SARS can collect outstanding taxes and administrative penalties from financial investments

The South African Revenue Service (SARS) can appoint any company to act as an agent to collect outstanding taxes and administrative penalties owed to it by taxpayers. This is in terms of Section 99 of the Income Tax Act, No. 58 of 1962.

Now, SARS has begun using this law to issue such instructions to investment and life companies. This means companies managing your financial investments as well as life insurers are now required by law to collect any money owed to SARS in outstanding taxes, if requested to do so.

Investment and life companies have set up their systems to automatically process these instructions once received from SARS. As such, these amounts can be legally deducted from clients’ investment or insurance payouts, such as living annuity incomes, and paid directly to SARS.

Unfortunately, prior notice of these deductions is not given, and clients are only notified once the money has already been deducted, with ‘SARS AA88’ being provided as the payment reference on the statement.

These deductions cannot be influenced in any way, either by us as our clients’ brokers or the investment or life companies where their investments and policies are held. All queries in this regard must be directed to SARS.

If you are uncertain as to whether or not you have any outstanding taxes or penalties due to SARS, we recommend querying this telephonically with SARS, via eFiling or through your tax consultant.