If any taxpayer has received a tax assessment (Assessment) from the South African Revenue Service (SARS) that did not align with the factual tax position or interpretation of the tax Acts, they are not alone. Many South Africans find themselves in this situation, facing what appears to be an impossible tax bill.

The Tax Administration Act, 2011 (the TAA), read together with the rules promulgated in terms of section 103 of the TAA (the Rules), govern the administration of tax laws in South Africa.

The good news? Options are available. If one disagrees with a SARS Assessment, one has the right to challenge it. It is easy to forget that the tax Acts protect the rights of taxpayers and that SARS does not hold all the power. Here is how an Assessment can be disputed:

REQUEST A SUSPENSION OF PAYMENT

SARS has a “pay now, argue later” policy. This means SARS expects to be paid, notwithstanding that the tax liability is disputed. If one does not pay one’s tax liability, even if one is going to object to the Assessment, SARS can take judgment and start execution proceedings. The “pay now, argue later” policy stems from the statutory obligation to pay tax. In order to make sure that SARS does not take judgment and execute against one’s property, one needs to request a suspension of payment. This request, if accepted by SARS, suspends one’s obligation to pay the assessed tax until one’s dispute has been finalised.

SARS’ debt collection arm and its audit arm do not necessarily liaise with each other. It follows that the suspension of payment and the dispute steps set out below need to occur simultaneously.

Ask for an explanation regarding the merits of the matter, if there is any uncertainty as to how SARS came to its Assessment:

• One can request SARS to provide reasons for its Assessment before an objection (dispute) is lodged.
• One has 30 business days after receiving the assessment to request reasons from SARS.
• SARS must respond and provide reasons within 45 business days, unless an extension is granted due to exceptional circumstances

OBJECT TO THE ASSESSMENT:

• After getting SARS' explanation (or if no reasons were requested), one has 80 business days to object to the Assessment. The objection is the most important dispute document as it sets out the grounds on which a taxpayer disagrees with SARS and generally the grounds cannot be changed. Taxpayers are strongly urged to approach tax practitioners to assist them in drafting the objection. The objection ought to be detailed, have evidence attached where applicable and set out the amounts which are in dispute. More importantly, it should also address penalties and interest, which in many cases is the biggest challenge.
• SARS must notify the taxpayer of an allowance (whether whole or partial) or a disallowance of the objection together with its reasons within 60 business days of the objection, unless it has asked for further information or documents. Should SARS not respond timeously, there are various avenues within which to finalise the matter at that stage.

APPEAL THE DECISION:

• If SARS does not agree with one's objection, its decision can be appealed. A notice of appeal must be submitted within 30 business days of receiving the notice of disallowance of the objection.
• If one does want to appeal a disallowance, one first needs to determine to which forum one will be appealing. If the amount in dispute does not exceed R1 million, then one may appeal to the tax board. There is talk about increasing this amount to R5 million; however, at present any amount in dispute which exceeds R1 million may be appealed to the tax court.
• In the notice of appeal one may indicate that one is willing to participate in alternative dispute resolution (ADR) proceedings. If SARS is of the view that the matter is capable of being resolved through ADR, the matter will be referred to ADR and the appeal process will be pended.
• If the matter is not resolved through ADR or not capable of being resolved through ADR, it will be referred to either the tax board or tax court, depending on the amount in dispute.
• If one is unhappy with the outcome of the appeal to the tax board or tax court, one may appeal to the full bench of the High Court, or directly to the Supreme Court of Appeal.

WHAT IF A DEADLINE IS MISSED?

It may happen that a deadline is missed. One should not panic! In some cases, SARS may grant extensions if it is satisfied that there are reasonable grounds for such a request:

For requesting reasons: up to 45 business days. After that, a SARS official does not have any discretion to provide any further extensions.

For filing an objection: up to 30 business days (or for a longer period in special cases where there are exceptional circumstances which are beyond the control of the taxpayer). A SARS official cannot extend the objection period if three years have elapsed since the date of the Assessment.

For appealing a decision: up to 21 business days'(or up to 45 business days in exceptional circumstances).

One must remember that these extensions are not guaranteed. It is always best to act within the original deadlines if possible.

WHY THIS MATTERS

Understanding these timelines is crucial for protecting one's rights as a taxpayer. By acting promptly and within these deadlines, one gives oneself the best chance of resolving any disputes with SARS fairly.

Dealing with tax matters can be complicated. If one is unsure about any part of the process or needs assistance in challenging a SARS assessment, do not hesitate to contact qualified tax practitioners for assistance and to help ensure that the right steps are being taken within the correct timeframes.

Written by: Daniel Robb, Senior Associate