Taking the guesswork out of VAT estimated assessments

When is an estimated assessment raised? 

The South African Revenue Service (“SARS”) is entitled to request relevant material to verify particulars disclosed in a vendor’s VAT201 return. If, despite more than one request sent by SARS, the vendor does not respond to a SARS verification request or provides relevant material that is considered to be inadequate, SARS is entitled to proceed to raise an estimated assessment in terms of section 95(1)(c) of the Tax Administration Act (“TA Act”). 

According to SARS, the aim of this process is to enhance tax compliance, streamline the VAT system and to strike a compromise between the interests of vendors and SARS.  

How does it work? 

The estimated assessment is raised by issuing a VAT 217 assessment ("VAT 217"). Once the VAT 217 is raised, vendors are required to submit the relevant material within 40 business days if they disagree with the estimated assessment.  

Vendors can submit relevant material via the SARS Online Query System, at a SARS branch, or on SARS eFiling  

If the vendor is unable to submit the relevant material within 40 business days, the vendor may request an extension from SARS, prior to the end of the 40 business days. An extension will be granted if there are reasonable grounds for the extension. 

If a vendor does not submit the relevant material within the required timeframe, the estimated assessment will be final, and the vendor will not be entitled to object to the estimated assessment. 

A vendor may only object to the estimated assessment if the required relevant material was submitted, and even after SARS had time to consider the impact of the relevant material on the assessment, the vendor is still aggrieved by the outcome. 

Practical challenges 

It has been our experience that the regular link supplied on SARS eFiling for the submission of relevant material subsequent to the VAT 217 being raised, does not function properly. Vendors are unable to use this functionality to submit the required relevant material. 

It is advisable to rather access the submit document functionality on the estimated assessment letter issued by SARS. This then provides access to SARS eFiling and allows the vendor to submit the relevant material via this link. 

Once SARS has reviewed the supporting documents and finalised or revised the assessment raised in respect of the tax period, there are instances where remitted penalties and interest in the revised estimated assessment, do not align with the VAT Statement of Account (“VAT SOA”). In other words, the VAT SOA does not reflect the fact that the penalties and interest have been remitted. Should you experience this issue, it is advisable to contact SARS to procure a resolution. 

The takeaway 

Ideally, vendors should not ignore requests for relevant material and implement controls to ensure that these requests are attended to timeously. 

In the unfortunate event that SARS does issue an estimated assessment due to non-submission of relevant material or inadequate relevant material, vendors only have 40 business days to comply. Non-compliance will result in the estimated assessment becoming final, and may significantly impact the financial position of the vendor. 

It is advisable to get in touch with a trusted tax advisor where you are not sure how to respond to an estimated assessment, or where you experience practical difficulties in submitting the required relevant material. 

Authors: 

Leila Wright, Manager

Sindisiwe Zinyongo, Assistant Manager