Taxpayers no longer need to pay now argue later

A question we are often asked is whether it is possible to postpone the payment of income tax due pending a decision on an objection lodged against an assessment.

Strangely, until a recent amendment which is yet to become effective, the Income Tax Act did not specifically deal with this question. The commissioner was legally entitled to insist that the taxpayer settles the tax due according to the assessment even where an objection against the assessment had been lodged. No discretion to suspend payment pending the outcome of the objection was granted. In practice, the commissioner may, on request from the taxpayer and depending on the circumstances, grant an extension of time to pay the tax pending a decision on the objection. There has been ongoing debate on whether the decision not to grant extension of payment terms may be challenged on the grounds that it violates the taxpayer's rights to administrative justice.

The Taxation Laws Second Amendment Act 2009 amends section 88 of the Income Tax Act. Before the amendment, section 88 dealt only with the payment of tax pending an appeal. The amendment to section 88 results in a taxpayer being allowed to request the commissioner to suspend the obligation to pay the amount of tax in dispute during the duration of an objection or an appeal. This is an important amendment. The granting of an extension to make payment where objection is lodged is now formally subject to the exercise of the Commissioner's discretion.

In terms of the amendment, the Commissioner may request a taxpayer to provide information regarding the taxpayers' financial position or to update previously provided information. This is presumably to allow the Commissioner to apply his mind as to the risk of non-payment when making a decision to extend payment terms, or to determine if the payment would cause serious hardship to the taxpayer which may not be reversed should the taxpayer succeed with the objection or appeal.

Furthermore, the section now includes a list of eight factors which the Commissioner should consider when making the decision to extend payment terms.
The factors include:

• The compliance history of the taxpayer;
• Whether the taxpayer is able to provide security for the payment of the amount involved; and
• Whether fraud is involved in the origin of the dispute.

This list allows the taxpayer to compile a considered and comprehensive written request for a suspension of payment to the Commissioner pending the outcome of an objection or appeal.

The amendment also grants the Commissioner the right to revoke the decision to suspend payment with immediate effect in certain specific instances, such as if there is a material change in the circumstances on which the suspension of payment was granted or if the taxpayer is considered to be using dilatory tactics in conducting the objection or appeal.

Lastly, the section provides that where, for instance, the objection or appeal lodged by the taxpayer is successful or the Commissioner concedes an appeal to the tax court, and the taxpayer has as a result paid too much tax, interest is payable by the Commissioner to the taxpayer on such excess. In this situation, the applicable interest rate will be the prescribed rate and interest will be calculated from the date that the relevant payment was received by the Commissioner. An example of where this may happen is if the Commissioner does not agree to suspend payment of taxes due in terms of the assessment and the objection lodged by the taxpayer is successful.

These amendments will to come into operation on a date to be determined by the Minister by Notice in the Gazette. In the interim period, taxpayers will still have to rely on the existing practice of the Commissioner when requesting suspension of payment for the duration of an objection.

*Christopher Green is from Deloitte

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responses to this article

This is ...welll, sooo unexpectedly reasonable and democratic Let us celebrate an unusual twist in the ANC hegemony. by Free the REst on December 30 2009, 14:45 Find this comment inappropriate? Report it

Helpful but.. How do we get in contact with the commissioner? In my experience, every eMail or letter I send to SARS just never elicits a response by Renter on December 30 2009, 16:38 Find this comment inappropriate? Report it

Thank you Great pce of infor Chris , thank for this by Juju on December 31 2009, 11:14 Find this comment inappropriate? Report it

Assessment repayments I received a repayment order of R11,000.00 after my assessment was done end of November 2009 .SARS insisted that I pay before end of December 2009.When I callled them to lodge a query I was told that I can repay the amonut strictly over three months . .more only!....Is there any other way one can repay over an extended period? . .less by Winston Papane on January 11 2010, 16:09 Find this comment inappropriate? Report it

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