court 101Tax clearance certificates play an important role in our economy and are, almost without exception, a

requirement when a person submits a tender or bid for doing business with government.

In this regard, tax clearance certificates had always been issued by the South African Revenue Service

(SARS) in terms of internal policy. As there was no legislative framework governing the issue of tax

clearance certificates, there was much uncertainty among taxpayers as to their entitlement to a tax

clearance certificate. Also, it was not clear what recourse a taxpayer had in circumstances where

a request for a tax clearance certificate had been denied or a tax clearance certificate revoked.

This situation clearly jeopardised businesses who depended on tax clearance certificates when

tendering or bidding for contracts.


We have previously reported on the case of Zikhulise Cleaning Maintenance and Transport

CC v Commissioner for the South African Revenue Service (case no 28084/2012, delivered on

29 May 2012, GNP), in which the taxpayer’s tax clearance certificate was revoked by SARS in light

of allegations of fraud. The taxpayer brought an application in the High Court for an order declaring

the decision to be of no force and effect pending a review application. The taxpayer argued that it was

not afforded an opportunity to make representations to SARS before the decision was taken to revoke

the tax clearance certificate. The court agreed with the taxpayer’s submissions and granted the order.


Interestingly, the court noted that:

“Whether the decision is reviewable, via the Promotion of Administrative Justice Act 3 of 2000 or

through the principle of legality, is not something I need decide. The applicant was entitled to

reasonable notice of SARS’ intention to call the certificate into question and an opportunity to put its

case to SARS.”


The Tax Administration Act, No 28 of 2011 (TAA) came into effect on 1 October 2012, and with it

s256 of the TAA (amended as of 20 December 2012). S256 of the TAA deals fully with tax

clearance certificates and prescribes the criteria for issuing and revoking tax clearance certificates.

On 3 March 2014 judgment was handed down in the North Gauteng High Court in the case

of Grant Chittenden N.O. and Kestrel Network Solutions (Pty) Ltd v Commissioner for the South

African Revenue Service and another (case no 12795/14). In this case the taxpayer applied for

a tax clearance certificate but SARS refused. The taxpayer subsequently brought an application to the

High Court for an order compelling SARS to issue a tax clearance certificate.


In contrast with the Zikhulise case, the court in Chittenden accepted that a decision on issuing a

tax clearance certificate constitutes administrative action for purposes of the Promotion of

Administrative Justice Act, No 3 of 2000 (PAJA) and noted that if a taxpayer is dissatisfied with a

decision by SARS, the taxpayer’s recourse is to bring review proceedings under PAJA. Where no

such proceedings are instated or where it has not yet been finalised, SARS’s decision remains of full

force and effect.


The court also noted that:

“The fact that a refusal of a tax clearance certificate is likely to cause the taxpayer involved

actual or impending harm does not entitle them to a mandamus compelling this court or the first

respondent [i.e. SARS] to issue such a certificate.”


The court reasoned that the taxpayer sought final relief, and not interim relief, but that in any event,

s256 of the TAA does not provide for the issue of interim or provisional tax clearance certificates and

therefore the court could not order the issue of such a certificate.


The court could not grant final relief because it would negatively impact on SARS’ tax administration. Granting final relief would mean that taxpayer’s whose requests for tax clearance certificates had been denied could approach a court to order the issue of such a certificate without the merits for refusal having been considered. The court, perhaps exaggerating, stated that:

“Quite clearly that would cause chaos within the country and tax administration would come to a



The importance of the Chittenden case lies in the fact that the court has confirmed that a taxpayer’s

only remedy for addressing issues relating to tax clearance certificates is to make use of the procedures in PAJA. Pending the outcome of such proceedings, SARS’ decision stands and is fully valid. It is irrelevant whether the taxpayer is prejudiced while such proceedings are underway.


Given the fact that review proceedings under PAJA could take many months to finalise, a taxpayer’s

business could be severely impacted as it might not be able to submit tenders or bids.