Receiving a notice of audit from the South African Revenue Service (SARS) is something many business owners dread, but it does not have to be a crisis. SARS audits are a normal part of the tax compliance landscape, and being well-prepared makes the process straightforward.
## Types of SARS Audits
**Risk Assessment**: SARS reviews your return against their risk models. Many assessments are resolved without further engagement.
**Verification**: SARS requests supporting documents to verify specific items on your return, such as VAT input claims or business expenses.
**Desk Audit**: Conducted via correspondence - SARS requests documents and reviews them without an on-site visit.
**Field Audit**: SARS auditors visit your premises to review your books, records, and operations. More comprehensive and potentially more disruptive.
**Criminal Investigation**: Initiated where SARS suspects tax fraud or evasion. This involves the SARS Criminal Investigations unit.
## Why Businesses Get Audited
SARS uses sophisticated risk models to identify returns that deviate from expected patterns. Common triggers include: large or unusual input VAT refund claims, significant year-on-year changes in income or expenses, mismatches between declared income and third-party data, first-time refund requests from new VAT vendors, and anonymous tip-offs.
## Your Rights as a Taxpayer
The Tax Administration Act 28 of 2011 entitles you to: receive written notice before an audit begins, be informed of the basis of the audit, have a tax practitioner or attorney present at any meeting, request reasons for any assessment, and challenge assessments through the objection and appeal process.
## Step-by-Step: Responding to a SARS Audit
**Step 1: Read the Audit Notice Carefully**
Note the specific tax type and period, the documents requested, and the deadline - typically 21 business days to respond.
**Step 2: Engage a Tax Professional**
Unless the audit is simple, engage a registered tax practitioner. A good practitioner can significantly reduce your audit exposure and communicate professionally with SARS on your behalf.
**Step 3: Gather Your Documents**
Organised, complete documentation is your best defence. Typically needed: financial statements for the relevant period, bank statements, VAT invoices (sales and purchases), employee records and payroll, asset registers, and contracts with major clients or suppliers.
**Step 4: Respond on Time**
Never ignore a SARS audit notice. Failure to respond allows SARS to raise an estimated assessment. Request an extension if you genuinely need more time - SARS generally accommodates reasonable requests.
**Step 5: Cooperate, but Know Your Rights**
Be cooperative and professional. Provide only what is requested - do not volunteer additional information. SARS officials must treat you with courtesy and must not intimidate you.
## If You Disagree with SARS's Assessment
1. Lodge an Objection: Within 30 business days of the assessment, file an objection on eFiling giving detailed grounds
2. Appeal: If your objection is disallowed, appeal to the Tax Court or the Alternative Dispute Resolution (ADR) process
3. Tax Ombud: If you believe SARS has acted improperly, complain to the Tax Ombud (an independent office protecting taxpayer rights)
## Prevention: Best Practices
- Maintain accurate, organised financial records for at least 5 years as required by the Tax Administration Act
- Reconcile VAT returns to your accounting records monthly
- Ensure third-party information matches your returns
- File and pay on time - late submissions attract SARS attention
- Use a reputable tax practitioner for complex returns