As part of its role to encourage compliance to tax laws, the Seychelles Revenue Commission (SRC) conducts a series of audits yearly, to verify if taxpayers’ reporting in relation to their business activities are true and accurate.
The examination performed by SRC in-house auditors also reviews the internal controls, financial accounts, business practices, transactions and records kept by the businesses being audited such as books, sales ledgers, expenses, assets, receipts of cash, purchases, banking records plus other relevant data; to ascertain if compliance to the Seychelles tax laws are being maintained.
Prior to the start of an audit, SRC will send a formal letter to the taxpayer to inform them that their business activity has been selected to be audited and the scope of the audit. The taxpayer will also be provided the opportunity to share any records to substantiate the subject matters to be audited to SRC.
The team of auditors’ duties covers three main types of audits: the desk examination audit, the issue-oriented audit and the comprehensive audit.
Whilst the issue-oriented audit and the comprehensive audit are conducted based on information requested from the taxpayers as well as information gathered through field visits, the desk examination audit to the contrary is performed based on the taxpayers’ records readily available at the office.
Reviewing its audit performance during the first quarter of 2023, a total of 190 audits were conducted comprising of 168 desk audits and 22 combined issue oriented and comprehensive audits amongst which 22 audits (issue oriented and comprehensive audit combined) resulted in adjustments for being 94 percent non-compliant and desk audit recorded 74 percent non-compliance in inaccurate reporting from taxpayers in terms of procedures, documentation, amount of taxes lodged, declared, payed and others.
The increase in audit performance last year during the same period recorded a total of 235 audits combining of 208 desk audit, 21 issue oriented and 6 comprehensive audits resulted in 99 percent non-compliance compared to the same period this year. The difference in quantity of audits conducted is dependent on the complexity of the issue being audited, the size of the business selected and its activity, as well as the approach and time taken to complete the audit.
In many cases where errors have been detected, SRC does provide taxpayers the final opportunity to voluntarily disclose any inaccurate reporting made to obtain possible reduced penalties. However, taxpayers are being reminded that the amount of additional tax and penalties payable will vary on a case by case basis.
SRC is thus encouraging taxpayers to be aware of their tax obligations and consequences for non-compliance, even if they are being represented by a tax agent and to notify the organization voluntarily of any mistakes made for any anomalies without being prompted by a member of SRC staff to obtain reduced penalties.
To note, the law does make provision for the imposition of a penalty for an incorrect return/entry, including prosecution in cases of gross negligence or fraud.