SARS, stand in line: How tax debts rank in business rescue

Author: Joon Chong, Tax Partner at Webber Wentzel. ​​​​​A company in financial distress may have a variety of outstanding tax debts at the commencement of business rescue. Besides capital amounts of tax due, there could also be tax returns for VAT, PAYE and income tax which are due and have not been submitted resulting in tax liabilities which are due and payable, but do not yet appear on the relevant statements of account. The late submission of returns will also result in 10% late payment penalties for VAT, PAYE and provisional taxes, and potentially 20% underestimation penalties for income tax, plus interest. There could also be administrative penalties imposed for non-submission of income tax returns.

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.

Voluntary disclosure programme: The High Court interprets the provisions of the Tax Administration Act

Author: Louis Botha. The Voluntary Disclosure Programme (VDP), contained in Part B of Chapter 16 of the Tax Administration Act 28 of 2011 (TAA), was introduced to encourage non-compliant taxpayers to come forward, and provide an account of their non-compliance with a view to regularizing their tax affairs. A valid disclosure and conclusion of a voluntary disclosure agreement with SARS shields the taxpayer from criminal prosecution and provides relief from the non-compliance and understatement penalties which would ordinarily have been imposed. Section 226(1) of the TAA provides that voluntary disclosure relief may be applied for by a person acting in their personal, representative, withholding or other capacity. Section 227 prescribes the requirements for a valid disclosure, and it must:

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.

Want to withdraw retirement funds on emigration? National Treasury and SARS say try again in 3 years’ time

Authors: Joon Chong, Partner &Wesley Grimm, Associate at Webber Wentzel. The National Treasury published the Draft Taxation Laws Amendment Bill, 2020 (Draft Tax Bill) for public comment. One of the more contentious proposals in the Draft Tax Bill relates to the ability of people emigrating from South Africa to access amounts in their pension preservation fund, provident preservation fund and retirement annuity fund (retirement funds) when they leave. In accordance with the policy decision to phase out “financial emigration” for exchange control purposes, which was announced in the 2020 Budget Speech, National Treasury and the South African Revenue Service (SARS) have proposed to amend the definitions of the terms “pension preservation fund”, “provident preservation fund” and “retirement annuity fund”.

Tax Appeal Tribunal ruling: Commissioner Generals discretion must be exercised judiciously

Authors: Celia Becker and Phillip Karugaba. The recent ruling of the Tax Appeals Tribunal (TAT) in the case of Century Bottling Company v Uganda Revenue Authority (URA), has brought the discretion of the Commissioner General of the URA sharply in focus. It is absolutely necessary and indeed important that in the exercise of their functions, public authorities exercise discretion. It is equally important that such discretion is properly exercised taking into account only the relevant considerations and for the proper reasons. The citizen has recourse to court to check the excesses of executive discretion. A public official is therefore not like the cultural leader kamala byona (he who finishes all matters). The formers discretion is very much controlled by law and by the courts.

About tax debts and civil judgments the High Court considers sections 172 and 174 of the TAA

Author: Aubrey Mazibuko and Louis Botha. Under the Tax Administration Act 28 of 2011 (TAA), the South African Revenue Service (SARS) has various powers to collect and enforce the payment of tax debts owing to it. One of the ways in which it can do so is by applying for a civil judgment for the recovery of tax, which is provided for in section 172 of the TAA. On 15 May 2020, the Western Cape Division, Cape Town, (WCHC) delivered judgment in Barnard Labuschagne Inc v South African Revenue Service and Another 2020 ZAWCHC (15 May 2020), which concerned the application of sections 172 and 174 of the TAA. More specifically, the taxpayer, Barnard Labuschagne Inc, sought to rescind a statement filed by SARS under section 172 of the TAA. The judgment deals with a number of related issues, but we focus mainly on the WCHCs interpretation of the TAA Read More …

Tax Filing Season 2020 for Individuals

In support of the Presidents call to the Covid-19 pandemic, that Social Distancing be observed at all times and that we should at most stay indoors and limit movement, SARS is responding by rapidly enhancing its efforts to further simplify the tax return filing requirements for individual taxpayers and removing the need to travel to our Branches in 2020. Through the increased use of third-party data, SARS will be completing your tax return for you more accurately than ever. Where we have the required information we will provide you with a proposed assessment without the need to file a tax return. This enables you to view, accept or edit your proposed assessment from the comfort of your home or place of work using eFiling or SARS MobiApp.

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.

COVID-19: Some practical tax issues

Author: Ben Strauss. Businesses and individuals may well ask themselves what practical, day-to-day tax consequences the COVID-19 pandemic now holds for them. For example, a company operating a financial services business may be obliged to incur expenditure which it would not incur in the ordinary course, such as sanitizers, gloves, masks and temperature measuring equipment for screening employees and customers. A taxpayer is entitled to deduct expenditure provided certain requirements are met. Notably, to be deductible, the expenditure must be actually incurred in the production of income as contemplated in section 11(a) of the Income Tax Act, 58 of 1962 (Act).