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Persons liable for tax under Tax Administration Bill

Wednesday, 09 May 2012   (0 Comments)
Posted by: SAIT Technical
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By Ruaan van Eeden (DLA Cliffe Decker Hofmeyr Tax Alert 26 April 2012)

The Tax Administration Bill (TAB) is expected to be promulgated during the course of 2012 and although it is unlikely that all sections in the TAB will come into force immediately due to, among others, system constraints, we wish to highlight important aspects pertaining to certain new types of persons potentially liable to tax.
As stated in many South African Revenue Service (SARS) publications, the object of the TAB is to provide a single body of law that outlines common procedures, rights and remedies and to achieve a balance between the rights and obligations of both SARS and taxpayers in a transparent relationship. Essentially, the TAB seeks to consolidate the administrative sections of the various acts administered by the Commissioner for SARS.

Chapter 10 of the TAB, dealing with tax liability and payment, introduces certain new categories of persons liable to tax and the capacity (personal or representative) in which those persons may be liable for tax debts. The categories discussed for purposes of this article are:

- person chargeable to tax;
- representative taxpayer;
- withholding agent; and
- responsible third party.

Person chargeable to tax

Although not technically a new type of person liable for tax, clause 152 of the TAB states that a person chargeable to tax is a person on whom the tax liability for tax due under any act administered by the Commissioner for SARS is imposed and who is personally liable for the tax. In essence, this is the primary person liable to tax (for example, an individual or company).

Representative taxpayer

Clause 153 of the TAB states that a representative taxpayer means a person who is responsible for paying the tax liability of another person as agent, other than a withholding agent (see below). A representative taxpayer includes a representative taxpayer under the Income Tax Act, No 58 of 1962 (Act), a representative employer under the Fourth Schedule to the Act and a representative vendor under the Value-Added Tax Act, No 89 of 1991 (VAT Act). It is important to note that a principal taxpayer is not relieved from any liability where a representative taxpayer has been appointed to pay any tax liability. A representative taxpayer will also be provided with the right to indemnity after paying the relevant tax debt.

A representative taxpayer may, however, be held personally liable for tax payable in a representative capacity if, while the tax debt remains unpaid, a representative taxpayer:

- Alienates, charges, or disposes of amounts in respect of which the tax is chargeable; or
- disposes of or parts with funds or monies, which are or came into the possession of the representative taxpayer after the tax is payable, if the tax could legally have been paid from those funds or monies.

Withholding agent

A withholding agent, under clause 156 of the TAB, is a person required to withhold an amount of tax and pay it to SARS. Pay-As-You-Earn (PAYE) is an example of a tax that must be withheld by a withholding agent. A withholding agent may be held personally liable for an amount of tax:

- withheld and not paid to SARS; or
- which should have been withheld under a tax act but was not so withheld.

A withholding agent will also be provided with the right to indemnity after paying the relevant amount of tax.

Responsible third party

The final category of person liable to tax is a responsible third party, which is a person who becomes otherwise liable for the tax liability of another person, other than as a representative taxpayer or withholding agent, whether in a personal or representative capacity.

A senior SARS official may, by notice to a person who holds or owes or will hold or owe any money for or to a taxpayer, require that person to pay the money to SARS in satisfaction of the taxpayer’s debt. Where a person receiving notice, parts with money contrary to the notice, that person then becomes personally liable.
Further, to the extent that negligence or fraud is present, a person who controls or is regularly involved in the management of the overall financial affairs of a taxpayer may be held personally liable for the tax debts of a taxpayer. The aforementioned is similar to provisions already contained in the Fourth Schedule to the Act.

Shareholders of a company (which excludes a listed company or its shareholders) may also incur a personal liability for a company’s tax debts under the TAB. Clause 181 of the TAB, dealing with shareholder liability, applies where a company is wound up other than by means of an involuntary liquidation without satisfying its tax debts including its liability as a responsible third party, representative taxpayer, withholding agent, employer or vendor.

Persons who are shareholders of the company within one year prior to its winding up are jointly and severally liable to pay the unpaid tax to the extent that:

- Those shareholders receive assets of the company in their capacity as shareholders within one year prior to the company’s winding up.
- The tax debt existed at the time of receipt of the assets or would have existed had the company complied with its obligations under a tax act.

A final aspect we wish to note under this section is the liability of a transferee for tax debts, which could be applicable in the case of an asset sale / disposal of a business. In essence, a transferee who receives an asset from a taxpayer who is a connected person in relation to the transferee without consideration or for consideration below the fair market value would be liable for the tax debts of the taxpayer.

It is clear the TAB will have a significant impact on the daily administrative interactions with SARS and taxpayers are cautioned to familiarise themselves with these provisions.



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.

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