The Minister of Finance in South Africa has recently enacted new rules governing objections and appeals under the Tax Administration Act (TAA) on 10 March 2023. These new rules, which took effect immediately upon publication, replace the previous rules from 2014. Legal experts at Cliff Dekker Hofmeyr emphasize the importance of taxpayers and tax advisors familiarizing themselves with these new amendments, as there was no prior announcement or publicized stakeholder engagement.
- The time period to lodge an objection to an assessment or decision by SARS has been extended from 30 to 80 business days, allowing taxpayers more time to gather and submit substantiating documents.
- Taxpayers are now required to submit all documentation necessary to substantiate their grounds of objection alongside the notice of objection in order for it to be considered valid.
- Amendments to the rules have been made concerning new grounds of appeal/assessment, dispute resolution time periods, alternative dispute resolution proceedings, and giving effect to Tax Court judgments, impacting taxpayers and the overall dispute resolution process.
Some key amendments to note include:
- Time period to lodge an objection
Under the old rules, taxpayers had to lodge an objection against an assessment or “decision” by the South African Revenue Service (SARS) within 30 business days from the date of issue. The new rules extend this period from 30 to 80 business days, giving taxpayers more time to gather and submit the necessary substantiating documents for their objections, particularly in complex cases with large volumes of documents.
However, taxpayers still only have 30 business days from the date of assessment to request reasons for the assessment, and the extended period for lodging an objection does not affect the suspension of payment provisions in section 164 of the TAA.
- Submission of substantiating documents
The new Rule 7(2)(b)(iii) requires taxpayers to submit all documentation necessary to substantiate their grounds of objection along with the notice of objection for it to be considered valid. Previously, taxpayers only had to specify which documents they planned to rely on.
While SARS still has the authority to request additional substantiating documentation, it remains unclear how SARS will treat the submission of further substantiating documentation after the objection has been submitted and SARS’ grounds of assessment have been delivered.
- New grounds of appeal/assessment
The updated rules also affect the introduction of new grounds of assessment when an appeal proceeds to the Tax Court. SARS must now deliver a Rule 31 statement detailing the grounds, facts, and legal basis of the assessment, as well as the facts and legal basis SARS relies on in opposing the appeal. Rule 31(3) has been amended to permit SARS to include a new ground of assessment or basis for the partial or full disallowance of the objection, unless it constitutes a novation of the entire factual or legal basis of the disputed assessment, or requires SARS to issue a revised assessment.
Similarly, Rule 10(3) now allows taxpayers to appeal on a new ground not raised in the notice of objection, unless the new ground is a new objection against a part of the assessment not previously objected to.
- Shortening of time periods
The new rules also provide for the shortening of dispute resolution time periods. Both parties may agree to shorten the time periods, or agreement can be reached between one party and the clerk or Registrar of the Tax Board or Tax Court. This amendment enables taxpayers and SARS to expedite the dispute resolution process by mutual agreement.
- Alternative dispute resolution proceedings
The new rules expand the categories of persons who can serve as alternative dispute resolution (ADR) facilitators. Facilitators must now have appropriate experience in the field of tax and be acceptable to both parties. Deadlines for the delivery of the facilitator’s interim and final reports have also been introduced.
Moreover, Rule 22(4) no longer allows the court to issue subpoenas compelling the disclosure of representations or documents tendered during ADR proceedings, enhancing the confidentiality of ADR proceedings.
- Giving effect to Tax Court judgments
A notable amendment to Rule 44 is the addition of sub-rule 8, which requires SARS to issue the assessment to give effect to the Tax Court’s decision within 45 business days after receiving the decision from the Registrar, provided that SARS does not lodge an appeal under section 133 of the TAA. This new provision addresses the issue of significant delays in SARS issuing assessments to give effect to judgments, which has caused prejudice to taxpayers in practice. Sub-rule 8 now allows taxpayers to compel SARS to adhere to the 45-day period.
Furthermore, the period for the Registrar to notify the parties of the Tax Court’s judgment has been reduced from 21 business days to 10 business days. This change means that parties wishing to appeal a judgment, as contemplated in the TAA, can do so more quickly.
These significant updates to South Africa’s tax laws have various implications for taxpayers and tax advisors. It is essential for all parties involved to become familiar with these new rules to ensure compliance and appropriate handling of objections and appeals under the TAA. As the changes took effect immediately upon publication, understanding and adapting to these new regulations is crucial for taxpayers, tax advisors, and other stakeholders in South Africa’s tax system.