Hogan Lovells Publications | October 2016

When can a taxpayer object to an assessment?

In terms of section 104(1) of the Tax Administration Act 28 of 2011 (TAA), a "taxpayer who is aggrieved by an assessment made in respect of the taxpayer may object to the assessment".

Section 104(3) goes on to say that a "taxpayer entitled to object to an assessment… must lodge an objection in the manner, under the terms, and within the period prescribed in the 'rules'". The "rules" referred to are the dispute resolution rules promulgated in terms of section 103 of the TAA (the Rules).

Many taxpayers are not aware that they may, in certain circumstances, have as many as three opportunities to lodge a valid objection against an assessment. 

There is an important distinction between what is referred to as a "valid objection" and what is referred to as a "successful objection". A "valid objection" is merely an objection that meets the requirements of Rule 7(2), which means that the South African Revenue Service (SARS) should consider the objection and either allow or disallow the objection. A "successful objection" is a valid objection that was considered by SARS and thereafter allowed (that is, the taxpayer has convinced SARS that its assessment is incorrect and SARS is then willing to withdraw or at least amend that assessment).

The different opportunities for an objection to an assessment are discussed below.

First opportunity

The Rules provide that a taxpayer who wishes to object to an assessment must deliver a notice of objection within 30 days (meaning business days) after a response from SARS to a request for reasons or, if no reasons were requested, the date of the assessment to which it is objecting.

In practice, however, taxpayers do not always adhere to this time period for a variety of reasons. For example, it is conceivable that the SARS system has an incorrect email address on record, with the result that the taxpayer does not receive notification that an assessment has been raised. It may also be that a taxpayer employs a third party (such as an external accountant) to attend to the taxpayer's tax affairs and that such third party then fails to lodge the objection timeously or at all, or that the objection lodged is not a valid objection. 

The question then is whether there is an opportunity for the taxpayer to remedy any failure to comply with the 30 business day period for filing an objection.

The 30 business day period may be extended upon application to SARS. The TAA provides that where reasonable grounds exist for the delay in lodging the objection, a senior SARS official may extend the 30 business day period by a maximum of a further 21 business days (a total of 51 business days). However, where there are "exceptional circumstances which gave rise to the delay", a senior SARS official may extend the 30 business days by a further period which exceeds 21 business days (that is, a total of more than 51 business days).

In the matter of ABC (Pty) Ltd v The Commissioner for the SA Revenue Service (ITC Case Number: 0038/2015) (ABC Case), the tax court had to consider whether the taxpayer had discharged the onus of proving that exceptional circumstances existed for an extension of the period allowed for the taxpayer to object to an assessment in terms of the TAA. The court held "exceptional circumstances" to mean that unusual facts must be proven that have a causal connection to the delay which resulted. It is usually also required that the cause of the taxpayer's delay in objecting to the assessment should have been out of the taxpayer's control. The judgment in the ABC Case is clear that the requirement for "exceptional circumstances" will not have been met, if the delay in lodging the objection is due to the taxpayer’s delay in obtaining proper legal advice.

Interpretation Note 15 (Issue 4) (IN 15) also provides guidance on the factors that a senior SARS official must take into account in determining whether to extend the period for the lodging of an objection. IN 15 states that "exceptional circumstances" is not defined for the purposes of the TAA and thus must be assigned its ordinary grammatical meaning. "Exceptional circumstances" is generally defined as "unusual; not typical" and the circumstances must therefore be of a nature that they would be considered as being something out of the ordinary and of an unusual nature. Additionally, the circumstances concerned must arise out of the particular case.

An objection to SARS's decision on whether or not to allow an extension of the period for the lodging of an objection may also be possible, but is beyond the scope of this article.

Second opportunity

If a taxpayer delivers an objection that does not meet the requirements of Rule 7(2), SARS may regard that objection as invalid and must, in certain circumstances, notify the taxpayer that its objection is not a valid objection and state the ground for invalidity in such notification, within 30 business days of SARS's receipt of the invalid objection. This notice is called a "Notice of Invalid Objection".

A taxpayer who receives a Notice of Invalid Objection has 20 business days after receipt of that notice to submit a new, further objection. It is, however, very possible that by the time that the taxpayer receives the Notice of Invalid Objection, the original 30 business day period after the taxpayer received SARS's response to the request for reasons or after the assessment, as the case may be, would have run out. The Rules specifically state that a taxpayer who receives a Notice of Invalid Objection does not have to apply for an extension of the 30 business day time period in terms of section 104(4) of the TAA.

Third opportunity

The Rules further state that where, within the 20 day period as contemplated in a Notice of Invalid Objection, a taxpayer submits a new objection that again fails to comply with the requirements of a valid objection, that taxpayer may still submit a further (the third) objection, but only if the taxpayer also makes an application to a senior SARS official for the right to do so.

In order to ensure that taxpayers make use of the various opportunities that are available for the lodging of an objection to an assessment or other SARS decision, it is important for taxpayers to seek professional legal advice to ensure that they understand their rights in terms of the TAA. 

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