Procedures Governing Objections and Appeals to SARS

A taxpayer who receives an assessment from the Commissioner: South African Revenue Service with which they do not agree, is entitled to lodge an objection against that assessment and Chapter 9 of the Tax Administration Act, No. 28 of 2011 (“TAA”) sets out the procedures that must be followed. 

Taxpayers also need to be mindful of the rules governing objections and appeals promulgated under section 103 of the TAA, which sets out in greater detail the steps to be followed in the objection and appeal process.

Under section 96(2) of the TAA, the Commissioner is obliged to supply the taxpayer with the grounds of the assessment so that the taxpayer can understand the basis on which the assessment has been issued. 

Unfortunately, far too many cases are seen where the Commissioner summarily disallows deductions claimed by taxpayers without supplying any information as to the legal basis on which the deduction was denied. 

In these cases the taxpayer is entitled to demand that the Commissioner complies with his statutory obligation to supply the grounds for the assessment in compliance with section 96(2) of the TAA. 

The taxpayer is required to submit the request for grounds of assessment where SARS has failed to fulfil its legal obligation to do so at the time of issuing of the assessment within 30 business days of the date of the assessment in question.

Once the taxpayer has received the grounds of assessment, they are entitled to submit an objection against that assessment within 30 days of receiving the grounds for the assessment. Where the Commissioner has supplied the grounds of the assessment as required at the outset, the taxpayer is required to lodge the objection within 30 business days of the date of the assessment.

According to the SARS’ website, taxpayers need to submit the correct documentation for the objection to be valid. In the case of personal income tax, a notice of objection or form NOO is required to be submitted via e-filing. Corporate income taxpayers are also required to file the objection electronically by using the form NOO. 

Where a trust disputes an assessment issued by SARS, it is necessary to complete form ADR1 and submit that either by hand or by email to an appropriate official at SARS. In the case of value-added tax, payroll related taxes and all other taxes , such as donations tax, dividends tax etc. a taxpayer can only file the objection using form ADR1 and is unable to lodge the objection electronically. 

Unfortunately, it does not appear that SARS officials are familiar with the procedure set out on the SARS website and officials have often rejected objections on the basis that they are invalid on the grounds that the taxpayer has not used an NOO form in respect of value-added tax or donations tax, secondary tax on companies. 

Once the legal position and SARS guidelines are pointed out to SARS officials, a letter of apology is issued and the objection is then acknowledged and confirmed as being properly filed. It is most unfortunate that SARS officials do not appear to be familiar with their own procedures.

It is critical that when the taxpayer decides to object to the assessment, that they also consider whether to pay the tax in dispute or whether they wish to apply for a suspension of payment of the tax in dispute in terms of section 164 of the TAA. 

The rules regulating the suspension of payment of tax in dispute is not discussed further here, except to point out that too often SARS does not respond timeously or at all to the letters requesting suspension of payment, as a result of the fact that the requests for suspension are not capable of being submitted to SARS electronically and are therefore not properly tracked within SARS’ systems. 

Too often taxpayers who have lawfully applied for suspension of payment receive demands for payment or in a worst case scenario, are informed that judgment has been taken against them even though SARS has sat on their request for suspension for many months.

When the taxpayer submits their objection, it is most important that the grounds of the objection are properly considered and fully set out in the letter of objection submitted to the Commissioner.

Where SARS has failed to supply the grounds of assessment or failed to supply proper reasons for the decision to issue the assessment, the taxpayer should insist that SARS complies with their statutory duty to inform the taxpayer for issuing the assessment in question. The taxpayer cannot properly object to an assessment without knowing the basis on which SARS has issued the assessment concerned.

It is also important that when the objection is prepared, that statements made in the letter of objection can be supported subsequently by documentary evidence should the case proceed on appeal to the Tax Court, or another court. The letter of objection needs to be carefully contemplated and drafted, so that the taxpayer sets out their case properly and knows that they can support the statements made in their letter of objection. There is nothing worse for a taxpayer to lodge an objection only to discover that documents which they believe to exist, which would support their case, in fact are no longer available or do not exist.

