is important that taxpayers who are indebted to the South African Revenue
Services (SARS) engage with the Commissioner to resolve the manner in which the
tax debts will be paid. It must be remembered that the tax debt will not go
away, and that the Commissioner has substantial powers in the Tax Administration
Act to ensure that taxpayers settle tax debts due to it.
Where a taxpayer fails to pay tax which is payable, the Commissioner
may, after the giving the taxpayer at least 10 business days’ notice, file with
the clerk or registrar of a competent court a statement setting out the amount
of tax payable and certified by SARS as correct. Previously, under section 91
of the Income Tax Act, the Commissioner was not obliged to issue a notice to the
taxpayer indicating that SARS was about to take a judgment against the
Note that the Commissioner is entitled to file a statement at court
regardless of whether or not the amount of tax reflected as payable is subject
to an objection or appeal, unless the obligation to pay the amount in dispute
has been suspended under section 164 of the Tax Administration Act.
Therefore, should a taxpayer wish to dispute an assessment and lodge
an objection thereto, they need to adhere to the rules regulating objections and
appeals, and, at the same time, decide whether to pay the tax in dispute or to
request the suspension of payment under section 164 of the Tax Administration
It must be noted that the Commissioner: South African Revenue Service
is not required to give the taxpayer prior notice of the intention to take a
judgment against the taxpayer where the Commissioner is satisfied that giving
such notice would prejudice the collection of the tax in question.
A difficulty arises in cases where the Commissioner has made an error
on the assessment issued to the taxpayer and subsequently files a statement at
court, which can have disastrous implications for the taxpayer’s credit
Furthermore, it does appear that there are occasions where the
Commissioner takes a judgment without advising the taxpayer that it is intending
to take judgment against the taxpayer.
The difficulty that taxpayers have is that the information reflected
on the e-Filing system regarding the amounts which may be payable by the
taxpayer do not, for some reason, always correspond with what is reflected on
SARS’ own internal system. It is not unknown for taxpayers to have been in
receipt of tax clearance certificates confirming that their tax affairs are in
order and yet suddenly be advised by creditors or another party that judgment
has been taken against them for the failure to pay taxes due to SARS.
Where SARS fails to advise the taxpayer of the intention to take
judgment, the taxpayer has no recourse against SARS, but would have to approach
SARS with a view to having the judgment withdrawn, or, alternatively, approach
the High Court for a rescission of the SARS judgment.
As pointed out above, should a taxpayer decide to lodge an objection
against an assessment, a decision must be made whether to pay the tax in dispute
or to submit a properly-motivated request to the Commissioner to postpone the
payment of tax pending the outcome of the objection and appeal.
Again, the difficulty that arises is that taxpayers may file an
objection and a request for postponement of payment and not receive any
communication from SARS for a substantial period of time. The first time that
they may become aware of a problem, is when SARS has either taken judgment
against them or demands payment of tax within a very short period of time,
despite the fact that SARS has failed to consider the taxpayer’s request for
postponement of tax in accordance with section 164 of the Tax Administration
The taxpayer’s only recourse would be to launch proceedings in the
High Court, or, once the Tax Ombud is appointed, to seek assistance from that
Where the taxpayer is unable to meet its tax obligations as a result
of poor financial conditions, it is imperative to engage with the Commissioner
to resolve the matter and consider seeking a deferral of payment in terms of
section 167 of the Tax Administration Act.
It does not appear that the Commissioner has published the Public
Notice referred to in section 167(1)(a) of the Tax Administration Act, which
sets out the criteria or risks that may be prescribed by the Commissioner in
adjudicating whether an instalment payment agreement should be concluded with
Where, however, the taxpayer is facing financial difficulties,
consideration should be given to applying for an instalment payment agreement on
a properly motivated basis, and in compliance with the provisions of section 167
of the Tax Administration Act.
Clearly, the Commissioner will not agree to an instalment payment
arrangement for an indefinite period, but will typically agree to the payment of
the outstanding tax in a number of instalments, and will review the arrangement
Previously, under section 99 of the Income Tax Act, the Commissioner
could appoint any other party as the agent of the taxpayer and direct that any
monies held by that person on behalf of the taxpayer be paid over to the
Commissioner in settlement of the tax debts due by the taxpayer. The rules
regulating the so-called ‘appointment of agent’ are now contained in section 179
of the Tax Administration Act.
section requires a senior SARS official to issue a notice to any person who
holds or owes or will hold or own any money, including a pension, salary, wage
or other remuneration for or to the taxpayer, and require the person to pay
those funds over to the Commissioner in satisfaction of the taxpayer’s tax
debt. The first time, generally, that a taxpayer becomes aware of such steps
having been taken against it, are when payment instructions issued by the
taxpayer to its bank cannot be followed because no funds are held in the
taxpayer’s bank account as a result of SARS’
The Commissioner may also direct an employer to withhold from any
salary payable to a member of its staff and to pay such money over to SARS in
satisfaction of tax debts due by the employee. SARS has published guidelines as
to how employers are to deal with so-called ‘garnishee instructions’, and, also,
to ensure that employees receive sufficient remuneration to pay the basic living
expenses of themselves and their dependants.
The Tax Administration Act also contains rules regulating the
liability of financial management for tax debts due to the
A person is personally liable for the payment of any tax debt due by
the taxpayer to the extent that the person’s negligence or fraud resulted in the
failure to pay the tax debt to SARS, where that person controls or is regularly
involved in the management of the overall financial affairs of the taxpayer,
and, where a senior SARS official is satisfied that the person is or was
negligent or fraudulent in respect of the payment of the tax debts of the
The decision to rely on section 180 of the Tax Administration Act
can, therefore, only be made by a senior SARS official. Unfortunately,
taxpayers at this stage are not aware as to which SARS officials have been
designated as senior SARS officials under the Tax Administration
Clearly, where a person is involved in the financial management of a
taxpayer, and deliberately fails to pay SARS taxes due and diverts those funds
for other purposes, and it can be shown that the person was negligent or acted
fraudulently, they may be personally liable for the tax debts of the
In addition, section 181 of the Tax Administration Act prescribes the
circumstances where shareholders may be liable for the tax debts of a company.
Previously, the Commissioner was only entitled to recover Value-Added Tax and
PAYE from persons involved in the financial management of a taxpayer under
specific provisions contained in the Value Added Tax Act and the Income Tax
Act. Section 181 of the Tax Administration Act now applies to any tax debt due
by a company, and is thus wider than those rules that were contained in the
administrative provisions of the various tax Acts which have been repealed with
effect from 1 October 2012.
liability of a shareholder for the tax debts of the company arises where a
company is wound up other than as a result of an involuntary liquidation without
having settled its tax debts due to SARS, including its liability as a
responsible third party, withholding agent or representative taxpayer, employer
Those persons, who are shareholders of the company within one year
prior to the company being wound up, are jointly liable to pay the unpaid tax to
the extent that they receive assets of the company in their capacity as
shareholders within one year prior to its winding up, and the tax debt existed
at the time of the receipt of the assets would have existed had the company
complied with its obligations under a tax Act.
It must be noted that the provisions contained in section 181 do not
apply in respect of a listed company as defined in the Income Tax Act or in
respect of a shareholder of such a listed company.
Tax Administration Act contains other specific provisions empowering the
Commissioner to ensure the collection of tax debts from taxpayers who do not
settle the payment of their tax debts timeously. In certain cases, the
Commissioner may seek the assistance of a foreign revenue authority where South
Africa has concluded a double-taxation agreement allowing for the reciprocal
assistance in the collection of tax debts.