The High Court (Gauteng Division, Pretoria) recently handed down judgment in the case of Malema v Commissioner for the South African Revenue Service (76306/2015) [2016] ZAGPPHC 263 (29 April 2016). The issue before the court was whether the South African Revenue Service (SARS) was bound to a compromise agreement entered into between the Malema (Applicant) and SARS as a result of alleged non-disclosures and misstatements made by the Applicant, who expressly warranted the truth of the facts furnished by him. The compromise agreement was concluded in accordance with the provisions of s205 of the Tax Administration Act, No 28 of 2011 (TAA).
Category: Objections & Appeals
Extension of the period to submit an objection: what constitutes exceptional circumstances?
Author: Chris de Bruyn(Candidate attorney at ENSAfrica). In the matter of ABC (Pty) Ltd v Commissioner for the South African Revenue Service (ITC 0038/2015) (“ABC case”), the Tax Court had to consider whether the taxpayer discharged the onus to prove that “exceptional circumstances” existed for an extension of the period allowed for the taxpayer to object to an assessment, in terms of section 104 of the Tax Administration Act, 28 of 2011 (“TAA”).
Section 104 of the Tax Administration Act and the meaning of ‘exceptional circumstances’ – a cautionary tale
Author: Heinrich Louw (Senior Associate). In terms of s104 of the Tax Administration Act, No 28 of 2011 (Act), a taxpayer who is aggrieved by an assessment or decision of the South African Revenue Service (SARS), may object to the assessment or decision. The Act states that the objection must be lodged within 30 business days from the date of the assessment. A senior SARS official may extend this period by no more than 21 business days, unless the official “…is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection”.
The Kluh-ed up taxpayer wins – a decision on section 26 of the Income Tax Act
In its efforts to increase its income from tax revenue, the South African Revenue Service (SARS) sometimes applies legislative provisions in tax legislation in a manner that can best be described as tenuous. An example of this is apparent from the recent decision of the Supreme Court of Appeal (SCA) in CSARS v Kluh Investments (Pty) Ltd (115/2015) [2016] ZASCA 5 (1 March 2016).
SARS’s investigative powers – a possible backstage pass to matters pending before court?
Author: Yashika Govind (Associate at CLiffe Dekker Hofmeyr). Chapter 5 of the Tax Administration Act, No 28 of 2011 (TAA) confers a broad range of information-gathering powers on the South African Revenue Service (SARS). Taxpayers are often assessed for more than one tax period at a time, however, the waters become muddied when there are parallel processes carried on in which the issues being investigated by SARS, overlap with disputes pending before the Tax Court. The taxpayer is then saddled with defending itself in respect of a tax period before court while simultaneously sourcing and providing relevant material pertaining to the same legal issues for an audit of a later tax period. In these circumstances, there is often an overlap of facts, law and witnesses which will ultimately be presented in court, thus rendering the information gathering process questionable.
SARS introduces electronic ‘suspension of payment’ applications
Taxpayers lodging a dispute with SARS can now electronically request that SARS suspend the payment of tax. However, please be aware that the suspension of payment should be requested at a branch if it is accompanying an objection or appeal. It must not be done via eFiling as eFiling only supports “suspension of payments” that do not accompany an objection or appeal. What if I don’t agree? What’s New? From 4 December 2015 for Income Tax, taxpayers will be able to electronically at a SARS branch and via eFiling:
Corrections of tax assessments – what is readily apparent to SARS?
Author: David Warneke Director and Head of Tax Technical at BDO South Africa. The latest version of the Tax Administration Laws Amendment Bill of 2015, which is likely to be promulgated in its current form, proposes that in future SARS will not be permitted to entertain so-called ‘requests for correction’ of tax assessments, except if SARS is satisfied that there is a (currently undefined) ‘readily apparent’ undisputed error in the assessment. In my view, it is likely that taxpayers will be severely prejudiced by this amendment. What is ‘readily apparent’ to one person may not be so to another. The number of cases in which SARS is likely to grant requests for corrections is likely to drop dramatically and a lack of consistency in interpretation between SARS’ assessors may be taken as a given.
The onus of proof rule for the imposition of understatement penalties
Author: Ruaan van Eeden As a basic principle, under s102(1) of the Tax Administration Act, No 28 of 2011 (TAA), the onus of proof that an amount is not taxable or that an amount is deductible, rests on the taxpayer, whereas under s102(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).
Increasing disconnect between SARS’ legislated powers and its internal policies
Author: Jerome Brink (Tax Associate at ENSafrica) While the Tax Administration Act, 28 of 2011 (“the TAA”) determined and consolidated the powers and duties of South African Revenue Service (“SARS”) officials engaged in the administration of a tax Act, it also, to a certain extent codified the rights and obligations of taxpayers to whom the TAA applies. Due to the fact that the TAA has now been in effect for a couple of years since its commencement date of 1 October 2012, there is a greater understanding of how the legislation is being practically implemented. Recent experience indicates that there may be a growing disconnect between the internal policies being implemented by SARS officials and the actual powers provided for in the enabling legislation. This article briefly highlights two examples recently encountered in practice.
Tax Court confirms importance of properly recording all matters relating to tax affairs
Author: Esther van Schalkwyk, Tax Consultant, BDO South Africa Section 102 of the Tax Administration Act places the burden of proving, amongst other things, that an amount or item is deductible or may be set-off, on the taxpayer. SARS, on the other hand, bears the onus in respect of, amongst other things, the facts on which SARS based the imposition of an understatement penalty. The Tax Court recently handed down judgment in VAT case no. 867, in which the Court once again confirmed the importance of the onus of proof in tax disputes.