Under the rules governing objections and appeals, taxpayers also cannot unilaterally add to the grounds of objection without following proper procedures laid down in the rules governing objections and appeals and this applies equally to SARS insofar as its grounds of assessment are concerned.

On 8 December 2014 Rogers J delivered judgment in the case of ABC (Pty) Ltd v Commissioner for SARS,  as yet unreported.

In ABC’s case, the Commissioner submitted an application to the Tax Court for consent to amend its grounds of assessment under rule 10 of the rules which previously governed the objection and appeal process.

The case related to the application or otherwise of section 103(2) of the Income Tax Act, No. 58 of 1962 (“the Act”) and in his Rule 10 Statement, the Commissioner indicated that he was relying not only on the first change in shareholding but also on the subsequent change of shareholding which occurred during November 2003. 

These factors were important in determining whether section 103(2) of the Act could apply to the transaction in dispute or not. From a review of the decision of Rogers J, it would appear that the Commissioner informed the taxpayer of the grounds of assessment setting out the basis on which the assessment was issued, without reference to the second change of shareholding and now sought the court’s consent to supplement his grounds of assessment.

The new rules governing objections and appeals took effect on 11 July 2014 and the court indicated that the Commissioner’s Rule 10 Statement was filed at the time that the old rules applied. Rogers J indicated that he was required to establish what could lawfully be contained in a Rule 10 Statement and he reached the conclusion that the coming into force of the new Tax Court rules did not affect that evaluation.

The court referred to the fact that the question as to whether the Commissioner or the taxpayer could introduce new grounds into their Rule 10 and 11 Statements not covered by the earlier steps in the assessment process is not entirely settled in law. In ITC 1843 Claasen J held that the Commissioner and the taxpayer were entitled to depart from their previously stated positions in letters of assessment and letters of disallowance of objection.

Subsequently in HR Computek (Pty) Ltd v The Commissioner for the South African Revenue Service the Supreme Court of Appeal indicated that the taxpayer does not have the freedom of amendment which Claasen J accepted in ITC 1843.

Rogers J reached the conclusion that a distinction should be made between a tax appeal which relates to objective questions of fact and law and tax appeals which relate to the exercise by the Commissioner of discretionary powers. The court analysed section 103(2) of the Act extensively and reviewed the grounds of assessment set out in the Commissioner’s Rule 10 Statement. 

The court indicated that the Commissioner cannot support the existing assessment made by the him on the basis of matters on which he was not satisfied when he first issued the assessment in dispute. The court therefore came to the conclusion that the Commissioner’s application to amend its grounds of assessment set out in their Rule 10 Statement should be refused and that the taxpayer’s counter application to strike out those amendments should succeed. The taxpayer in the case of ABC (Pty) Ltd therefore succeeded in preventing SARS from amending its grounds of assessment and also received an order of costs in its favour.

The lesson to be learnt from the ABC case is that the taxpayer must formulate its grounds of objection properly and likewise SARS must formulate its grounds of assessment adequately and cannot supplement that at will and thereby prejudice the taxpayer.

Dr Beric Croome: Tax Executive, ENSafrica. This article first appeared in Business Day, Business Law & TAx Review, April 2015. Photograph by Judy Croome.

Lodging Objections Against Assessments Issued by the Commissioner: South African Revenue Service

INTRODUCTION

On 1 October 2012, the Tax Administration Act, No 28 of 2011 (‘the TAA’) came into force.  As a result of the commencement of the TAA, several sections of the fiscal statutes were repealed and replaced by corresponding provisions in the TAA.  

The primary purpose of the changes is to consolidate existing tax administration legislation into a single, more comprehensive statute, which will, hopefully, ensure that tax administration is managed more efficiently and effectively.  

It is important that taxpayers are aware of the changes introduced as a result of the TAA, particularly insofar as it relates to the objecting of assessments issued by the Commissioner: SARS.  

It must be noted that the TAA applies to all taxes administered by the Commissioner, other than customs and excise.  Therefore, what is stated below will apply to assessments issued to taxpayers for income tax, value-added tax and other taxes also.

THE DATE BY WHEN AN OBJECTION SHOULD BE LODGED AGAINST AN ASSESSMENT

One of the important changes brought about by the TAA relates to the definition of ‘date of assessment’, the importance of which relates to tax dispute resolution.

