Dispute Resolution

Tax Dispute Resolution or Tax Debt Negotiation.

Broadly speaking, if you do not agree with SARS regarding the amount of money outstanding to them, Tax Debt Resolution is the route to go. If you do agree with SARS regarding the outstanding amount to them, you can engage in tax debt negotiations.

Jashwin Bajoo is the legal manager at Tax Consulting South Africa. He is an expert at formally engaging SARS in the dispute process on behalf of the taxpayer, especially with regards to the Request For Reasons & The Letter Of Objection.

Taxpayers seldom know what to do if they don’t agree with the debt they owe SARS? Where do you start? How does the process work? Are there tax or legal consultants who can assist?

Example 1:
SARS raises an assessment and claims that you owe them R2 mil. You are of the opinion that you owe SARS only R200,000. The first step is to engage with SARS, as it could be something as simple as an error on the assessment or return.

Example 2:
Alternatively, SARS may have raised an additional assessment and the information may not be accurate. The first step here is to submit a request for reasons. SARS will then provide you with the full reasons for the assessment being raised and once you receive those reasons, you can object to SARS as that will provide you with grounds of objection.

The notice of objection follows on from here. It becomes a lengthy document with extensive grounds of objection. You have three years from the date of assessment to file this objection. In the event that you are late or can prove exceptional circumstances in your notice of objection, the objection outcome will either be allowed, disallowed or partially allowed. Consider the following results to your objection of R1,8m: If it is entirely allowed, the total amount will then be reversed from your assessment. Should there be a disallowance, there will be no adjustment made to your assessment. With a partial allowance, SARS would, for example, allow the aspect of a rental loss, but they disallow a further portion of that based on the loss not forming part of an Urban Development Zone (UDZ). You can either accept this as a partial allowance or proceed with the notice of appeal stage. Your appeal has a selection for either Litigation or Alternative Dispute Resolution (ADR).

In the case of litigation, the appeal is submitted to the tax board if the amount in dispute is less than R 1 million, or to the tax court when the amount is more than R 1 million. The appeal works very similarly to an appeal in the normal legal sense with a direct court route.

In the case of ADR, when SARS agrees to an ADR, you have a round table meeting with a senior SARS official to resolve the matter. If SARS does not agree to the ADR, the matter proceeds either to the tax board or the tax court.

We have noticed that SARS is quite often late with their response to an appeal and therefore falls outside of their expected timeframes. What happens in that instance is a notice in terms of rule 56 needs to be delivered either to the board or the tax court, depending on who the application was directed at. Should the tax board be the relevant body, the matter must still be escalated to the tax court because it is then more a legal notice than a dispute resolution notice. The board will be made aware of it, but it is ultimately a decision taken by the tax court to enforce from SARS’s side that a response is delivered timeously and that notice will provide you with 15 days within which to receive a response from SARS before preparing the rule 56 application and taking the matter on full steam as a litigious matter in the tax court.

Rule 56 is about keeping SARS accountable to their time frames, and by giving them notice and should SARS not adhere to the requirements of Rule 56, you can then apply for a final order or default judgement to the courts. Time frames are therefore very important.

You may be more than three years late or SARS did not raise their objections or appeals in that time.