Tax administration – Prescription

From time to time, our courts are called upon to remind public officials that compliance with the requirements of provisions in legislation is necessary to enable them to enforce the powers entrusted to them. The requirements are in place to enable the public to understand the reasons for the administrative action and to determine whether the action is compliant with the law.

Set-off of customs debt against amounts refundable

Author: Petr Erasmus (Director at Cleffe Dekker Hofmeyr). South African Revenue Service (SARS): Customs (Customs) sets off amounts owed to Customs against amounts refundable to clients. Section 76C of the Customs and Excise Act, No 91 of 1964 (Act) provides for set-off as follows: “Set-off of refund against amounts owing – Where any refund of duty is in terms of this Act due to any person who has failed to pay any amount of tax,

Criticism on SARS’s approach to the interpretation of legislation

Author: Mareli Treurnicht (Senior Associate at Cliffe Dekker Hofmeyr). On 29 April 2016 the High Court of South Africa (Gauteng Division, Pretoria) handed down judgment in an application brought by Julius Malema (Applicant) against the Commissioner for the South African Revenue Service (SARS). The matter concerned a compromise agreement concluded between them in terms of s205 of the Tax Administration Act, No 28 of 2011 (TAA).

SARS Tax Clearance Certificate – be cleared online

Author: Sduduzo Mhlongo (ENSAfrica candidate attorney). The South African Revenue Service (“SARS”) has introduced a new Tax Compliance Status System (“TCS”)  from 18 April 2016 in an effort to improve compliance and to make it easier for taxpayers to manage their tax affairs. The Tax Compliance Status System is a holistic view of the tax compliance level across all registered tax types. The new system makes it stress-free for taxpayers to obtain a Tax Clearance Certificate (“TCC”) and allows taxpayers to obtain a Tax Compliance Status PIN which can be used by authorised third parties to verify the taxpayer’s compliance status online via SARS eFiling. There are 2 steps in the process of obtaining a TCS:

VAT – Consequences of non-registration for VAT

The Value Added Tax Act 89 of 1991 (the VAT Act) requires VAT to be levied by a vendor on the supply of goods or services in the course or furtherance of an enterprise carried on by the vendor. A vendor is any person who is or is required to be registered in terms of the VAT Act. The fact that a vendor includes any person that is required to be registered makes it clear that a person’s liability for VAT is not dependent on whether the person is in fact registered as a vendor but rather whether the person is required to be registered as a vendor. The VAT Act requires registration as a vendor on either a prospective or retrospective basis. On a prospective basis, a person would be required to register as a vendor on the first day of the month in which the total value of … Continue reading

Tax Administration – Onus of proof for understatement penalty

As a basic principle, under section 102(1) of the Tax Administration Act 28 of 2011 (the TAA), the onus of proof that an amount is not taxable or that an amount is deductible, rests on the taxpayer, whereas under section 102(2) of the TAA, the onus of proof pertaining to the facts upon which an understatement penalty is imposed, is upon the South African Revenue Service (SARS). Too often, upon the conclusion of investigations or reviews, SARS threatens exorbitant understatement penalties for seemingly innocuous and easily resolvable queries. A good example is the classic turnover/expenditure reconciliation process which could produce, in certain instances, horrendous results for a taxpayer where the calculations are devoid of commercial logic.

The complex world of hybrid debt instruments: a ruling applicable to non-resident issuers

On 1 March 2016, the South African Revenue Service (SARS) issued Binding Private Ruling 225 (Ruling), dealing with the dividends tax consequences for a non-resident issuer of hybrid debt instruments. By way of background, according to the Explanatory Memorandum on the Revenue Laws Amendment Bill, 2004 (Explanatory Memorandum) s8F of the Income Tax Act, No 58 of 1962 (Act) was introduced to draw a distinction between debt and equity for tax purposes. The section was further introduced to limit the deductibility of interest by persons other than natural persons in respect of hybrid debt instruments which are debt in legal form, but have sufficient equity features to place them clearly at the equity end of the debt/equity spectrum.

Prescription rules: When the clock stops ticking

Author: Kyle Mandy (PwC). In order to prevent the five year rule from being abused, there are certain exceptions. Section 99 of the Tax Administration Act regulates the prescription of tax periods. The most important circumstances in which SARS is barred from raising further assessments in relation to a tax period are those relating to the passing of time. As a general rule, SARS is time-barred from raising an assessment in relation to a tax period as follows:

Can SARS limit legal professional privilege?

Authors: Natalie Napier and Phillip Lourens (Hogan Lovells). New rules have come into effect for how legal professional privilege is regulated, we look at what effects they may have in practise. Amendments have been made to the Tax Administration Act (the TAA) by the insertion of a new section 42A with effect from 8 January 2016. Section 42A prescribes the procedures and requirements that must be followed by the taxpayer in order to claim legal professional privilege in respect of relevant material required by SARS, during an inquiry or during the conduct of a search and seizure by SARS. 

Tax Administration – Rules of prescription

A fundamental reason for the existence of the rules of prescription in our tax law is to provide a taxpayer with certainty as regards its tax position. It is therefore important that such rules are clear and not subject to unfettered discretions. In disputes with the Commissioner for South African Revenue Service (the Commissioner or SARS), prescription is a powerful defence available to compliant taxpayers, allowing them to bring finality to their tax assessments. For some time, amendments to the prescription provisions have been on the cards. SARS has motivated for such amendments due to the fact that it has been involved in protracted information entitlement disputes which it alleges are being used as a delaying tactic to force audits closer to the end of a prescription period.  SARS also alleges that it has difficulty finalising certain audits within prescription periods due to their sheer complexity.