A taxpayer may object to an assessment given by the South African Revenue Service (SARS) within 30 business days from the date of issue of the assessment.
First stage: This is the procedure in respect of the internal process at the SARS and involves either the alternative dispute resolution process or approaching the tax court or Tax Board:
-The tax dispute procedure begins with the SARS attending to an objection internally, by either allowing the objection or disallowing the objection. Where an objection is disallowed by the SARS, a taxpayer may either appeal it to the tax board (for amounts less than ZAR 1 million) or to the tax court (for amounts over ZAR 1 million) by service of a notice of appeal or refer it for alternative dispute resolution (ADR), with a view of concluding a settlement agreement. It should be noted that where no settlement is reached between the taxpayer and the SARS, either party may still approach higher institutions for resolution to the matter.
Second stage: This is the judicial process of approaching the courts.
If the matter progressed through all the levels up to the Supreme Court of Appeal then it is estimated to be three to five years.
Note that the days indicated below are subject to extensions requested by either the taxpayer or the SARS.
a. Start:
Where a taxpayer objects to an assessment, a taxpayer may request, within 30 business days from the date of assessment, the SARS to provide reasons for the assessment.
Where reasons have not been provided, the SARS must provide such reasons within 45 business days. Where the SARS is of the view that sufficient reasons have already been provided, the SARS is required to notify the taxpayer of this within 30 business days.
Notwithstanding the above, a taxpayer may lodge an objection within 30 business days from the date of assessment. Alternatively, where reasons were requested from the SARS, within 30 business days from the date of delivery of the reasons.
The SARS is required to inform the taxpayer of its the decision in respect of the objection within 60 business days. Further, the SARS may allow all or part of the objection, or may disallow the objection in its entirety.
b. Conduct of the proceedings:
A taxpayer must provide detailed grounds on which the objection is founded, with supporting documents where necessary.
The SARS will either allow or disallow the objection.
c. Completion of proceedings:
A taxpayer is entitled to appeal any aspect of the objection that has been disallowed and must lodge the applicable appeal notice within 30 business days from the date of the disallowance of the objection.
The appeal may be referred to:
-ADR at either the SARS branch office or SARS head office level
-the tax board (administered at the SARS branch office level)
-the tax court (administered at the SARS head office level)
ADR
The ADR process is aimed at achieving a speedier and cost-effective resolution to a tax dispute. The ADR is typically informal and can take place via telephone or video-conferencing. Further, any representations made and documents submitted are done on a without prejudice basis.
An appointed facilitator, who must be suitably qualified and experienced, and is bound by a code of conduct to act independently, fairly and impartially, oversees the ADR process. The facilitator may not make a binding decision on behalf of either the taxpayer or the SARS; and merely attempts to reach settlement terms.
- Resolution by agreement
Where the taxpayer and the SARS are able to reach an agreement, the agreement must be recorded in writing and be executed. The SARS must then issue a revised assessment reflecting the agreed position within 45 business days.
- Resolution by settlement
If the taxpayer and the SARS are unable to reach agreement, they may still attempt to settle the dispute or aspects thereof. This mechanism is aimed at settling the tax payable without either party conceding as regards to their interpretation of the facts and the law. Where the SARS and the taxpayer reach a settlement, the SARS must issue an assessment to reflect the agreed position within 45 business days. Such altered assessment is final and the taxpayer may not object to the settled matters any further.
Tax board
The tax board is an administrative tribunal created under the Tax Administration Act.
The tax board hears tax appeals involving tax in dispute that does not exceed ZAR 1 million. The taxpayer and the SARS must also agree that a matter is to be heard by the tax board. If the taxpayer or the SARS is not satisfied with the decision of the tax board, the taxpayer or the SARS may request that the matter be heard de novo by the tax court. This is not an appeal against the decision of the tax board, but a completely new trial. The sittings of the tax board are not public and the board's decisions are not published by the SARS. The decisions of the tax board are binding on the parties but have no precedent value.
Tax court
The tax court is an administrative tribunal created under the Tax Administration Act. The tax court has jurisdiction over tax appeals lodged under section 103 of the Tax Administration Act and may hear interlocutory applications and procedural matters relating to objections and appeals.
The tax court consists of a judge of the high court, as well as an accountant member and a commercial member selected from a panel of members appointed by the President of the Republic of South Africa.
The tax court may also, in matters involving more than ZAR 50 million tax in dispute and with the approval of the judge-president of the jurisdiction within which the tax court sits, consist of three judges of the high court and the two members.
The judgments of the tax court must be published for general information but, if the sitting was not public, it must be in a form that does not reveal the taxpayer's identity.
A taxpayer or the SARS may appeal against the tax court's judgment to the full bench of the provincial division of the high court, or to the Supreme Court of Appeal (SCA) if the president of the tax court on request allows a direct appeal to the SCA.
An appeal heard by the full bench may be further appealed to the SCA.
The judgments of the tax court are not binding on other courts, but only between the parties. However, the judgments of the tax court are of persuasive value in other tax courts, the high courts and the SCA.
d. Other actions:
High courts
The high courts are spread throughout South Africa. They have jurisdiction over the defined provincial areas in which they are situated and over all persons residing or present in that area. These courts hear matters that are of such a serious nature that the lower courts would not be competent to make an appropriate judgment or to impose a penalty in that regard, as well as matters referred to them by law. Under section 133 of the Tax Administration Act, a taxpayer or the SARS may appeal against the tax court's judgment to the full bench of the high court, which has jurisdiction in the area in which the tax court sitting is held. The sittings of the high courts are public and its judgments are published for general information.
The judgments of the high court are binding on all lower courts and tribunals and of persuasive value in other high courts and higher courts, such as the SCA and the constitutional court.
Supreme Court of Appeal
The SCA is seated in Bloemfontein and is the highest court in South Africa, except for constitutional matters. It generally only deals with cases referred from the high court, but statutory provision is made in section 133 of the Tax Administration Act for direct access from the tax court.
The judgments of the SCA are binding on all lower courts and tribunals and, except for the constitutional court, no other court can overturn a decision of the SCA.
Constitutional court
The constitutional court is the highest court in all constitutional matters. It is the only court that may adjudicate disputes between organs of state in the national or provincial sphere of government concerning the constitutional status, powers or functions of any of those organs of state, or that may decide on the constitutionality of any amendment to the Constitution or any parliamentary or provincial bill.
The constitutional court makes the final decision on whether an Act of Parliament, a provincial act or the conduct of the president is constitutional. In the context of tax appeals, it has a limited jurisdiction to review an SCA judgment dealing with a tax appeal.