Ne­go­ti­at­ing your tax dis­pute with SARS

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Ferdie Schneider

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.

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