Previously, section 81(1) of the Income Tax Act, No 58 of 1962, as amended (‘the Act’), stated the following:

“Objections to any assessment made under this Act shall be made in the manner and under the terms and within the period prescribed by this Act and the rules promulgated in terms of section 107A by any taxpayer who is aggrieved by any assessment in which that taxpayer has an interest.”

Rule 4(e) of the Rules promulgated under section 107A of the Act, prescribing the procedures to be observed in lodging objections and noting appeals against assessments (‘the Rules’) states:

“a taxpayer who is aggrieved by an assessment may object to an assessment, which objection must –

                (e)           be delivered to the Commissioner at the addressed specified in the assessment for this purpose, within                   30 days after –

                                in the case where the taxpayer has requested reasons under rule 3, either the date of the notice by the                       Commissioner that adequate reasons or the date the reasons were furnished by the Commissioner, as                   the case may be, or;

                                in any other case the date of assessment.”

The Rules themselves do not define the meaning of the words ‘date of assessment’, and it is necessary, therefore, to refer to the definition section contained in section 1 of the Act, which defines the terms as follows:

“in relation to any assessment, means the date specified in the notice of such assessment as the due date, or, where a due date is not so specified, the date of such notice.”

Lastly, the meaning of ‘day’ in the definition section contained in section 1 of the Rules means:

“a day as contemplated in section 83(23) of the Act.”

Section 83(23) of the Act defines ‘day’ as:

“any reference in this Part and the Rules to ‘day’ means any day other than a Saturday, Sunday or public holiday: provided that the days between 16 December of a year and 15 January of the following year, both inclusive, shall not be taken into account in determining days or the period allowed for complying with any provision in this Part or the rules.”

In addition, paragraph 6.1 of SARS Guide on Tax Dispute Resolution (‘SARS Guide’) sets out when an aggrieved taxpayer may object to an assessment.  It refers to the definition of ‘date of assessment’ contained in section 1 of the Act and thereafter states the following:

“Please note that where an assessment has a ‘date of assessment’ on the assessment form, as well as a due date and a second date, the 30-day period must still be calculated with reference to the due date, in accordance with the definition of ‘date of assessment’ in the Act.  The ‘date of notice’ or ‘date of assessment’ only applies where there is no ‘due date’ on the notice.”

The SARS Guide provides an example, summarised in the table below, and which provides clarity on the matter:

Date of Notice:	29/09/2003
Due Date:	03/11/2003
Second Date:	28/11/2003
In the above example, the objection must be filed within 30 days after 03/11/2003 of the ‘due date’, that is, by 15 December 2003.  The tax due must be paid before 28/11/2003 (the “second date’).

THE DEFINITION OF ‘DATE OF ASSESSMENT’ AND DISPUTE RESOLUTION UNDER THE TAA

The TAA has repealed section 81 of the Act, and, hence, objections and appeals against assessments issued by SARS are now governed by section 104 of the TAA.  Section 104(3) of the TAA directs that an objection to an assessment or decision must be lodged in the manner and within the time periods prescribed in the ‘Rules’.  

The aforementioned Rules have not yet been published by Public Notice in terms of section 103 of the TAA, and, thus, until such time as they are, the old Rules promulgated under the Act remain the relevant Rules in terms of section 264(2) of the TAA.

As pointed out above, there is no definition of ‘date of assessment’ in the ‘old Rules’.  It is, therefore, necessary to consider the definitions contained in the TAA, which took effect on 1 October 2012.  Section 1 of the TAA defines ‘date of assessment’ as follows:

“(a)          in the case of an assessment by SARS, the date of the issue of the notice of assessment;”

Based on the above, the period granted for the submission of an objection has changed, and has been reduced.  

Now, by referring to the example contained in the table above, the objection must be filed 30 days after 29 September 2003, that is, by 7 November 2003, which is a reduction of the time allocated for the submission of the objection of over a month.  

