All rental income must be declared to Sars

The South African Revenue Service (Sars) has reminded property owners in South Africa, who host paying guests, that they must declare any rental income in their income tax return. The same principle applies to people who rent out their properties as a home-owner.

Property owners must also register for Value Added Tax (VAT) if their short-term rental income is more than R1 million in a period of twelve months, the Sars said in a statement.

“Sars is working hard to provide clarity and certainty for taxpayers to meet their obligations effortlessly. We also strive to make it easy for taxpayers who are willing to comply. Our approach has always been that every taxpayer should pay their fair share.”

On the other hand, Sars says it is equally determined to make it hard and costly for non-compliant taxpayers who are not willing to meet their obligations. “We are working hard to improve system capabilities to detect taxpayers who do not comply by using data to identify risk.”

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According to Sars, early evidence has highlighted the need to focus on improving compliance in this sector of property owners who derive income from fee-paying guests.

Sars is encouraging property owners, who have not declared rental income until now, to set this straight immediately. “Affected taxpayers can choose to use our Voluntary Disclosure Programme (VDP), which offers more favourable terms. If you do not, you could be at risk and if Sars selects you for an audit, the more stringent normal processes will apply.”

The VDP offers more favourable terms for an assessment in terms of the penalty amount.

“Taxpayers must remember that failure to comply with their tax obligations may result in administrative penalties in addition to interest, or even criminal action.”

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