The use of electronic or digital signatures in tax matters
Author: Carmen Gers and Jadyne Devnarain (ENSafrica).
With tax litigation becoming more prevalent in recent years, taxpayers are now faced with new issues.
One such issue is: when and to what extent will documents bearing an electronic signature be acceptable under the relevant tax legislation?
In this regard, section 255(2) of the Tax Administration Act No. 28 of 2011 (“TAA”) provides that the South African Revenue Service (“SARS”) may, in the case of a return or other document submitted in electronic format, accept an electronic or digital signature of a person as a valid signature for purposes of a tax act if a signature is required. Section 255(3) of the TAA then continues to state that if, in any proceedings under a tax act, the question arises whether an electronic or digital signature of such person was used with the authority of such person, it must be assumed, in the absence of proof to the contrary, that the signature was so used.
The terms “electronic signature” and “digital signature” are not defined in the TAA. However, these terms are defined in the Rules for electronic communication (“Rules”) which were promulgated under section 255(1) of the TAA in terms of GG 37940, Notice 644, on 25 August 2014.
A “digital signature” is defined in Rule 1 to have the meaning assigned to an “electronic signature”. “Electronic signature”, is in turn, defined through ascribing a meaning thereto in relation to a “registered user” and an “electronic communicator”.
On page 36 of the SARS Electronic Communications Guide (“SARS Guide”), the TAA mentions both electronic and digital signatures, but because these terms are not necessarily interchangeable in terms of the Rules, when the TAA refers to a digital signature, it is specifically in the context of identification. In addition, the SARS Guide provides on page 13 that the concept of a digital signature is often used to denote encryption rather than a signature for identification purposes.
The meaning of electronic signature in relation to registered users
In this context “electronic signature” means the user ID and access code of the user and the date and time that the electronic filing transaction was received by the information system of SARS. A “user ID” is the unique identification created in compliance with the requirements of Rule 6 and used by a registered user in order to access the user’s electronic filing page. Further, an “access code” means a series of numeric characters, alphabetic characters, symbols or a combination thereof, associated with an individual user ID.
The meaning of electronic signature in relation to electronic communicators
In this context, “electronic signature” refers to data attached to, incorporated in, or logically associated with other data which is intended by the electronic communicator to serve as a signature. An “electronic communicator” is a person that is obliged to or has elected to communicate with SARS in electronic form or is a person who is a registered user, for example, a registered tax practitioner registered under Rule 5.
Rule 7 specifically deals with electronic signatures and states that, other than the use of a user ID and access code for the signing of electronic filing transactions, if a provision of a tax act requires a document to be signed by or on behalf of an electronic communicator, that signing may be effected by means of an electronic signature if the electronic signature is:
- uniquely linked to the signatory;
- capable of identifying the signatory and indicating the signatory’s approval of the information communicated;
- capable of being accepted by the computers or equipment forming part of the information system of SARS; and
- reliable and appropriate for the purpose for which the information was communicated.
Rule 7 of the Rules further states that when considering the use of an electronic signature, an electronic communicator must specifically consider the level of confidentiality, authenticity, evidential weight and data integrity afforded by the signature.
According to the SARS Guide at page 36, “because an electronic signature can be an electronic image of a signature, a symbol or even a typed name at the bottom of an e-mail, the simple act of signing on the dotted line may be slightly more challenging within the electronic environment. The challenge, of course, is that of confidentiality and security, including authenticity, evidential weight and data integrity.”
In light of the above, in our view, it may be argued that the information contained at the bottom of an email meets the requirements set out in Rule 7 of the Rules and if the sender of an email is someone who has elected to communicate with SARS in electronic form, an unsigned document attached to the email would constitute data attached to other data which is intended by the electronic communicator to serve as a signature.