Ricochet News

How to deal with SARS disputes

By Patrick Emmett, Senior Tax Consultant - Jun 15, 2017
How to deal with SARS disputes

There has been a sharp increase in the number of additional assessments raised by the South African Revenue Service (SARS) as they focus on increasing their revenue collections. In some instances, these may have been warranted, but in others, assessments raised have left taxpayers perplexed and left with the only option of disputing the SARS decision.

Although the dispute process may appear to be technical, and may at times be daunting, it is our view that taxpayers should at least be aware of the process and the rights aff orded to them during this time. We unpack this in further detail below.

Before addressing the dispute process, it is well worth considering how important it is for the taxpayer to do all they can to prevent an additional assessment from being raised in the fi rst place, and thus avoiding a dispute altogether. The onus rests with the taxpayer to prove that information disclosed in a return is correct.

However, in this regard, it has been held in our courts (SARS v Pretoria East Motors (Pty) Ltd (291/12) [2014] ZASCA 91)) that SARS may only raise an additional assessment where they have proper grounds to believe that there is an error in a return submitted by a taxpayer.

Accordingly, we stress that a taxpayer must fi rstly ensure that the information which is disclosed (such as expenditure claimed as a deduction for income tax purposes) is correct and can be substantiated, and secondly that, upon receiving a request for information from SARS, that suffi cient supporting documents are provided which clearly refl ect why the disclosure is valid (for instance why the expense item is deductible for income tax purposes).

Where SARS is of the opinion that the claim is not valid, or the information provided is not suffi cient to discharge the onus of the taxpayer, they are within their rights to issue an additional assessment, with a dispute then the only option left for the taxpayer.

Dispute rules (the Rules), which prescribe the procedures to be followed in lodging an objection or appeal have been promulgated by the Minister of Finance in terms of Section 103 of the Tax Administration Act, No. 28 of 2011 (the TAA). In terms of the Rules, a taxpayer who is aggrieved by an assessment raised by SARS, may within 30 business days from the date of the assessment request SARS to provide reasons for the assessment.

Where the reasons have, in the opinion of SARS, been provided, SARS has 30 business days to provide the reasons to the taxpayer (extended to 45 business days where the reasons have not been clearly provided).

Once the reasons for the assessment have been received by the taxpayer, the Rules state that the taxpayer is aff orded 30 business days to lodge an objection against the assessment. If no reasons are requested, the taxpayer has 30 business days from the date of the assessment to lodge an objection.

A taxpayer who has not complied with the above timelines may request condonation for the submission of a late objection, but must provide acceptable reasons for the delay with the request.

SARS is aff orded a period of 60 business days to resolve the objection in terms of the Rules, which can be extended upon their request. Where the objection is disallowed, the taxpayer may lodge an appeal against the disallowance, and is aff orded a period of 30 business days from the notice of disallowance to lodge the appeal.

This process can follow an alternative dispute resolution process, proceed to the Tax Board, the Tax Court and all the way to the Constitutional Court, if needs be, but for the purposes of this article we have not addressed this process further.

It is also important for a taxpayer to note that, although the “pay now argue later” principle is valid, a taxpayer is able to request the suspension of a tax debt pending the outcome of a dispute.

In this regard, section 164 of the TAA allows a taxpayer to request the suspension of a tax debt if they intend disputing
an assessment which has resulted in the tax debt due. SARS may upon receiving the request from the taxpayer, approve the suspension, which will be valid during the dispute process.

However, if such request is denied, the tax debt remains due and payable in full.

There are three crucial benefi ts of the suspension of debt, namely:

  • Section 164(6) of the TAA states that SARS may not proceed with any collection steps from the date that the request for suspension of payment is received and up to 10 days after any notice of revocation of the suspension;
  • Section 191 of the TAA allows SARS to set-off refunds against other tax debts. However, in terms of section 191(2), SARS may not set-off the refund where the period outlined in section 164(6) of the TAA has not expired or the debt has been suspended in terms of section 164 of the TAA; and
  • Section 256(3) of the TAA allows a senior SARS offi cial to provide a taxpayer with a tax clearance certifi cate (TCC) where the tax debt has been suspended in terms of section 164 of the TAA.

As most taxpayers are aware, the receipt of a demand for payment, SARS setting of vital refunds (especially with VAT) against other tax debts, and / or the failure to obtain a TCC can be very frustrating, and at times can cause signifi cant damage to a taxpayer’s ability to continue operating.

Thankfully, the above remedies are available to the taxpayer, whether SARS abides by them however remains to be seen.

The dispute process may appear to be daunting, and therefore it may be worthwhile speaking to an advisor to assist with thWe process. At Mazars, we have signifi cant experience in dealing with SARS disputes and would be happy to assist you at any time in attempting to resolve what, in most instances, can be a very stressful situation.

Please feel free to contact one of our Tax Consulting specialists should you require any assistance in this regard.

For more information, visit Mazars Port Elizabeth at 30 Bird Street, Central, Port Elizabeth, or call 041 501 9700. Also visit them at www.mazars.co.za