Negotiating your tax dispute with SARS
Rules and guidance on how to resolve a dispute with the tax authorities released
NEW Alternative Dispute Resolution (ADR) rules which give needed guidance on how to resolve a dispute with the tax authorities must be welcomed. New rules took effect last month, on 11 July, and a vendor may request reasons of assessment to lodge an objection. The request must be delivered within 30 business days from date of assessment. Delivery includes e-filing; registered mail; hand-delivery; and e-mailing.
The 30-day period can be extended in certain instances.
Where a vendor objects, the objection must be delivered within 30 days from the date of the assessment or a date on which the South African Revenue Service (SARS) provides reasons requested by the vendor. The vendor must complete the prescribed form (ADR 1). The vendor must specify the grounds of objection and specify the amount and the grounds and must submit documents not previously delivered to SARS to substantiate the grounds. The vendor may apply (in the 30-day period) for extension to object. Delivered objections may be invalid if they do not comply. SARS will notify the vendor in 30 days from delivery of the objection of reasons why the objection is invalid. A vendor may submit a new objection on receipt of SARS’s notification in 20 days from delivery of the notice. Where the vendor fails to submit a new objection, the vendor may only submit a new objection with a request for an extension to object. SARS must notify the vendor of the allowance or disallowance and the basis of its decision within 60 days from delivery of the objection. SARS may extend the 60 days in certain instances.
A vendor must deliver the notice of appeal within 30 days from delivery of the disallowance of the objection. SARS can extend the 30 days if reasonable grounds or exceptional circumstances exist. The appeal must be done in the prescribed form (ADR 2) and must specify detailed grounds to which the vendor appeals; grounds for disputing the basis of disallowance of the objection; and any new grounds of appeal. An appeal cannot be done on a new ground that constitutes a new objection not used before. SARS may extend the period if reasonable grounds exist.
Where a vendor requests an ADR, SARS must inform the vendor in 30 days of its appropriateness. Where the vendor did not request an ADR but SARS believes that the matter is suitable, SARS must inform the vendor within 30 days of receipt of the appeal and the vendor must within 30 days of delivery of SARS’s notice, deliver notification of whether the vendor agrees thereto or not. An ADR must be finalised in 90 days from date of appeal and terminates after 90 days from date of appeal, unless the parties agree otherwise.
SARS must appoint a facilitator within 15 days from date of appeal and inform the vendor. A facilitator must seek an equitable and legal resolution and has a duty to give effect to the fairness of the ADR process. A facilitator must decline appointment or obtain technical assistance when a case is outside his/her field of competence. A facilitator must attempt to resolve the dispute quickly. The facilitator must, after consultation with the vendor and SARS within 20 days after appointment, determine the place, date, and time of the ADR and notify the parties in writing. The facilitator may terminate the ADR proceedings immediately without prior notice if any party fails to attend; if the facilitator is of the opinion that the dispute cannot be resolved through an ADR process; or for any other appropriate reason. The proceedings may not be recorded electronically.
The taxpayer must be personally present, and if SARS agrees, may be represented by a representative. The facilitator may, in exceptional circumstances, allow the vendor to be absent and represented.
The facilitator must deliver a report on resolved and unresolved issues and other points to the vendor within 10 days from the proceedings.
The parties may agree at the start that if no agreement is reached, the facilitator may make written recommendations at conclusion of the proceedings that must be delivered within 30 days to the parties unless the parties agree to an extension.
A dispute is resolved if a party accepts the other party’s interpretation of some or all of the facts or law. Where all the issues were not resolved, the agreement must stipulate the resolved and unresolved issues. The agreement may be made an order of court with the consent of both parties or on application to the tax court. SARS must report the agreement internally. Where agreement is reached, SARS must issue assessment within 45 days after date of signature of the agreement. Where the vendor wants to proceed to the tax board on unresolved issues, it should deliver notice to the clerk of the court within 15 days from date of agreement.
Where the parties are unable to resolve the dispute despite reasonable efforts, they may revert to settlement that can be reached without one party accepting the other’s interpretation of law or facts. A senior SARS official must approve settlement, which must relate to the whole appeal and be recorded in writing and signed by both parties. Where all of the issues are not resolved, the agreement must stipulate the resolved and unresolved issues and that the vendor may appeal to the tax board. To the extent that agreement is reached, SARS must issue assessments within 15 days from date of settlement.
Ferdie Schneider is head of tax at BDO South Africa.