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Tax clearance certificates

08 June 2012   (0 Comments)
Posted by: SAIT Technical
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By Heinrich Louw (DLA Cliffe Dekker Hofmeyr Tax Alert June 2012)

A taxpayer can apply to SARS for a tax clearance certificate in respect of:

- Good standing and tenders;

- emigration; and

- Foreign Investment Allowances.

One of the most frequently applied for tax clearance certificates in the commercial sphere is the one relating to good standing and tenders. It is invariably a requirement when contracts are put out to tender that bidders must submit such tax clearance certificates with their bids. These certificates usually only vouch for the fact that a taxpayer's returns are up to date and that there are no amounts outstanding on the taxpayer's account. They are also usually only valid for a limited period.

Even though tax clearance certificates are quite common in the commercial world, they are a rather peculiar phenomenon from a tax law perspective. This is so because tax clearance certificates are not issued in terms of any particular section of the Income Tax Act No 58 of 1962, or any other act administered by SARS for that matter, but are wholly issued in terms of internal policy at SARS.

On 30 May 2012 a significant ruling was handed down by Wright J in the North Gauteng High Court in motion proceedings brought by a taxpayer (a close corporation) whose tax clearance certificate was revoked by SARS in light of allegations of tax fraud involving the taxpayer and a member of the taxpayer.

Essentially the court said that the revocation was unlawful because the taxpayer was not afforded an opportunity to make representation to SARS before the decision was taken to revoke the certificate. The court alluded to a fundamental rule of administrative justice, being that parties whose rights could be negatively affected by an administrative decision have the right to be heard. Of course, this also entails that reasonable notice must be given to the affected party.

When bidding for contracts, the sudden revocation by SARS of a tax clearance certificate can have devastating effects on a business.

This ruling sends a clear message to SARS that taxpayers need to be dealt with in a fair manner that accords with the tenets of administrative law. It is anticipated that this ruling will prompt an overhaul of SARS's policy in respect of tax clearance certificates.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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