Withdrawal of assessments under the Tax Administration Act
31 March 2014
Posted by: Author: Danielle Botha
Author: Danielle Botha (DLA CLiff Dekker Hofmeyer)
Section 98 of the Tax Administration Act, No 28 of 2011 (TAA) makes provision for the withdrawal of an assessment by the South African Revenue Service (SARS) in certain circumstances. Prior to its amendment, s98 allowed for the withdrawal of an assessment (despite no appeal having been noted or objection lodged), that was:
a) issued to the incorrect
b) issued in respect of the
incorrect tax period; or
c) issued as a
result of an incorrect payment allocation.
In terms of s98(2) of the TAA, an assessment withdrawn under
this section is regarded as not having been issued in the first place.
The Tax Administration Laws Amendment Act 2013 has extended the
ambit of s98 of the TAA by introducing further circumstances in which SARS may
withdraw an assessment. S98(1)(d) provides SARS may withdraw an assessment in
respect of which it is satisfied that it was based on:
- an undisputed factual error by the taxpayer in a return; or
- a processing error by
- a return fraudulently submitted by a person not authorised by the
However, such an assessment may only be withdrawn if the
following additional requirements are met:
- the assessment must impose an unintended tax debt in respect of an
amount that the taxpayer should not have been taxed on;
- the recovery of the tax debt under the assessment would produce
an anomalous or inequitable result;
- there must be no other remedy available to the taxpayer; and
- it must be in the interest of the good management of the tax
Essentially, the new provisions
contained in s98(1)(d) can only find application in situations where, firstly,
there is an undisputed factual error by the taxpayer in a return, a processing
error by SARS or a fraudulent submission of a return. Secondly, four additional
requirements must be met. The third requirement, being that there must be no
other remedy available to the taxpayer, appears to be the most problematic.
The explanatory memorandum
issued by SARS on the objects of the Tax Administration Laws Amendment Bill
2013 provides that the reason for the amendment to s98 relates mainly to the
situation where erroneous assessments are discovered after the expiry of all
prescription periods and remedies available to the taxpayer. This may result in
a situation which may be unreasonable or inequitable. S98(1)(d) aims to remedy
this situation by allowing for the withdrawal of assessments in specified
In light of the rationale for
the amendment, it may be argued that the 'no other remedy' requirement in
s98(1)(d)(iv) is understandable given that this is precisely the situation the
provision aims to address. On the other hand, one may be disappointed should
one wish to utilise s98(1)(d) as a means of dispensing with an erroneous
assessment. This is so because circumstances under which there is no other
remedy available to a taxpayer are very rare.
One would have to consider the interpretation of the words 'no
other remedy available'. Given the rationale behind the provision in creating a remedy for a taxpayer who would
suffer inequitable treatment should all prescription periods and remedies have
expired, it appears that 'no other remedy' should include a situation where the
time period for lodging an objection or appeal has expired or where a claim has
The amendments further provide, in s98(2) of the TAA, that in
the alternative to regarding the erroneous assessment as never having been
issued, a senior SARS official may agree with the taxpayer as to the amount of
tax properly chargeable for the relevant tax period and subsequently issue a
revised original, additional or reduced assessment, pursuant to such agreement.
Such an 'agreed assessment' would not be subject to objection and appeal.
Whilst some may be disappointed
that s98(1)(d) does not necessarily provide a simpler mechanism for doing away
with an assessment, others who have discovered that they have suffered loss due
to administrative errors or fraud, may breathe a sigh of relief.
This article first appeared on cliffedekkerhofmeyr.com.