Developers hamstrung by SARS

Posted On Tuesday, 29 March 2005 02:00 Published by eProp Commercial Property News
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DEVELOPERS were up in arms this week after the Johannesburg office of the South African Revenue Services (SARS) allegedly refused to grant transfer duty receipts to property buyers whose tax affairs were not in order.

Construction IndustryThis policy applied to all those who had submitted tax returns late or had balances outstanding, as well as those who had not registered for tax, say developers.

A developer who did not want to be named said it also applied to VAT vendors who had VAT returns or amounts outstanding.

"In a fair percentage of these cases SARS is at error and in fact people’s tax affairs are in order," said the irate developer.

This move by the SARS office prevented people with outstanding tax matters from buying property from developers because they could not take transfer.

"This forced developers to be the agents of the receiver of revenue by making us ensure that our clients were tax compliant," the developer said.

Because of these prodedures the Johannesburg SARS office has been taking longer to issue a transfer duty receipt. The developer said this had affected developers’ business because sales were taking longer to conclude.

Jo Pelser, MD of developers Sable Homes, confirmed Johannesburg’s SARS office had been refusing to issue transfer duty receipts if a buyer’s tax affairs were not in order.

"It affects our business. You can’t plan for this. Right at the end, after the development (has been completed) and everybody’s paid their contributions, the receiver says: ‘I refuse to allow this transfer’," said Pelser.

He said that as far as he was aware the Johannesburg office had not communicated that it would be following this procedure with buyers or sellers.

"Nobody we’ve seen, including clients and attorneys, have heard about this. What is strange is only one tax office applies this procedure," said Pelser.

SARS spokesman Sechaba Nkosi says SARS has started risk profiling purchasers and sellers of fixed property.

"Where sellers are in default with their taxes, SARS will issue garnishee orders to recover any taxes owing by the sellers. Where the purchaser is in default, SARS will seek to attach the properties acquired or register caveats over the property," says Nkosi.

He says this process is being rolled out countrywide and is part of SARS’ initiatives to ensure better tax compliance. Nkosi says similar measures have been in place for many years in regard to pension and resignation benefits.

But he says buyers and sellers are given a chance to get their tax affairs in order before SARS takes the steps referred to above.

"The issue of transfer duty and VAT receipts or exemptions will not be refused, but where the buyers and sellers do not contact SARS about their outstanding taxes and returns, the issue will be delayed for a few days so SARS can issue garnishee orders or instruct its attorneys to attach properties or register garnishee orders."

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