Amend­ments aim to firm up ten­der com­pli­ance

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Beric Croome

The Tax Ad­min­is­tra­tion Act 28 of 2011 which took ef­fect on 1 Oc­to­ber 2012 con­tained pro­vi­sions reg­u­lat­ing the is­sue of tax clear­ance cer­tifi­cates by the South African Rev­enue Ser­vice (SARS). Sec­tion 256 of the Tax Ad­min­is­tra­tion Act was sub­sti­tuted in its en­tirety as a re­sult of sec­tion 64 of the Tax Ad­min­is­tra­tion Laws Amend­ment Act 44 of 2014.

The new pro­vi­sions gov­ern­ing the is­sue of tax clear­ance cer­tifi­cates took ef­fect on date of pro­mul­ga­tion of the amend­ment act, namely, 20 Jan­uary this year. The Mem­o­ran­dum on the Ob­jects of the Tax Ad­min­is­tra­tion Laws Amend­ment Bill of 2014 in­di­cated that a new tax clear­ance sys­tem has been in­tro­duced by SARS to en­hance its func­tion­al­ity in is­su­ing tax clear­ance cer­tifi­cates for pur­poses of ap­ply­ing for gov­ern­ment ten­ders for both tax­pay­ers and those en­ti­ties that are award­ing ten­ders.

Un­der sec­tion 256 of the Tax Ad­min­is­tra­tion Act, tax­pay­ers are en­ti­tled to re­quest con­fir­ma­tion of tax com­pli­ance sta­tus re­gard­ing ten­ders, good stand­ing, utilisation of the for­eign in­vest­ment al­lowance or those per­sons wish­ing to em­i­grate.

A tax­payer seek­ing a tax clear­ance cer­tifi­cate is re­quired to ap­ply in the pre­scribed form and man­ner to SARS and SARS is then re­quired to is­sue con­fir­ma­tion of that tax­payer’s com­pli­ance sta­tus within 21 busi­ness days from the date the ap­pli­ca­tion is sub­mit­ted, or such longer pe­riod as may rea­son­ably be re­quired if a se­nior SARS of­fi­cial is sat­is­fied that the is­sue of the tax clear­ance cer­tifi­cate may prej­u­dice the ef­fi­cient and ef­fec­tive col­lec­tion of taxes.

SARS may only pro­vide con­fir­ma­tion of the tax­payer’s tax com­pli­ance sta­tus as com­pli­ant where that tax­payer is reg­is­tered for tax and does not have any out­stand­ing tax debt due to SARS, ex­clud­ing an amount which is in dis­pute and which has been suspended un­der sec­tion 164, or where the tax­payer has con­cluded an in­stal­ment pay­ment agree­ment with SARS un­der sec­tion 167 of the Tax Ad­min­is­tra­tion Act or the tax­payer has com­pro­mised the tax debt with SARS un­der sec­tion 204.

Fur­ther­more, SARS may not is­sue con­fir­ma­tion that the tax­payer is com­pli­ant where the tax­payer has any re­turn out­stand­ing to SARS, un­less the tax­payer has made an ar­range­ment with SARS re­gard­ing the sub­mis­sion of that re­turn.

Pre­vi­ously, sec­tion 256 re­quired that there were no out­stand­ing re­quests for in­for­ma­tion and that has been re­moved as a re­quire­ment for con­fir­ma­tion of the tax­payer’s tax com­pli­ance sta­tus, but that amend­ment will be re­viewed dur­ing the 2015 leg­isla­tive cy­cle.

Once SARS is sat­is­fied that the tax­payer is com­pli­ant, it must is­sue con­fir­ma­tion of the tax­payer’s com­pli­ance sta­tus in the pre­scribed for­mat, and in­clude the orig­i­nal date of is­sue of the tax com­pli­ance sta­tus con­fir­ma­tion, as well as the tax­payer’s tax ref­er­ence num­ber and other iden­ti­fy­ing de­tails.

Gen­er­ally, SARS is not en­ti­tled to dis­close in­for­ma­tion re­gard­ing a tax­payer to any other per­son, in light of the con­fi­den­tial­ity pro­vi­sions con­tained in Chap­ter 6 of the Tax Ad­min­is­tra­tion Act. How­ever, sec­tion 256 pro­vides that SARS may con­firm the tax­payer’s tax com­pli­ance sta­tus upon re­quest by an or­gan of state or any other per­son to whom the tax­payer has pre­sented the tax com­pli­ance sta­tus con­fir­ma­tion.

Where SARS dis­cov­ers that it has is­sued the con­fir­ma­tion of the tax­payer’s com­pli­ance sta­tus in er­ror, or that the con­fir­ma­tion was ob­tained on the ba­sis of fraud, mis­rep­re­sen­ta­tion or non-dis­clo­sure of ma­te­rial facts, SARS may al­ter the tax­payer’s tax com­pli­ance sta­tus from com­pli­ant to non-com­pli­ant, so long as it has given the tax­payer an op­por­tu­nity to re­spond to the al­le­ga­tions of at least 14 days prior to the with­drawal of the con­fir­ma­tion of the tax­payer’s com­pli­ant sta­tus.

The tax­payer will be re­garded as non-com­pli­ant from the pe­riod com­menc­ing on the date that the tax­payer no longer com­plies with the re­quire­ments spec­i­fied in sec­tion 256(3) of the Tax Ad­min­is­tra­tion Act, and end­ing on the date that the tax­payer reg­u­larises their non-com­pli­ance.

SARS has in­di­cated that it is in­tended that where a tax­payer’s re­quest for con­fir­ma­tion of tax com­pli­ance sta­tus is suc­cess­ful, it will is­sue the tax­payer with a per­sonal iden­ti­fi­ca­tion num­ber (PIN) for their spe­cific re­quest. When the PIN is utilised by any other per­son, that per­son will be able to as­cer­tain the com­pli­ance sta­tus of the tax­payer on a real time ba­sis on the date on which that PIN is utilised. It is in­tended that the tax com­pli­ance sta­tus process will al­low tax­pay­ers to print a tax clear­ance cer­tifi­cate in the pre­vi­ous for­mat from the new sys­tem dur­ing the phas­ing in pe­riod of the new real time tax clear­ance sta­tus sys­tem, by util­is­ing the PIN pro­vided by SARS.

Un­for­tu­nately, cases have been en­coun­tered where tax­pay­ers have ap­plied for tax clear­ance cer­tifi­cates, only to be de­clined on the ba­sis that they have an out­stand­ing tax debt, which re­lates to an amount in dis­pute for which the tax­payer has ap­plied for post­pone­ment un­der sec­tion 164 and to which SARS has not re­sponded.

This flows from the fact that ap­pli­ca­tions for sus­pen­sion of pay­ment are not tracked on the SARS sys­tem and too of­ten SARS de­lays mak­ing a de­ci­sion on whether the tax­payer’s re­quest for sus­pen­sion is granted or not, and hope­fully this de­fi­ciency will be rec­ti­fied in the fu­ture.

Clear­ance cer­tifi­cate sys­tem de­signed to en­hance ef­fi­ciency

Dr Beric Croome is a tax ex­ec­u­tive at ENSafrica.

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