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Business Tips – Documentation and SARS

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Please note that this pertains to South African SARS (South African Revenue Services) and best practice requirements.

On a daily basis I meet with people who are either starting their own businesses or alternatively there are those who have been in business for many years now – irrespective of where they are in this particular journey called life, they more often than not, have no clue about the legal requirements around the retention of their business documents.

The harsh reality is that not only is there a legal requirement in terms of what documents must be kept there are also requirements on how long these documents must be kept and they are not all just about the financial records either. Some need to be kept for only a couple of years, others for up to 5 or 7 or even 15 or so years and others that have to be retained “indefinitely”.

Add to all of this the digital and electronic age and although in many ways this simplifies life there are also instances where this will complicate things.

Take for example the tax records . . . it has been promulgated into law that the tax records and financial documentation pertaining to these records can be stored in their electronic form provided that they are stored electronically in a physical location in South Africa. Furthermore, if the taxpayer wishes to store and maintain their accounting or invoicing records using “the cloud” technology or servers outside of South African borders, they will need to obtain written approval from a Senior SARS officiator.

Apparently though, obtaining authority to do this is not an easy achievement either, as the following requirements have to be met. These are (but not limited to):-

– You have to be able to easily access these records here in SA.
– Irrespective of the location of these servers, this should not affect access to the records.
– It is a requirement that the country where the servers are hosted has to have an international tax agreement with South Africa for reciprocal tax assistance.
– That the taxpayer in South Africa has to be able to produce an acceptable electronic form of the record – ideally it should look exactly like its paper hardcopy equivalent and
– The storage capabilities must meet all storage requirements.

Additional challenges that may be encountered are in the form of system description development should the software or electronic platform not be commonly used and recognized in South Africa, so beware of all the “off the shelf” products that may have been developed in India or the USA as they may carry ‘hidden’ costs.

Be sure to have properly researched what you purchase to ensure that SARS requirements are always met – it will be cheaper and less stressful for you in the long run.