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Seeing a chunk of every month’s salary head off to the taxman is painful.

It’s even more painful in this country, where it usually ends up being squandered or pilfered or both.

Fail to pay your taxes, and SARS will come knocking, with a number of new initiatives targeting everyone from businesses through to wealthy South Africans.

Congrats if you received that SARS ‘welcome letter’ sent to high wealth individual taxpayers earlier this year, I guess.

Choosing not to pay your taxes and legally minimising the amount of tax you have to pay are two very different things.

As regional wealth manager Mark Diuga pointed out to BusinessTech, understanding the gap between tax evasion and tax avoidance also requires a definition for tax planning:

Tax Evasion: using unlawful methods to pay less or no tax. Usually, this constitutes fraud, i.e., falsifying statements or presenting false information to the South African Revenue Service (SARS) with penalties including imprisonment.

Tax Planning: legally, you may arrange your financial affairs in such a way as to reduce your tax liability; a commonly used approach would be to make contributions into a retirement annuity to receive a tax refund and, by doing so, you can use the funds to build long-term wealth whilst deferring an income tax liability until the point of receiving a benefit.

Tax avoidance: is everything in between which constitutes you paying less tax than SARS would like.

Given that SARS has made it clear that it’s on the warpath, you want to steer clear of the first option.

When it comes to tax planning, that’s where advice from the likes of  Galbraith | Rushby comes in handy. Their team of experts is well versed in compliance matters, handling tax return submission for individuals, companies, trusts, non-profits, body corporates, and more.

While SARS states that it expects “every taxpayer to meet their obligations and pay their fair share of tax”, tax avoidance can still be lawful.

Diuga says General Anti-Avoidance Rules (GAAR) are constantly being updated, both locally and internationally, “to push the lawful, yet undesirable, tax avoidance practices into extinction”.

[source:bustech]