)
Job Title:
Phone:
+27(0) 11 784-2598
Email
kerri@magna-carta.co.za
Name:
Clinton Eidelman
Company:
Deloitte & Touche
Job Title:
Associate Director, Tax Technology
Phone:
Tel: +27 (0)11 209 6415
Email
ceidelman@deloitte.co.za
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