When does prescription apply if SARS discover they never levied STC on an interest-free loan?
16 July 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: By when can
SARS stop assessing interest-free debit loans with related entities and
individuals as a deemed dividend?
Will it be covered in terms of s 99(1)(a) of the
Tax Administration Act – three years after the date of assessment of an
original assessment by SARS, thus if the 2012 ITR14 was assessed 12/12/2012,
will it "expire” 12/12/2015 since it is usually assessed from an income tax
Or is STC opened for 5 years since it is a self-assessment?
But if that’s the case there will not be an original assessment to count the 5
Can SARS reason that if STC was not voluntarily
declared and assessed on a debit loan, SARS can therefore reopen it regardless
of the period due to 99(2) (i)(ii)(iii)?
A: With regard to
prescription of a deemed dividend (section 64C) we submit that the further
proviso to section 79(1) of the Income Tax Act (now deleted) applies. For ease of reference we copy it here:
"Provided further that where the Commissioner has in respect
of any year of assessment made an assessment upon any company for normal tax
purposes he or she shall not after the expiration of three years from the date
of the said assessment (or, where more than one such assessment has been made,
from the date of the latest of such assessments), or such longer period as the
company and the Commissioner may agree prior to the expiry of that three year
period, make any assessment in respect of any amount of secondary tax on
companies payable by the company in respect of any dividend declared during
that year, unless the Commissioner is satisfied that the fact that an
assessment in respect of the said amount was not previously made was due to
fraud or misrepresentation or non-disclosure of material facts.”
The self-assessment definition was introduced by the Tax
Administration Act. The secondary tax
was repealed before the Tax Administration Act and we submit that section
79(1), referred to above, must be applied and not section 99.
For the same reason we also don’t believe that SARS can
apply section 99. Section 79(1) (Income
Tax Act) also refers to "fraud or misrepresentation or non-disclosure of
material facts”. We submit that the
intention of section 79(1) was to provide for a prescription rule in respect of
the secondary tax on companies and that the Tax Administration Act therefore doesn’t
apply to that.
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