Since its introduction, the “pay now, argue later” rule relating to disputed amounts of tax has been and remains to be the subject of much controversy, and rightfully so. The basic premise is that even though you disagree with an amount of tax, once you have been assessed by SARS, the amount becomes due and your obligation to pay the tax, and SARS’ right to recover the tax, is not suspended by any objections or appeals against the assessment or pending court proceedings (i.e. pay the tax, and then dispute it).
Taxpayers do however have some remedy, in that they may request a senior SARS official to suspend the payment of the tax (or a portion), pending the outcome of a dispute against an assessment. Importantly, a taxpayer needs to dispute, or at least intend to dispute, the amount of tax allegedly due before a request to suspend the payment can be made.
In considering the request, the SARS official should consider relevant factors, including:
- whether the recovery of the disputed tax will be in jeopardy or if there will be a risk of dissipation of assets;
- the compliance history of the taxpayer with SARS;
- whether fraud is prima facie involved in the origin of the dispute;
- whether the taxpayer has tendered adequate security for the payment of the disputed tax and if accepting it is in the interest of SARS or the fiscus; and
- whether payment will result in irreparable hardship to the taxpayer not justified by the prejudice to SARS or the fiscus if the disputed tax is not paid or recovered.
Taxpayers should not look to abuse the suspension system, as SARS are well within their rights to revoke a decision to suspend payment with immediate effect, if it is satisfied that a taxpayer merely entered into the dispute process on a frivolous or vexatious basis, is employing dilatory tactics, or if there is a material change in the circumstances from when the request was granted. Furthermore, if a request has been successfully granted, but the taxpayer does not object to the assessment, does not appeal after a disallowed objection or proceeds to court, the suspension is revoked with immediate effect.
SARS will not suspend payment of an amount of tax out of own accord once the dispute process has commenced. Taxpayers will need to actively take steps to initiate the suspension, through either e-filing or a branch office visit. A request for suspension of payment is a vital part of the dispute resolution process and should be submitted as soon as possible for an assessment which a taxpayer intends to dispute. If not already along with a request for reasons, it would be good practice to submit the request at the same time as the objection.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)