More than a million taxpayers have withdrawn from two-pot system: Sars

The South African Revenue Service (Sars) has to date received 1.213,646 applications for tax directives for withdrawals from the savings withdrawal benefit of the two-pot system and a gross lump sum of R21.4bn has been paid out. 

“Of the total number of applications 1.148,729 tax directives were approved for funds to be released. The remainder were declined for a variety of reasons, including incorrect identity numbers and incorrect tax numbers, among others,” Sars said in statement on Friday. 

Sars asked taxpayers who wanted to apply for a withdrawal to make sure they verified their tax numbers and supplied the correct identity numbers and did not have any outstanding debt with Sars. 

It said after a registered taxpayer applied, a successful tax directive informed the fund management how much tax to deduct from a withdrawal. Before a final amount was paid to the applicant, the pension fund would be informed to also deduct any outstanding debt on behalf of Sars before any payout was made to the member.

Tax on these withdrawals would be imposed at a marginal tax rate ranging between 18% and 45% depending on their scales.   

Sars said despite this public information, there were taxpayers who were wilfully understating their incomes.

“Sars is deeply concerned that 213,654 taxpayers have been identified where they have declared incorrect taxable income with the view to have a more favourable tax rate. If a taxpayer understates their income, they are intentionally involved in evading their tax obligation,” Sars commissioner Edward Kieswetter said. 

He said a penalty would be imposed on taxpayers who understated their income.

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