Keeping tax records in the cloud

Graeme Palmer, a Senior Associate in the Commercial Department at Garlicke & Bousfield Inc.

Taxpayers are obliged to keep records for a period of five years after submitting a tax return. It is far more convenient to retain records in an electronic form than accumulate mountains of paper. The Commissioner for the South African Revenue Service (S

Electronic records are those stored in electronic form on a computer or electronic storage device and are either originally created in an electronic form or are converted from any non-electronic form into an electronic form.

Cloud computing is gaining in popularity, and one of the services offered is storage, where large service providers rent space in their storage infrastructure on a subscription basis. The cloud server where the data is stored could be located anywhere in the world, but according to SARS rules, records retained in an electronic form must be kept and maintained at a place physically located in South Africa.

If you intend keeping your electronic books of account or documents relating to your tax on a server situated outside of South Africa you first have to get authorisation from a senior SARS official. A single telephone call to the SARS contact centre is unlikely to achieve this result, as the official must first be satisfied that you meet certain requirements before giving her authorisation. These requirements include:

· the electronic system used must be accessible from the taxpayer’s physical address in South Africa for the duration of the five year period;

· the locality of the records will not affect access to the electronic records;

· South Africa must have an international tax agreement for reciprocal assistance with the country where the electronic records are stored;

· the form in which the records are maintained satisfies all the requirements of the SARS rules;

· the taxpayer will be able to provide an acceptable electronic form of the records to SARS on request within a reasonable period.

Before sending your records into the cloud, find out where the server storing the data is located. If it is outside South Africa, make sure there is a tax agreement with that country and that you can comply with all the SARS rules relating to storing electronic records. Only once you are satisfied you can comply with these requirements apply for authorisation.