It’s a case of ‘taxpayers beware’ when it comes to adhering to the very strict timelines promulgated under the Tax Administration Act (TAA). Even if the aggrieved taxpayers’ dispute is valid, they can be stripped of the opportunity to challenge the decision. When a taxpayer enters into dispute resolution proceedings, the timelines are non-negotiable unless there are ‘exceptional circumstances.’
Tax Attorney, Schalk Pieterse one the panel of experts for Tax Risk Underwriting Managers, unpacks acceptable reasons for delay, condonations and the ABC judgement against the taxpayer, based on non-compliance to timelines.
Objections and condonation
- A taxpayer has 60 days to file an objection and 30 days to file an appeal if an objection is disallowed
- If these time periods are not adhered to, the taxpayer must file for condonation and explain to SARS why they were late with their submissions.
- SARS have a discretionary power to allow or decline the condonation.
- The discretion must, however, be exercised in a reasonable, lawful and procedurally fair manner, and they need to provide adequate reasons if the answer is no. This is in terms of section 33 of the Constitution, and subordinate legislation.
SARS under the time whip too
Similarly, SARS must also adjudicate an objection and appeal within a certain time period. If they fail to do so, a taxpayer can approach the tax court for a default judgement against SARS, requesting that the objection or appeal be upheld.
What is condonation?
It is a form of a pardon from SARS when the taxpayer shows ‘exceptional circumstances’ ie valid reasons for not adhering to timelines for objections.
Taxpayers need to be aware of their rights and grounds for applying for a condonation. The question is what constitutes exceptional circumstances? Exceptional circumstances are set out in section 218 of the Tax Administration Act (TAA). Even though the section deals with penalties, its common practice to raise/ use these grounds in argument for condoning the late filing of a dispute.
- Natural or human-made disaster
- Civil disturbance or disruption in services
- Serious illness or accident
- Serious emotional or mental distress
- serious financial hardship, such as in the case of an individual, lacking basic living requirements
- In the case of a business, an immediate danger that the continuity of business operations and the continued employment of its employees are jeopardised or
- Any other circumstance of analogous seriousness.
Any of the following acts by SARS
- Capturing error
- Processing delay
- Provision of incorrect information in an official publication or media release issued by the Commissioner
- Delay in providing information to any person
- Failure by SARS to provide sufficient time for an adequate response to a request for information by SARS
When a condonation fails
In the event that condonation is disallowed, it’s still not the end of the road for the taxpayer. They can object to the disallowance. The Constitution and the Promotion of Administrative Justice Act (PAJA) provides that even if it’s disallowed by SARS, the decision is still subject to judicial review.
It’s important that taxpayers are aware of their rights and what authority and reasoning to use when asking for condonation, as it can be the make or break of a case, even if an assessment is clearly incorrect.
Condonation is not an easy ‘get out of jail free card’. A taxpayer must persuade SARS of the existence of ‘exceptional circumstances’ and that they are unusual and causally connected to the delay.’
An example of an application for condonation not succeeding can be found in the ABC Judgment ITC0038/2015. The Income Tax Court had to consider whether or not the taxpayer had shown ‘exceptional circumstances,’ that would justify SARS condoning its late objection. Interpretation Note 15 dated 4 March 2016 requires SARS officials to consider, inter alia, the reasons for the delay, the length of the delay and the prospects of success of the objection.
The judge ruled: ‘None of these submissions persuade me of the existence of ‘exceptional circumstances’. They are neither unusual nor causally connected to the delay.’
The court specifically held that the taxpayer could and should have appointed appropriate tax attorneys to deal with the matter, immediately upon receiving the assessments. Ignorance and no knowledge of the rules under the TAA is not an excuse for taxpayers and it’s essential that they obtain advice timeously, to prevent them being deprived of their legal remedies because they were late. Which is why it is essential, to have access to affordable tax risk insurance that covers costs associated with for example tax audit issues and disputes. We know that tax dispute resolution is usually a protracted and expensive exercise and many individuals and companies cannot afford the cost of this.
The good news is by having Tax Risk insurance cover, administered by Tax Risk Underwriting Managers, costs on average, less than your monthly gym premium, individuals and companies have access to experts to mitigate this risk and guide you through the process, ensuring your rights as a taxpayer are protected.
Author: Attorney, Schalk WP Pieterse specialising in Administrative law, Tax law and Constitutional law and one the panel of experts for Tax Risk Underwriting Managers.