On 10 March, the Minister of Finance published new dispute resolution rules in the Government Gazette in terms of the Tax Administration Act. These rules describe the procedures for objections and appeals, for the alternative dispute resolution (ADR) mechanism, and for the conduct and hearing of appeals before a Tax Board or Tax Court.
The new rules are, in the main, regarded by dispute resolution experts as in favour of taxpayers.
The rules came into effect on 10 March and apply to matters already under way, said Joon Chong, a tax specialist and partner at Webber Wentzel.
Requests for reasons, objections, appeals to the Tax Board or Tax Court, ADR, settlement discussions, or interlocutory applications that were instituted under the previous rules but have not been completed will have to be continued and concluded under the new rules.
Chong said the notable changes in the new rules are:
1. Extension of time periods (rule 4)
The parties – the taxpayer or the South African Revenue Service (Sars) – can agree to shortened periods for various procedures if the timelines are not already regulated by the rules. The 2014 rules allowed for the parties to agree to extensions only.
2. Objection against an assessment (rule 7(1))
A taxpayer objecting to an assessment must deliver a notice of objection (NOO) within 80 days (2014 rules: 30 days) of the date of the assessment.
If the taxpayer requested reasons, the NOO must be delivered within 80 days of the delivery of (i) the Sars notice that adequate reasons have been provided or (ii) the Sars letter with the reasons requested.
The 80-day period excludes the 30-day extension where a taxpayer may still request additional time on reasonable grounds, and up to three years’ extension on exceptional grounds.
3. Appealing on new grounds (rule 10(3))
A taxpayer may appeal on a new ground not raised in the NOO unless the new ground is a new objection against a part of the assessment not previously objected to. This rule has been the subject of a few court decisions and is now couched in the positive (see also item 6 below).
4. Appointment of an ADR facilitator (rules 16 and 17)
One of the biggest issues with the ADR process in the 2014 rules is the perceived lack of independence of the facilitator because the facilitator is appointed by Sars and is a Sars employee.
Rule 16 has been amended to remove the requirement that a senior Sars official must establish a list of facilitators.
The new rules also provide that the facilitator must have appropriate tax experience and be acceptable to both Sars and the taxpayer.
Although the facilitator, once accepted by all parties, is still appointed by a senior Sars official within 15 days of the ADR commencement date, rule 17(3) now expressly provides that the facilitator must act independently and impartially.
5. Delivery of the facilitator’s report (rule 20)
The facilitator is required to deliver a report within five days of a meeting, and a final report within 10 days after the ADR process ends.
6. New grounds in the statement of assessment and opposing appeal (rule 31)
If an appeal proceeds to the Tax Court, Sars is required to deliver a rule 31 statement setting out the grounds, and the facts and legal basis of the assessment, and the facts and legal basis relied on by Sars in opposing the appeal.
Rule 31(3) has been amended to provide for Sars to include a new ground of assessment or basis for the partial or full disallowance of the objection. A new ground is allowed unless (i) the new ground is a novation of the whole of the factual or legal basis of the disputed assessment or (ii) the new ground requires Sars to issue a revised assessment.
As with the amendment to rule 10(3), rule 31(3) is now couched in the positive, whereas previously it was worded in the negative.
7. Subpoenas of witnesses to the Tax Board and Tax Court (rules 27 and 43)
A person may be subpoenaed by the Tax Board clerk or the Tax Court registrar to attend the appeal and give evidence or provide documents on issues relevant to the appeal.
The new rules also provide that the subpoena must not be an abuse of process. If a party is of the view that the subpoena is not relevant or an abuse of process, the new rules provide for them to request the withdrawal of the subpoena, and if not withdrawn, to apply to the Tax Board or Tax Court for the withdrawal of the subpoena.
Where an issued subpoena was withdrawn by the clerk or registrar, the aggrieved party can also apply to the Tax Board or Tax Court for the issue of the subpoena.
8. Sars to issue an assessment within 45 days of a Tax Court decision (rule 44)
Where the Tax Court confirms or alters the Sars decision or assessment, Sars must issue the relevant assessment within 45 days of the registrar receiving the Tax Court’s decision.
9. Applications on notice (rule 50)
Applications on notice must be brought within 20 days of the cause of the application, unless the parties agree to a longer period, or the Tax Court grants an extension on good cause shown.
Disclaimer: The information in this article does not constitute tax or legal advice.
HI MOONSTONE MR KRUGER
As we go back a long way as a client could your please help in respect of these regs and the convoluted TAX CLEARENCE STATUS AND AIT required to release funds due to beneficiaries onshore and offshore but mainly offshore.
Many thanks
Edward Ions