Were a taxpayer unaware of this change and thus follow the old rules in conjunction with the old definition of ‘date of assessment’, they would have to seek condonation for the late filing of the objection, which is unlikely to be continuously entertained by SARS on the basis of ignorance of the law.  The example shows the importance of this amendment to the fiscal provisions, and is important for all parties, especially taxpayers and their advisors, to ensure that they are aware of the changes that the TAA has introduced, and to seek advice where uncertainty arises.

Where the taxpayer has been subjected to an audit, the Commissioner will, in most cases, issue a letter advising that the taxpayer’s taxable income is being amended.  Often, these letters are referred to as a letter of assessment, and, if the letter complies with the definition of assessment contained in section 1 of the TAA, read together with paragraph 23(a) of Schedule 1 to the TAA, the taxpayer must object within thirty days of the date of the letter of assessment.  In this regard, see the decision of the Court in C:SARS v South African Custodial Services (Pty) Ltd [2012] 74 SATC 61.

This article first appeared in
Without Prejudice (March 2013)

GROUNDS OF OBJECTION

Where the taxpayer decides that the reasons received from SARS adequately set out the basis on which the assessment has been issued, the taxpayer must lodge a proper notice of objection setting out the grounds of the objection.  Clearly, in the event that the reasons received are inadequate, a taxpayer is entitled to call for adequate reasons in terms of Rule 3(1)(a) of the Rules governing dispute resolution.

It is important that the taxpayer formulates their grounds of objection in detail and sets out the basis on which they dispute the assessment issued by the Commissioner. 

A question that is often asked by taxpayers disputing an assessment is the detail which must be contained in the letter objecting to the assessment issued by the Commissioner.  It is important that the objection sets out the basis on which the taxpayer challenges the assessment issued by the Commissioner.  The question that arises is whether a taxpayer may later expand upon the grounds of objection.

In ITC 1843 [2010] 72 SATC 229, the Court was required to determine whether the Commissioner was entitled to raise a new ground of assessment at the time when the Rule 10 statement setting out the Commissioner’s grounds of assessment was being issued to the taxpayer.  

Claasen J reviewed the Rules governing objections and appeals and decided that it was competent for the Commissioner to advance new grounds of assessment which had previously not been communicated to the taxpayer in the process leading up to the amended assessment issued to the taxpayer.  

The Court decided that, just as the Commissioner is entitled to modify his grounds of assessment in the Rule 10 statement to be issued to the taxpayer, the taxpayer would also be entitled to expand on and vary the grounds of objection contained in their letter of objection when the time arrived to finalise the grounds of appeal comprising the taxpayer’s Rule 11 statement setting out the grounds of appeal.

The Court, therefore, reached the conclusion that the Commissioner could add new grounds to its Rule 10 statement of grounds of assessment, and that there could be no prejudice to the taxpayer, on the basis that Rules 10 and 11 were interpreted in the manner contained in the judgment because of the built-in safeguards which were available to a taxpayer to vary their grounds of objection in their statement of grounds of appeal, regulated by Rule 11.

However, more recently, in the case of HR Computek (Pty) Ltd v The Commissioner for the South African Revenue Service, as yet unreported (case number 830/2011), where judgement was delivered by the Supreme Court of Appeal on 29 November 2012, the Court decided that the taxpayer is limited to the grounds stated in their notice of objection.  Unfortunately, Ponnan JA did not refer to the decision of Claasen J handed down in 2010 in ITC 1843.

The Supreme Court of Appeal reached the conclusion that, by virtue of the fact that the taxpayer had not raised an objection to the principal amount of VAT in its notice of objection, the taxpayer was precluded from raising it on appeal before the Tax Court.

The Court reached the conclusion that, when the taxpayer challenged the capital amount of the value-added tax reflected as payable for the first time in its Rule 11 statement, it effectively raised a new objection against an individual assessed amount that had not previously been objected to.  

The Supreme Court of Appeal, therefore, concluded that, in terms of section 32(5) of the Value-Added Tax Act, No 89 of 1991, as amended, because no objection had been lodged against SARS’ assessment, the taxpayer was liable to SARS for the additional VAT output tax amounting to R1,246,177.60, and that the assessment issued became final and conclusive in April 2007.  

Thus, the Supreme Court of Appeal held that the taxpayer’s appeal must fail, on the basis that it was not competent to amend the grounds of objection set out in the earlier letter of objection when the time came to prepare the Rule 11 statement of grounds of appeal.  This decision would appear contrary to that of Claasen J.

