With SARS’ new policy regarding verification of returns submitted, it is inevitable that disputes with SARS will result. This could be a lengthy process with numerous pitfalls. Most disputes arise from a disagreement between the taxpayer and SARS concerning facts, interpretation from gathered information and the law, or a combination of these.
SARS has published a Service Charter to taxpayers promising to improve the taxpayer’s experience by handling your tax queries fair and prompt. However, the Service Charter makes no commitment to meeting a timeframe, but the Tax Administration Act on the other hand, requires both SARS and taxpayers to comply with prescribed timeframes.
Request for supporting documents
The method most often used by SARS to gather information is a letter issued to the taxpayer requesting supporting documents in terms of section 46 of the Tax Administration Act. This is used to verify information submitted in a return.
Relevant information must be submitted within a prescribed period. Relevant information is defined as “any information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act”.
Therefor responses to submit supporting documentation should be complete and submitted within the requested time. After SARS processed the documentation submitted, they may either close the matter or select it for audit. During the audit SARS may request additional documentation, and on completion, will issue a letter of findings or finalisation of the audit, together with an assessment.
The dispute process
Assessments are usually issued in the form of an IT34A, but a letter containing all the legally required information may also constitute an assessment.
If a taxpayer disagrees with an assessment the taxpayer may enter into a dispute with SARS. This process is governed under section 103 of the Tax Administration Act.
A taxpayer must object within 30 business days after the date of assessment, or if the reasons for the assessment are unclear, submit a request for reasons for the assessment. SARS may extend the period for filing an objection on reasonable ground, but may not be extended if more than 3 years have lapsed after the assessment.
Corroborative documents must be submitted with the objection stating the relevant facts and applicable law upon which the taxpayer relies. SARS can request additional supporting documentation within 30 days after filing of the Notice of Objection. SARS has 60 days (45 days after receipt of additional requested documentation) to determine the outcome of the objection. There is no penalty to SARS if it fails to adjudicate the objection within the prescribe timeframe, and this leads to a lot of frustration to taxpayers. The Tax Ombud can be contacted to investigate SARS’ disregard for prescribed periods in the dispute resolution rules.
After SARS has taken all the facts supplied into consideration, it may allow an objection, or wholly/partially disallow it. Were an objection is allowed in whole or part, SARS will issue a reduced assessment.
Where a Notice of Objection is wholly or partially disallowed by SARS, a taxpayer may lodge a Notice of Appeal within 30 days after the disallowance. The notice of appeal must specify in detail, which of the grounds of objection are relied upon, the ground upon which the disallowance by SARS is disputed and any new ground for appeal. This must relate to the original objection and cannot introduce a new objection.
Alternative Dispute Resolution
On lodging an appeal a taxpayer can elect to submit an ADR – a less formal approach to settle the dispute. SARS is not obliged to agree to ADR, but they must inform the taxpayer within 30 days whether ADR is appropriate. ADR must be concluded within 90 days after commencement.
Facilitators – which are SARS law officers – are appointed to identify differences of fact or law and determine whether the dispute can be settled. Any settlement must be in writing and a new assessment must be issued within 45 days after conclusion of the agreement.
The above describes the normal process of dispute resolution between SARS and taxpayers where there is a disagreement regarding assessments. SARS can take up to 90 days (and 180 days if an objection is appealed) to complete an assessment within the prescribe timeframe of the law.
SARS Service Charter Timeframes
The SARS Service Charter provides hope that SARS will streamline the verification and audit processes, as it will endeavour to complete verification within 21 days and audits within 90 days.
Inspection, Audit or Verification
If a taxpayer is subjected to an inspection, audit or verification SARS will endeavour to:
- Notify the taxpayer of the verification within 15 business days after submission of the return (in practice this usually happens within minutes)
- Conclude the verification within 21 business days from the date the documents were received
- Conclude the audit within 90 business days from the date all the required supporting documents were received
Where SARS has verified the correct banking details, and more than R100 is due by SARS, they will endeavour to pay out the current filing period refunds within 7 business days of final assessment, if:
- The refund due to the taxpayer is from the current year of assessment
- No other debt is due
- All obligations have been met
- SARS administration control processes are adhered to, and
- No inspection, verification or audit is required or has been initiated.
Complaints to SARS
SARS will endeavour to respond to a service complaint lodged by a taxpayer within 21 business days.
Complaints to the Tax Ombud
If a taxpayer has exhausted all administrative complaint processes at SARS, or has compelling circumstances, they may lodge a complaint with the Tax Ombud.
Please note that the information provided in this article is based on generic scenarios and should not be taken as tax or financial advice. The circumstances of each individual and employer are different, requiring tailored advice and, where required, customized financial planning. Please contact us should you need any advice on this topic.