Avoid future headaches: raising all grounds of objection is critical in SARS tax disputes

In recent years, SARS has become increasingly litigious, resulting in disputes often ending up in the Tax Court or the High Court. Such a dispute will generally arise when a taxpayer disagrees with an assessment raised by SARS. An aspect of the dispute process that can have dire consequences if overlooked is that a taxpayer must canvas all relevant grounds of objection from the outset, as these form the basis of any future litigation. A case in point isCommissioner for the South African Revenue Service v Airports Company for South Africa.In this case, SARS raised an additional assessment for the taxpayers 2011 year of assessment, disallowing deductions of Corporate Social Investment (CSI) expenditure and allowances in terms of section 13quinand 12F of the Income Tax Act,1962 (the ITA). The taxpayer only objected to the disallowance of the CSI expenditure. No objection was lodged to section 13quin and section 12F allowances Read More …

SCA rules on the imposition of USP where a taxpayer relied on an opinion

The South African Revenue Service (SARS) may impose penalties on taxpayers who make errors in their tax returns, but relief is available under certain circumstances. Understatement penalties (USPs) are levied in terms of section 222(1) of the Tax Administration Act, 2011 (TAA) and provide that in the event of an understatement by a taxpayer, the taxpayer must, in addition to the tax payable, pay a USP, unless it is the consequence of a bona fideinadvertent error. A provision in theTAAfurther states that SARS must remit a penalty imposed for a substantial understatement if it is satisfied that: the taxpayer was in possession of an opinion by an independent registered tax practitioner that was issued by no later than the date the relevant return was due; the opinion was based upon full disclosure of the specific facts and circumstances of the arrangement; and the opinion confirmed that the taxpayers position is Read More …

Another reminder that SARS bears the onus of proving understatement penalties

In the matter ofLance Dickson Construction CC v Commissioner for the South African Revenue Service, the High Court set aside the order of the Tax Court in favour of the South African Revenue Service (SARS) and upheld an appeal by Lance Dickson Construction CC (Taxpayer) with costs. The Taxpayer, in its tax return for the 2017 year of assessment, did not declare any proceeds from the disposal of certain property to a related entity, Kwali Mark Construction CC (KMC), as it believed and as stated in the agreement of sale between the Taxpayer and KMC, that capital gains tax (CGT) would be paid by the Taxpayer when the property was on-sold by KMC to an unrelated third-party and the relevant proceeds were received by the Taxpayer. Because these conditions were not fulfilled in the 2017 year of assessment, the Taxpayer did not declare proceeds on the disposal of the property Read More …

Time bars taxpayers from correcting readily apparent undisputed errors

There are provisions within the Tax Administration Act, 2011 (the TAA) that allow taxpayers to request assessment corrections without having to rely on the often protracted dispute resolution procedures provided for in the TAA, read together with the Tax Court Rules. In particular, section 93 of the TAA deals with Reduced Assessments and provides (with our emphasis) as follows: (1)SARS may make a reduced assessment if (a) the taxpayer successfully disputed the assessment under Chapter 9; (b) necessary to give effect to a settlement under Part F of Chapter 9; (c) necessary to give effect to a judgment pursuant to an appeal under Part E of Chapter 9 and there is no right of further appeal; (d)SARS is satisfied that there is a readily apparent undisputed error in the assessment by (i) SARS; or (ii)the taxpayer in a return; (e) a senior SARS official is satisfied that an assessment was Read More …

SARS decision to audit: Can it be taken on review?

Author: Louise Kotze. Administrative action (being the exercise of public powers and the performance of public functions by organs of state) may be taken on review by members of the public that have been adversely affected by a decision that is taken by any public authority. In the recent judgment of Cart Blanche Marketing CC and others v CSARS (26244/15) [2020] ZAGPJHC (31 August 2020), the High Court of South Africa had to determine whether the decision taken by the South African Revenue Service (SARS) to audit a taxpayer constituted administrative action and whether the said decision was capable of being reviewed under South African administrative law.

The failure by a taxpayer to object to the imposition of interest may prove fatal

Author: Louise Kotze. In the judgment of CSARS v The Executor of the Estate Late Lot Maduke Ndlovu (A395/2016) [2020] ZAGPPHC (12 October 2020), the High Court of South Africa had to determine whether the Tax Court had erred in its findings that, amongst others, the taxpayer should be entitled to raise a new ground of objection during the appeal when such ground had not been raised by the taxpayer in his objection. Facts The late taxpayer, the executor of whose estate was the respondent in this matter, was granted options to acquire shares in his employer, which options were exercised by him during his tenure of employment.

High Court sets aside notice by SARS to debit a taxpayers bank account

Authors: Heinrich Louw and Ndzalama Dumisa. In the recent case of SIP Project Managers (Pty) Ltd v The Commissioner for the South African Revenue Service (Case Number 11521/2020) (as yet unreported), the High Court set aside a notice by the South African Revenue Service (SARS) to a bank to debit a taxpayers bank account in terms of section 179 of the Tax Administration Act 28 of 2011 (TAA), and ordered SARS to repay the amount to the taxpayer.

Tax treatment of losses incurred during lockdown

Authors: Aubrey Mazibuko, Emil Brincker and Louis Botha. There is little doubt that the national lockdown in response to the COVID-19 health crisis has had a negative financial impact on individuals and business alike. In our Tax & Exchange Control Alert of 28 May 2020, we discussed some of the practical day-to-day tax consequences that the lockdown may have on businesses. In this alert we take a look at the effect that the national lockdown may have on expenditure or losses incurred by individuals and businesses. We also the look at the tax consequences that may arise as a result of employers providing their employees with personal protective equipment. To this end we will consider two scenarios.

Tax disputes in the time of eFiling “Late” objections are not always late

Author: Esther van Schalkwyk , Tax Manager at BDO. While eFiling has played a crucial role in managing ones tax affairs remotely during the Covid-19 pandemic and lockdown, there are some discrepancies in the way SARS is handling disputes to tax assessments. In some instances, taxpayers whose objections are not late are prompted on eFiling to motivate why their late objection should be condoned. Whats more worrying is that we have seen such objections being disallowed for being late (despite a senior SARS official presumably having applied his/her mind). Such unlawful disallowances by SARS seem to occur mainly where taxpayers have exercised their right to request reasons for the assessment before objecting.