On March 10, 2023, the Minister of Finance announced new rules for objections and appeals under the Tax Authorities Act (TAA).
The new rules came into effect on the date of publication, replacing the ‘old rules’ issued in 2014 with immediate effect.
According to legal experts at Cliff Dekker Hofmeyr, as there was no prior announcement or public stakeholder involvement regarding the new rules, it is critical that both taxpayers and tax advisers become familiar with any changes to the rules.
The company shared some of the most notable changes:
Time limit for making an objection
Under the old rules, a taxpayer had to object to an assessment or ‘decision’ by the South African Revenue Service (SARS) within 30 working days of the date of issuance of the assessment or handover of the SARS reasons.
This period has now been extended from 30 working days to 80 working days.
A review of the new rules shows that the extended 80-day period excludes the 30-day extension that a taxpayer can request on reasonable grounds, and the three-year extension on exceptional grounds.
The extension of the deadline for submitting objections is a welcome relaxation of the previous rules, as taxpayers now have more time to collect and submit, among other things, the supporting documents for their grounds of objection, especially in cases where the case is complex and includes a large number of documents.
Notwithstanding the aforementioned change, it should be noted that taxpayers still have only 30 business days from the assessment date to request the reasons necessary to object.
Since this period is no longer equal to the period for submitting an objection, taxpayers should still think about their assessments in good time and carefully consider whether reasons from SARS are necessary to formulate their objection.
In addition, the taxpayer must take into account that the extended objection period does not change the provisions on suspension of payments in Article 164 TAA, which pertain to suspension of the obligation to pay the tax debt that has arisen on the basis of the assessment that is disputed.
Submission of supporting documents
Rule 7(2)(b)(iii) now requires a taxpayer to submit all documentation necessary to substantiate the grounds of objection, along with the notice of objection, for it to be considered valid.
Under the old rules, the taxpayer only had to indicate on which documents he wanted to substantiate his ground for objection. Therefore, an appeal would not be considered invalid if some of the supporting documentation was not submitted with the appeal.
This may have been the case when taxpayers needed more than the prescribed 30-day period previously provided for in Rule 7 to collect all supporting documentation, particularly in large or complex litigations.
Nevertheless, SARS still has the authority to request any additional supporting documents that are outstanding after the appeal has been filed.
What is not clear is how SARS views the submission of further substantiating documentation after the objection has been submitted and after SARS’ grounds for assessment have been provided.
The rules regarding access to documents in the context of an appeal to the Tax and Customs Administration have remained the same, suggesting that access to additional documents that have not been submitted as part of the appeal is likely to be permitted.
New grounds of appeal/assessment
When an appeal is filed with the tax court, SARS is required to issue a Rule 31 Statement setting out the grounds, facts and legal basis of the assessment, and the facts and legal basis on which SARS relied in order to oppose the appeal. to reschedule.
Rule 31(3), which pertains to the introduction of a new tax base, has been amended and is now worded positively, where it was previously worded negatively.
Rule 31(3) allows SARS to include a new ground of assessment or basis for the partial or full rejection of the objection, unless (i) the new ground is a novation of the entire factual or legal basis of the contested assessment, or ( ii) the new ground requires SARS to issue a revised assessment.
This rule has been the subject of some court rulings and one wonders what impact it will have had that it is now worded positively.
As with the aforementioned amendment, rule 10(3) allows a taxpayer to appeal on a new ground that has not been put forward in the notice of objection, unless the new ground concerns a new objection against a part of the assessment that has not previously been objected to made. Under the old rules this rule was worded negatively, but the amendment is now worded positively.
Shortening deadlines
Rule 4 has always provided for the extension of time limits for dispute resolution. The new rules now also provide for shortening time limits.
In this regard, the parties may agree to shorten the time limits, or an agreement may be reached between one of the parties and the clerk or clerk of the tax authority or tax court.
Therefore, no party can unilaterally shorten any of the dispute resolution time limits.
This rule change will allow taxpayers and SARS to speed up the dispute resolution process in consultation where necessary.
Alternative Dispute Resolution Procedure
In terms of the new rules, the categories of persons who can act as alternative dispute resolution (ADR) facilitators have been broadened.
In addition, the appointed facilitator must not only have the right experience in the tax field, but also be acceptable to both parties.
With regard to the interim report from the facilitator, a deadline for its delivery has also been introduced. Rule 20(6) now states that the facilitator’s ‘interim’ report must be delivered within five business days of the end of the ADR meeting.
This is in addition to the deadline for the final report, which states that delivery must take place 10 working days after the end of the ADR procedure.
Another notable change made as far as ADR proceedings are concerned is included in Rule 22(4). Under the new Rule 22(4), the court will no longer allow persons involved in an ADR process subpoenas to compel disclosure of statements made or documents submitted during the ADR process.
This amendment aims to increase the confidentiality of ADR procedures.
Implementing decisions of the Tax and Customs Administration
A very welcome change to rule 44 is the insertion of sub-rule 8, which forces SARS to issue the assessment to give effect to the decision of the tax court within a period of 45 business days after receipt of the decision of the tax court from the clerk , provided there is no appeal by SARS under Section 133 of the TAA.
The often significant delays in SARS issuing assessments to enforce judgments is a long-standing problem that has, in practice, penalized taxpayers. The introduction of sub-rule 8 should allow taxpayers to force SARS to comply with the 45-day period.
Another notable change is the term within which the clerk must inform the parties of the decision of the Tax Court. This has been reduced from 21 working days to 10 working days, so that if a party wishes to appeal against a judgment, as contemplated in the TAA, an appeal can be lodged.
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