Author: Danielle Botha (DLA CLiff Dekker Hofmeyer)
Section 98 of the Tax Administration Act, No 28 of 2011 (TAA) makes provision for the withdrawal of an assessment by the South African Revenue Service (SARS) in certain circumstances. Prior to its amendment, s98 allowed for the withdrawal of an assessment (despite no appeal having been noted or objection lodged), that was:
a) issued to the incorrect taxpayer;
b) issued in respect of the incorrect tax period; or
c) issued as a result of an incorrect payment allocation.
In terms of s98(2) of the TAA, an assessment withdrawn under this section is regarded as not having been issued in the first place.
The Tax Administration Laws Amendment Act 2013 has extended the ambit of s98 of the TAA by introducing further circumstances in which SARS may withdraw an assessment. S98(1)(d) provides SARS may withdraw an assessment in respect of which it is satisfied that it was based on:
However, such an assessment may only be withdrawn if the following additional requirements are met:
Essentially, the new provisions contained in s98(1)(d) can only find application in situations where, firstly, there is an undisputed factual error by the taxpayer in a return, a processing error by SARS or a fraudulent submission of a return. Secondly, four additional requirements must be met. The third requirement, being that there must be no other remedy available to the taxpayer, appears to be the most problematic.
The explanatory memorandum issued by SARS on the objects of the Tax Administration Laws Amendment Bill 2013 provides that the reason for the amendment to s98 relates mainly to the situation where erroneous assessments are discovered after the expiry of all prescription periods and remedies available to the taxpayer. This may result in a situation which may be unreasonable or inequitable. S98(1)(d) aims to remedy this situation by allowing for the withdrawal of assessments in specified narrow circumstances.
In light of the rationale for the amendment, it may be argued that the ‘no other remedy’ requirement in s98(1)(d)(iv) is understandable given that this is precisely the situation the provision aims to address. On the other hand, one may be disappointed should one wish to utilise s98(1)(d) as a means of dispensing with an erroneous assessment. This is so because circumstances under which there is no other remedy available to a taxpayer are very rare.
One would have to consider the interpretation of the words ‘no other remedy available’. Given the rationale behind the provision in creating a remedy for a taxpayer who would suffer inequitable treatment should all prescription periods and remedies have expired, it appears that ‘no other remedy’ should include a situation where the time period for lodging an objection or appeal has expired or where a claim has prescribed.
The amendments further provide, in s98(2) of the TAA, that in the alternative to regarding the erroneous assessment as never having been issued, a senior SARS official may agree with the taxpayer as to the amount of tax properly chargeable for the relevant tax period and subsequently issue a revised original, additional or reduced assessment, pursuant to such agreement. Such an ‘agreed assessment’ would not be subject to objection and appeal.
Whilst some may be disappointed that s98(1)(d) does not necessarily provide a simpler mechanism for doing away with an assessment, others who have discovered that they have suffered loss due to administrative errors or fraud, may breathe a sigh of relief.
This article first appeared on cliffedekkerhofmeyr.com.