If the taxpayer is to be bound to their grounds of objection, following the decision of the Supreme Court of Appeal, the Commissioner must also be bound to the reasons supplied in the grounds of assessment notified to the taxpayer at the time that the assessment is issued.  

It would be most iniquitous if the taxpayer cannot vary the grounds of objection, whereas the Commissioner is entitled to supplement the basis on which the assessment was issued to the taxpayer.

It remains to be seen if the anomalies arising between ITC 1843 and the Supreme Court of Appeal’s decision in Computek will be reconciled when the new Rules governing objections and appeals are finalised under the provisions of the TAA.

CONCLUSION

Taxpayers wishing to dispute an assessment issued by the Commissioner must lodge the objection within the time allowed, or, alternatively, request adequate reasons for that assessment, and, should they fail to meet the time periods prescribed, they will need to call for condonation for the late submission of the objection.  It is important that the objection lodged against the assessment sets out in detail the grounds on which the taxpayer seeks to rely in challenging the assessment issued by the Commissioner.

DR BERIC CROOME Tax Executive Edward Nathan Sonnenbergs Inc.  

For Taxpayers, it's a case of Hurry Up and Wait!

THE financial year for government came to an end on March 31 and taxpayers have become accustomed to the month of March being a month during which the Commissioner of the South African Revenue Service (SARS) seeks to collect as much tax as possible in order to meet the collection targets specified in the National Budget.

SARS issued a press release on April 1 which indicated that by midnight on March 31 SARS had collected R674,2bn in tax revenue, which was R2bn higher than the revenue budget set in the 2011 budget in February.

The increase in tax collected represented nominal growth in revenue of 12,6% or R75,6bn more than the previous fiscal year. SARS exceeded its collection target is to be commended.

However, a question that must be asked is whether the continual increase in tax collected is sustainable, taking account of the narrow tax base in the country.

According to Tax Statistics 2010, published by SARS, the number of registered individual taxpayers increased from 4,1-million in 2004/2005 to more than 5,9-million in 2009/2010.

SARS has previously reported that there are about 5-million SITE workers who derive an annual taxable income below R60 000 per year and are therefore not required to register and submit tax returns. Therefore, the number of individuals paying tax, according to SARS, amounts to about 10 920 612 persons.

It is difficult to determine how many individuals should be registered as taxpayers in SA and the shortfall between those persons who should be registered and those who are on the register constitutes part of the tax gap. The tax gap also comprises tax not collected as a result of taxpayers failing to declare the correct amount of income subject to tax — this constitutes tax evasion and is illegal.

It would appear that in the 2009/10 financial year about 14-million persons benefited from social grants funded by registered taxpayers. In attempting to establish how many persons should be registered for tax purposes it is appropriate to refer to the Quarterly Labour Force Survey, published by Statistics SA, for the third quarter of 2010 which was issued on October 26 2010. That survey reported that 17 371 000 persons were in employment. Comparing the number of persons in employment per the Labour Force Survey of 17 371 000 persons and the number of persons paying tax of 10 920 612, there is an unexplained shortfall of some 6 450 388 persons.

Part of the shortfall probably comprises those persons who derive amounts below the tax threshold and are therefore not required to pay tax. However, it does appear that there are a significant number of economically active persons in the country who are not registered for tax purposes. SARS has undertaken various initiatives to encourage persons outside of the tax net to regularise their tax affairs and to broaden the tax base.

Left: SARS officials are so focused on the collection of tax in the month of March they do not attend to other matters such as objections and appeals or finalising refunds. Taxpayers find the delays and waiting frustrating.

The fiscal statutes regulate the timing of payment of tax by taxpayers but unfortunately certain SARS officials seeking to ensure that the collection target is met do not always adhere to those principles.

We are aware of a number of cases where taxpayers were, for example, contacted on March 3 by SARS to enquire when payment would be made on an assessment issued which contained a payment date of March 31. Clearly, under the provisions of the law, taxpayers are entitled to pay tax as and when due according to the provisions of the fiscal statutes and not before.

