ACCOUNTING RECORDS REQUIRED FOR TAX PURPOSES AND RETENTION PERIODS

If your records do not adhere to the requirements of SARS you could face massive penalties! … Up to 200%. A single item of which you do not have proof will cause SARS to doubt the validity of all your other deductions claimed or disclosure of income received. The retention of records will assist you to fulfil the requirements of the Tax Administration Act and to satisfy SARS that you have complied with the requirements.

Tax Administration Act, no 28 of 2011 (the TA Act) general requirements for record keeping:

Document	Retention period
Taxpayers that have submitted a return.	5 years from date of submission
Taxpayers who were meant to submit a return, but haven’t for that period.	Indefinite, until the return is submitted – then 5-year rule applies.
Taxpayers who were not required to submit a return, but receive income, had capital gains/losses or engaged in any other activity that is subject to tax or would be subject to tax, but for the application of a threshold or exemption.	5 years from the end of the relevant tax period.
A person who has been notified or is aware that the records are subject to an audit or investigation.	In addition to the 5-year rule, records must be retained until the audit is concluded or the assessment or the decision becomes final. In this regard the extended retention will apply irrespective of whether the assessments have prescribed in terms of Section 99.
A person who has lodged an objection or appeal against an assessment or decision under the TA Act.	In addition to the 5-year rule, records must be retained until the audit is concluded or the assessment or decision becomes final.

Income Tax Act, no 58 of 1962 (the IT Act) in addition to the records required in Chapter 4, part A of the TA Act, every employer MUST keep the records as indicated below:

Document	Retention period
4^th Schedule, para 14(2): In respect of each employee the employer must keep a record showing: Amount of remuneration paid or due by him to the employee The amount of employees’ tax deducted or withheld from the remuneration paid or due The income tax reference number of that employee Any further prescribed information	5 years from the date of submission of the return evidencing payment (i.e. EMP201)
4^th Schedule, para 14(3): In respect of each employee the employer must keep a record showing: Amount of remuneration paid or due by him to the employee The amount of employees’ tax deducted or withheld from the remuneration paid or due The income tax reference number of that employee Any further prescribed information	5 years from the date of submission of the return required by gazette (i.e. EMP501)
6^th Schedule, para 14(a) – (d): A registered micro business must only retain a record of: Amounts received by that registered business during a year of assessment Dividends declared by that registered business during a year of assessment Each asset of that registered business as at the end of a year of assessment with a cost price of more than R10 000; and Each liability of that registered business as at the end of a year of assessment that exceeded R10 000.	5 years from date of submission or 5 years from end of the relevant tax year depending on type of transaction.

Value Added Tax Act, no 89 of 1991 (the VAT Act) in addition to the records required in Chapter 4, part A of the TA Act, every vendor MUST keep the records as indicated below:

Document	Retention period
Section 15(9) Where a vendor’s basis of accounting is changed, the vendor shall prepare lists of debtors and creditors showing the amounts owing by the debtors and owing to the creditors at the end of the tax period immediately preceding the changeover period.	5 years from the date of submission of the return.
Section 16(2) Records of importation of goods and documents: Bill of entry, or Other documents prescribed by the Custom and Excise Act; Proof that the VAT charge has been paid to SARS.	5 years from the date of submission of the return.
Section 55(1)(a) Vendors are obliged to keep the following records: Record of all goods and services supplied by and to the vendor The rate of tax applicable to the abovementioned supplies; and Invoices and tax invoices Credit and debit notes Bank statements, deposit slips Stock lists Paid cheques relating thereto	5 years from the date of submission of the return.
Interpretation note 31 – 30 March 2013 Documentary proof substantiating the zero rating of supplies.	5 years from the date of submission of the return.
Where a tax invoice or credit or debit note has been issued in relation to a supply by an agent or to an agent or a bill of entry as described in the Customs and Excise Act, the agent shall maintain sufficient records to enable the name, address and VAT registration number of the principal to be ascertained.	5 years from the date of submission of the return.

Documents in electronic form – The SARS Commissioner published notice 787, which may be consulted, to provide taxpayers with more detailed guidance regarding the retention of documents in electronic form.

Now you are informed regarding the type of records SARS wants you to keep and how long you must keep them. Please comply to avoid penalties. If you have any queries, contact Petri Westraadt at pwestraadt@fhbc.co.za