If a taxpayer has outstanding tax debts (including penalties), the Tax Administration Act empowers the Commissioner for the South African Revenue Service (SARS) to appoint a third party, i.e. an employee of a bank, to recover money held by third parties, on behalf of SARS. The Act also defines the criteria which SARS must comply with when collecting tax debts.
In a recent High Court case these criteria were once again emphasised when the Court ordered that SARS need to repay money to a taxpayer as a result of not giving the tax payer “sufficient” notice before they instructed a bank to pay over an outstanding tax amount. According to Althea Soobyah, tax consulting Director at Mazars, the ruling is a victory for both taxpayer rights and the wider cause of administrative justice.
The criteria that SARS needs to comply when collecting tax debts are:
| ● | There must be a tax debt; |
| ● | The due date for payment of the tax debt must have expired; |
| ● | A letter of demand must be delivered to the taxpayer at least 10 days prior to issuing a notice to a third party who holds monies for and on behalf of the taxpayer concerned; |
| ● | The letter of demand delivered to the taxpayer must set out the recovery steps to be taken should the tax debt not be paid; and |
| ● | The letter of demand must also specify the relief mechanisms available to the taxpayer. |
In this specific case a third party notice was issued to the bank to pay an amount of R1 262 007 to SARS. The taxpayer alleged that it had not received any notification of the letter of final demand on its e-filing profile. As a result, the court found in favour of the taxpayer that the letter of final demand was not “delivered” and that SARS had failed to comply with the peremptory requirement provided for in terms of Section 179(5) of the TAA Act.
Although SARS needs to comply with certain criteria and processes, it is also important for all tax payers to ensure that they liaise with SARS directly if they have a tax debt.
Various media articles covered this judgement, click on the links to read more:
SARS can’t just order a bank to pay over your tax debt, court rules
