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South Africa: SARS 'May Suspend Payment of Tax Debt'

Sanchia Temkin

2 October 2009

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Johannesburg — THE controversial "pay now, argue later" tax rule has finally been clarified , says a tax expert.

The South African Revenue Service (SARS) may suspend payment of a tax debt by the taxpayer provided certain requirements are met, Muneer Hassan, project director for tax at the South African Institute of Chartered Accountants (Saica) said this week.

Beric Croome, a tax executive at corporate law advisers Edward Nathan Sonnenbergs, said when SARS issues an assessment the tax must be paid by the second date reflected on the assessment. Where the taxpayer wishes to dispute the assessment, an objection can be lodged against that assessment.

Under the "pay now, argue later" rule, taxpayers can be compelled to pay the tax first and then dispute the assessment under the rules governing objections and appeals, he said.

Hassan said there had been some uncertainty as to whether SARS could apply the rule at the objection stage. Both the Income Tax Act and the Value-Added Tax Act made it clear that the rule applied at the appeal stage, he said.

However, amendments in the taxation Laws Second Amendment Bill provide that a disputed tax debt could still be collected despite an objection to the assessment.

"The taxpayer may, however, request the commissioner to suspend the payment of any tax due under the assessment," said Hassan. The amendments give guidance on the factors to be considered when deciding on a taxpayer's request to suspend payment .

SARS would consider the taxpayer's compliance history; the amount of tax involved; the risk of dissipation of assets; the ability of the taxpayer to provide adequate security; financial hardship to the taxpayer; and any imminent sequestration.

"SARS may deny a request if the objection or appeal is frivolous or vexatious, or the taxpayer employs dilatory tactics," Hassan said.

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