In other cases SARS sought to encourage large employers to pay Employees ’ Tax (PAYE), which would under the law be due on April 7, no later than March 31, thereby ensuring that the cash was accounted for in the collection target set for March 31 2011. The manner in which certain officials conducted themselves would tend to indicate SARS officials are participating in bonuses based on the collection target set in the budget.

Where a taxpayer has lodged an objection or an appeal, that taxpayer is entitled to request a postponement of payment of tax under section 88 of the Income Tax Act or equivalent provision in another fiscal statute. Recently, the rules governing the postponement of tax pending an objection or appeal were clarified and taxpayers now need to satisfy certain criteria to ensure that a deferral of tax in dispute is granted.

Unfortunately, it does not appear that the different branches at SARS are aware when taxpayers have applied for the deferral of payment of tax in dispute. We encountered a number of instances during March where SARS officials were demanding payment of tax even though the taxpayer, having noted an appeal or objection, had requested a deferral of payment.

It appears that SARS officials become totally focused on the collection of tax in the month of March and do not attend to other matters affecting taxpayers such as objections and appeals or finalising refunds payable to taxpayers. Many taxpayers awaiting refunds in March were informed that those refunds would not be finalised prior to March 31 and that those refunds would only be released after April.

Difficulties taxpayers encountered with SARS officials seeking to collect tax during March often included SARS officials, who were unaware of the taxpayer’s full circumstances and who did not have access to the taxpayer’s records on the SARS system, calling for payment of tax before it was legally due.

International research has shown that where taxpayers are treated fairly they are more likely to adhere and comply with the fiscal statutes in a particular country. Therefore, where officials choose not to adhere to the constitutional provisions or SARS Service Charter in their interactions with taxpayers, such conduct undermines the levels of taxpayer compliance that may be experienced in the future.

Clearly, where taxpayers are indebted to SARS and fail to pay timeously SARS has substantial powers in the fiscal statutes to ensure that the tax is paid over promptly. Taxpayers, therefore, need to meet their obligations to pay their tax as and when it falls due to SARS. However, at the same time, SARS, when collecting taxes from taxpayers, needs to adhere to the standards set out in the Service Charter and contained in the bill of rights.

It is also important that the tax base is broadened by increasing the number of taxpayers on register, thereby ensuring that the tax burden is fairly shared by citizens of the country and that those taxpayers who are on register, but who do not comply with their fiscal obligations, are brought to account. In addition, taxpayers need to be satisfied that the taxes they pay to the state are properly utilised in uplifting the lives of all South Africans and are not wasted.

■ Dr Beric Croome is a tax executive at ENS. This article first appeared in the Business Day Business Law & Tax Review (May 2011.) Free Image from ClipArt.

Payment of tax during an objection regulated

In January, the Government Gazette contained a notice determining the date on which section 13(1) and 38(1) of the Taxation Law Second Amendment Act, 2009 will come into operation. Government Notice number 50, contained in the Government Gazette 33977, provided that February 2011 shall be the date on which Sections 13(1) and 38(1) of the Taxation Law Second Amendment Act, 2009 shall come into effect.

In order to ascertain the import of the abovementioned Government Gazette it is necessary to refer to the provisions of section 13(1) of the Taxation Law Second Amendment Act, 2009. Section 13(1) of the said statute substitutes the existing provisions contained in section 88 of the Income Tax Act of 1962.

The Government Gazette provides that the rules contained in the new version of section 88, which will be dealt with below, will come into operation on February 1. The South African Revenue Service (SARS) placed the Government Gazette's notice on its website when it was issued and, subsequently, issued a press release setting out the consequences of the notice and how SARS will deal with the new rules.

The old version of section 88 of the act regulated the payment of tax pending an appeal. It did not deal with when a taxpayer had lodged an objection and SARS had not made a decision on that objection. Section 88 of the act now regulates the payment of tax pending an objection or appeal lodged by a taxpayer.

It must be remembered that the Constitutional Court in Metcash Trading Limited vs the Commissioner: SARS 2001(1) SA 1109 (C) held that provisions of section 36 of the Value-Added Tax Act of 1991 (the VAT Act) which requires a taxpayer to “pay now, argue later" was constitutionally valid. Section 88 of the act is identical to section 36 of the VAT Act.

