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Prescription period

18 March 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

The answer to this query is based on legislation as at 2014/03/18. 

Q: The latest collection stint from SARS is that they are collecting taxes going as are far back as 1992. My interpretation of section 171 of the TAA is that SARS cannot collect more than 15 years back; section 171 states "Proceedings for recovery of a tax debt may not be initiated after the expiration of 15 years from the date the assessment of tax, or a decision to in section 104 (2) giving rise to a tax liability, becomes final.

I have a matter where the taxpayer has now suddenly received a letter of demand for R98 000 for tax that was assessed in September 1992. When I raised this with SARS their collection department replied and advised that section 171 is only applicable to tax debts raised from 1 October 2012. All tax debts on the system raised before 1 October 2012 is subject to a 30 year prescription period. My taking on the SARS interpretation then is that they contend that Sect 171 will only come into effect in October of 2027, 15 years after the introduction of the TAA? 


A: The 30 year prescription period relates to section 11 of the Prescription Act which has not been repealed. S 269(5) of the TAA then orders: "A right or entitlement enjoyed by, or obligation imposed on, a person under the repealed or amended provisions of a tax Act, that had not been exercised or complied with before the commencement date of this Act, is a valid right or entitlement of, or obligation imposed on, that person in terms of any comparable provision of this Act, as from the date that the right, entitlement or obligation first arose, subject to the provisions of this Act."

Because the Prescription Act is not a tax act, do I doubt that s 269(5) allows for the continuance of SARSs’ prescription rights. One would also have to consider as to how the TAA will impact on debt incurred prior to 1/10/2012 and in this regard one should look at s 270(1): "Subject to this Chapter, this Act applies to an act, omission or proceeding taken, occurring or instituted before the commencement date of this Act, but without prejudice to the action taken or proceedings conducted before the commencement date of the comparable provisions of this Act". The non-payment may be regarded as an "omission” and from this do I believe that one might be able to argue that the TAA should apply (s 171).

Conclusion - We have properly applied our minds to your query and have come to the conclusion that one should rather seek legal opinion in this regard.



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