TAX COURT: APPLICATION FOR DEFAULT JUDGMENT VS APPLICATION TO HAVE AN OBJECTION DECLARED VALID

TAX COURT: APPLICATION FOR DEFAULT JUDGMENT VS APPLICATION TO HAVE AN OBJECTION DECLARED VALID

In recent case[1], the taxpayer launched a default judgment application in terms of rule 56 of the tax court rules in consequence of SARS’ apparent failure to request documents in terms of rule 8 of the rules that govern tax objections and appeals (for a detailed exposition of these rules, see: Practical Guide to Handling Tax Disputes). The taxpayer lost and costs were awarded in favour of SARS. We set out briefly below the background to the case followed by why, in our view, the taxpayer lost and why a different application may have yielded a different result. Background The...

GET THE BASICS RIGHT: A FAILED DEFAULT JUDGMENT APPLICATION IN THE TAX COURT

GET THE BASICS RIGHT: A FAILED DEFAULT JUDGMENT APPLICATION IN THE TAX COURT

The very basics of a tax dispute are making sure that (a) you file the right forms and (b) at the right time. Get this wrong and you can be as fancy as you like with legal applications in the tax court, at the end of the day you will almost certainly fail. An example of a case where a taxpayer seemed not to have gotten the basics right appears to emanate from a recent tax court judgment. [1] The background of this case is briefly set out below. The taxpayer (ostensibly) filed an appeal following SARS’ disallowance of a...

TAX DISPUTES: SARS MUST ALSO COMPLY WITH THE RULES

TAX DISPUTES: SARS MUST ALSO COMPLY WITH THE RULES

When entering into a tax dispute with SARS, taxpayers are often reminded by SARS of the very strict time periods and prescribed rules and procedures that must be followed by the taxpayer. And yes, taxpayers should comply with the procedures and time periods as failing to do so is likely to result in adverse consequences for the taxpayer. But does the same apply to SARS? Yes. However, taxpayers, unlike SARS, does not have the power to, summarily, hold SARS to account for its failures to comply with time periods and rules. No, taxpayers, must jump through a few hoops in...

A CURIOUS TAX COURT JUDGMENT – APPLICATION TO AMEND AN OBJECTION

A CURIOUS TAX COURT JUDGMENT – APPLICATION TO AMEND AN OBJECTION

In a recent tax court case[1], the taxpayer brought an application to amend an objection. Whilst the facts appear to be not fully ventilated in the judgment, it seems rather a curious scenario that leaves one with more questions than answers.   The facts of the case, as far as can be established from the judgment, are as follows: The taxpayer had been assessed by SARS and submitted an objection against same. However, following advice, decided to abandon the objection. Some time afterwards, the taxpayer received conflicting advice presumably to the effect that the objection ought not to be abandoned...

TAX DISPUTES – MORE THAN ONE WAY TO SKIN A CAT

TAX DISPUTES – MORE THAN ONE WAY TO SKIN A CAT

Taxpayers who are aggrieved by an assessment or decision by SARS have various remedies at their disposal to challenge such assessment or decision. One of those remedies, and perhaps to most well-known remedy, is the remedy of objection and appeal. It often happens though that this remedy is not available for many reasons – too much time has lapsed and the assessment or decision in question is not one that is subject to objection and appeal, for example. But is there another way? Indeed, there often is. In fact, the Tax Administration Act[1] (“the TAA”), provides several remedies to taxpayers...

TAX DISPUTES: ONUS OF PROOF

TAX DISPUTES: ONUS OF PROOF

Taxpayers carry the burden of proof in most tax disputes[1]. Most taxpayers know this. Few, however, seem to truly understand it. What does it really mean? How do you go about discharging the onus? Can SARS simply raise an assessment out of thin air and leave the taxpayer to prove them wrong given that taxpayers carry the burden of proof?   What does it really mean? In short, it means that a taxpayer must prove, on a balance of probabilities, that: Something is exempt from tax or otherwise not taxable; That an amount is deductible or may be set off;...

TAX DISPUTES: THE RELEVANCE OF SARS’ PRE-ASSESSMENT OBLIGATIONS

TAX DISPUTES: THE RELEVANCE OF SARS’ PRE-ASSESSMENT OBLIGATIONS

The Tax Administration Act imposes several obligations on SARS, aimed in part and insofar relevant here, at ensuring that SARS treat taxpayers in a procedurally fair manner as is also required by the Constitution.  These obligations, subject to a few exceptions, include: The obligation to notify taxpayers that it has been selected for audit; The obligation to keep the taxpayer informed of the progress of the audit; The obligation to inform the taxpayer of proposed adjustments and the grounds for such proposed adjustments consequent upon an audit before raising the assessment; and The obligation to allow taxpayers an opportunity to...

VAT ON IMPORTED SERVICES: WHAT IS IT?

VAT ON IMPORTED SERVICES: WHAT IS IT?

There seems to be an increased focus from SARS recently on non-VAT registered entities who enlist services from foreign suppliers. The reason for this is likely that, in most cases, there may be some VAT to be collected by SARS from these South African entities. It appears though, few people, especially those who are not VAT registered, are aware of their obligation to pay VAT on imported services. Subject only to a handful of exceptions, any person who is not VAT registered (or in some cases even those who are VAT registered but who also make exempt supplies) and who...

UNDERSTATEMENT PENALTIES: SARS’ BURDEN OF PROOF IS IRRELEVANT?

UNDERSTATEMENT PENALTIES: SARS’ BURDEN OF PROOF IS IRRELEVANT?

In a recent case[1] the Tax Court had to adjudicate on the imposition by SARS of understatement penalties on a taxpayer in consequence of a taxpayer’s failure to timeously declare a capital gain. SARS imposed a penalty of 25%, which is a penalty for failure by the taxpayer to take reasonable care when completing a tax return.  During evidence, however, SARS conceded that they should probably have imposed a penalty of 50% on the basis that the taxpayer had no reasonable grounds for the tax position it had adopted. SARS, therefore, conceded that it imposed the penalty incorrectly. However, since...

CLARITY FOR TAXPAYERS ON TAX DISPUTE RESOLUTION

CLARITY FOR TAXPAYERS ON TAX DISPUTE RESOLUTION

Taxpayers and businesses are under increased pressure as a result of the economic downturn and impact of COVID-19. On the flip side, the South African Revenue Service (SARS) is also under pressure to meet targets. A possible outcome of this double-sided scenario is, according to experts, the potential for an increased number of tax disputes in the near future, with SARS attempting to secure revenue and taxpayers wanting to reduce their tax burden. “Tax disputes have become increasingly complex,” says Nico Theron, tax expert and author of the newly released Practical Guide to Handling Tax Disputes published by LexisNexis South Africa. “There...