The Commissioner has the power to postpone the payment of tax pending the finalisation of an appeal. The old section 88 did not specify the criteria that SARS should take into account to determine whether a taxpayer should be granted a postponement of payment of tax pending finalisation of an appeal. The Constitutional Court held in Metcash that any decision made by the Commissioner on a taxpayer's request is subject to the rules of administrative justice, as a decision made under section 88 constitutes administrative action as envisaged in the constitution.

The new provisions of section 88 now deal with the powers of SARS to recover tax even though the taxpayer's objection or appeal has not been finalised.

Section 88 makes it clear that a taxpayer is entitled to request that SARS suspends the payment of any tax or a portion thereof due under an assessment when the liability to pay that tax is disputed by lodging an objection or appeal.

Section 88(3) of the act now provides that the Commissioner may suspend the payment of the tax in dispute by having regard to the following criteria:

• The compliance history of the taxpayer;
• The amount of tax involved;
• The risk of dissipation of assets by the taxpayer concerned during the period of suspension;
• Whether the taxpayer is able to provide adequate security for the payment of the amount involved;
• Whether payment of the amount involved would result in irreparable financial hardship to the taxpayer;
• Whether sequestration or Iiquidation proceedings are imminent;
• Whether fraud is involved in the origin of the dispute; and
• Whether the taxpayer has failed to furnish any information requested by the Commissioner under the act for a decision under section 88.

When a taxpayer receives an additional assessment or an assessment that does not agree with the tax return submitted by them to SARS, they have the right to lodge an objection to that assessment.

Left: Taxpayer's need to be aware of the requirements contained in section 88(3). IN determining whether to grant a taxpayer a suspension of payment, SARS must adhere to the rules of adminsitrative justice.

At the time that the objection is formulated the taxpayer should decide whether to pay the tax and know that if they succeed with their objection or appeal they will receive the tax paid by them together with interest. However, when a taxpayer chooses not to pay the tax, they will need to apply for the postponement of payment under section 88, and in the event that their objection does not succeed they will be liable for interest from the second date of the assessment issued to them.

Taxpayers need to be aware of the requirements contained in section 88(3) and should submit a formal application by way of a letter requesting postponement of payment pending finalisation of an objection or appeal, and show that each of the criteria mentioned above have been complied with.

Section 88(4) provides that SARS may refuse a request for postponement or may revoke a decision to suspend payment when SARS is satisfied that:

• The objection or appeal is frivolous or vexatious;
• The taxpayer employs dilatory tactics in the objection or appeal;
• On further consideration of the factors contemplated in section 88(3), the suspension should not have been given; or
• There is a material change in any of the factors described in section 88(3) upon which a decision to suspend the amount was based.

When a taxpayer succeeds with an objection and has paid the tax that was reflected on the additional assessment, he will receive the tax back from SARS together with interest thereon. Previously section 88 only required interest to be paid when the assessment was reduced pursuant to an appeal being allowed or conceded. The new section is more equitable than the old rules.

Section 36 of the VAT Act has been amended along the lines referred to above and should a taxpayer request a postponement of payment for a dispute under the act, the same criteria referred to above will need to be adhered to under the provisions of section 36 of the VAT Act.

When a taxpayer receives an additional assessment a decision must be made whether to lodge an objection against that assessment and, if so, a decision must be made whether to pay the tax due or alternatively to seek postponement of payment under section 88 or, in the case of a VAT matter, under section 36 of the VAT Act.

When SARS refuses a taxpayer's request to postpone payment subject to objection or appeal, the taxpayer may not object or appeal against that decision under the provisions of the act. The taxpayer would be required to pursue the matter in the high court on the basis that SARS has not complied with its obligations under the Promotion of the Administrative Justice Act of 2000. SARS, in determining whether a taxpayer should be granted a suspension of payment, must adhere to the rules of administrative justice and where it fails to do so a taxpayer should succeed in having the decision reviewed by the high court.

 Dr Beric Croome is a tax executive at ENS. This article first appeared in Business Law and Tax Review, March 2011, Business Day. Free image from ClipArt.