SARS audit, verification or dispute: what to do and by when
A verification checks what you declared. An audit examines your records. In either case, act on the date in the letter. If you disagree with an assessment, you have 80 business days to object.
In short
- Verification checks the information on a return at face value. An audit examines your financial statements, accounting records and supporting documents.
- The deadline is in the letter. If you do not respond, SARS can issue a revised assessment based on the information it already holds.
- To dispute an assessment, lodge an objection within 80 business days. Late objections need reasonable grounds and cannot be accepted more than three years after the assessment.
- Understatement penalties can reach 200% of the shortfall, so get your practitioner involved on the day the letter arrives.
Verification or audit?
SARS uses both to test what a taxpayer declared. They differ in depth and in how long they take.
| Verification | Audit | |
|---|---|---|
| What SARS does | Checks the information on a return or declaration | Examines financial statements, accounting records and supporting documents |
| How you are told | A letter stating you were selected, with a due date | A Notification of Audit letter, with an assigned auditor |
| How long it takes | SARS aims to verify within 21 business days after you upload the documents | From 30 business days to 12 months |
| Updates | None stated | Progress reports every 90 calendar days |
An audit can follow a verification, so treat both seriously.
What to do the day a letter arrives
- Read it and note the due date. The deadline is in the letter, not in a general rule.
- Pass it to your accountant or tax practitioner the same day.
- Gather what it asks for. Bank statements, invoices, contracts and workings. Good records make this a day’s work. See recording accounting transactions.
- Respond in full, on time. Upload through eFiling or as the letter directs, and keep copies of everything you send.
- If you need more time, ask before the deadline, in writing, not after it.
If you do not respond
For a verification, SARS sends a second letter. If you still do not respond by the deadline, it issues a revised assessment based on its own information. For an audit, SARS raises an assessment from information it already holds or obtains from third parties. Neither is likely to favour you.
If you disagree: lodge an objection
- 80 business days. An objection must be submitted within 80 business days after the date of the assessment or SARS decision.
- Ask for reasons first if the assessment is unclear. If you request reasons, the 80 business days run from when SARS confirms it has given adequate reasons, or from the date it provides them.
- How to submit. For company and personal income tax, PAYE, trusts and VAT, use the dispute process on eFiling or visit a SARS branch by appointment. Some company tax and VAT matters use a manual process.
- What happens next. SARS tries to tell you within 30 business days if the objection is invalid or needs more documents, and aims to give the outcome within 60 business days. If it allows the objection in whole or in part, it issues a revised assessment.
- Late objections. You need grounds for the delay. For reasonable grounds, SARS can extend the period by 30 business days. No objection can be submitted more than three years after the assessment.
If SARS disallows your objection, the notice sets out how and by when you may appeal, and alternative dispute resolution may be available. Check the deadline the day the notice arrives, because it is short.
Penalties
If SARS finds that you understated your tax, it can charge interest and an understatement penalty of up to 200% of the shortfall. If the problem is that you cannot pay rather than that you disagree, read can’t pay SARS? before you do anything else.
What to do now
- Put every SARS letter in front of a practitioner within a day of receiving it.
- Keep your records in one place, with a back-up, for at least five years.
- Check your eFiling inbox weekly, not at year-end.
- Diarise objection deadlines the day an assessment arrives.
- Review your risk areas with the year-end checklist.
Frequently asked questions
What is the difference between a SARS verification and an audit?
A verification checks the information you declared on a return at face value. An audit examines your financial statements, accounting records and supporting documents to confirm the tax position is correct. An audit can follow a verification.
How long does a SARS audit take?
SARS says an audit can take from 30 business days to 12 months to complete, and it gives progress reports every 90 calendar days from the Notification of Audit.
Can I ignore a SARS verification letter?
No. If you do not respond, SARS sends a second letter, and if you still do not respond it issues a revised assessment based on the information it holds, which may include penalties.
How long do I have to object to a SARS assessment?
Within 80 business days after the date of the assessment or SARS decision. If you asked for reasons, the period runs from when SARS gives adequate reasons. Late objections need reasonable grounds and cannot be accepted after three years.
Do I need a tax practitioner for a SARS audit?
You are not required to use one, but audits turn on records and technical rules. A practitioner can respond correctly, protect your position and deal with SARS on your behalf.
Sources and further reading
This article is general information for South African businesses. It is not tax, legal or financial advice, and it reflects the rules and figures at the date shown above. Rules and fees change, so confirm the current position before you act.