Tax clearance certificates (TCCs) are issued by the South African Revenue Service (SARS) to, inter alia, validate the status of a taxpayer and confirm that such taxpayer’s tax affairs are in order.
TCCs are, almost without exception, required for tender or bid applications, to reflect good standing, foreign investment and for emigration purposes. A TCC is only valid for one year from the date of issue in respect of a tender and/or good standing, provided the taxpayer remains compliant with SARS requirements.
On 15 July 2014, the National Treasury (Treasury) issued National Treasury Instruction No 3 of 2014/2015 (Treasury Instruction) on tax compliance measures for persons doing business with the State. It is stated that the Treasury Instruction was issued to strengthen the measures to be implemented by accounting officers of departments and constitutional institutions as well as accounting authorities of the public entities listed in Schedules 2 and 3 to the Public Finance Management Act, No 1 of 1999, to ensure that all persons conducting business with the State are tax compliant.
In order to reduce supply chain management related fraud and to ensure that persons conducting business with the State do not abuse the supply chain management system, the Treasury Instruction provided that institutions would no longer be required to obtain a hard copy of an original and valid TCC, as they would be able to check the tax compliance status of bidders through an electronic Tax Compliance Status System (TCS system).
According to the Treasury Instruction, SARS would no longer issue paper-based TCCs with effect from 1 April 2015. A taxpayer, who requires his or her tax compliance status to be disclosed to a department, constitutional institution or public entity for purposes of submitting a bid or to confirm his or her good standing, would have to request a unique security Personal Identification Number (PIN) from SARS. As the TCS system would allow for the online real-time verification of a taxpayer’s tax compliance status, the accounting officer or accounting authority of such department, constitutional institution or public entity would be able to use the PIN in order to verify the tax compliance status of the taxpayer. The implementation of the TCS system was set to take effect from 1 November 2014.
However, it is interesting to note that on 31 October 2014, Treasury issued National Treasury Instruction No. 3A of 2014/2015 (Treasury Instruction 3A) which served as a clarification regarding the implementation of the TCS system.
According to Treasury Instruction 3A, the implementation of the TCS system would be deferred and further instructions on its applicability and implementation date would be issued at a later date. Accounting officers of departments, constitutional institutions, accounting authorities of Schedule 2 and 3 public entities and heads of provincial treasuries were instructed to halt the Treasury Instruction with immediate effect as both Treasury and SARS were still evaluating the implications of the TCS system. It will be interesting to see whether the TCS system will indeed be implemented at a future date and if so, whether such implementation will ease the difficulties faced by taxpayers when applying for TCCs.
Cliffe Dekker Hofmeyr
National Treasury Instruction No 3 of 2014/2015 and No 3A of 2014/2015
Public Finance Management Act, No 1 of 1999, Schedule 2 and 3
Tax Administration Act: Section 256