For the purposes of this Part ‘settle’ means to resolve a dispute by compromising any disputed liability, otherwise than by way of either the Commissioner or the person concerned accepting the other party’s interpretation of the facts or the law applicable to those facts, or of both the facts and the law, and ‘settlement’ shall be construed accordingly.
[Section 77J effective on 22 December 2003]
Part C: Settlement of dispute
77J. Definitions
77K. Purpose of this Part
(1) The basic principle in law is that it is the duty of the Commissioner to assess and collect taxes, duties, levies, charges and other amounts according to the laws enacted by Parliament and not to forgo any such taxes, duties, levies, charges or other amounts properly chargeable and payable.
(2) Circumstances may, however, require that the strictness and rigidity of this basic principle be tempered where it would be to the best advantage of the state.
(3) The purpose of this Part is to prescribe the circumstances whereunder it would be inappropriate and whereunder it would be appropriate that the basic rule be tempered and for a decision to be taken to settle a dispute.
77L. Circumstances where inappropriate to settle
It will be inappropriate and not to the best advantage of the state to settle a dispute, where, in the opinion of the Commissioner-
(a) the action on the part of the person concerned which relates to the dispute, constitutes intentional tax evasion or fraud and no circumstances contemplated in section 77M exist;
(b) the settlement would be contrary to the law or a clearly established practice of the Commissioner on the matter, and no exceptional circumstances exist to justify a departure from the law or practice;
(c) it is in the public interest to have judicial clarification of the issue and the case is appropriate for this purpose;
(d) the pursuit of the matter through the courts will significantly promote compliance of the tax laws and the case is suitable for this purpose; or
(e) the person concerned has not complied with the provisions of any Act administered by the Commissioner and the Commissioner is of the opinion that the non-compliance is of a serious nature.
[Section 77L effective on 22 December 2003]
77M. Circumstances where appropriate to settle
The Commissioner may, where it will be to the best advantage of the state, settle a dispute, in whole or in part, on a basis that is fair and equitable to both the person concerned and SARS, having regard to inter alia–
(a) whether that settlement would be in the interest of good management of the tax system, overall fairness and the best use of the Commissioner’s resources;
(b) the cost of litigation in comparison to the possible benefits with reference to-
(i) the prospects of success in a court;
(ii) the prospects of collection of the amounts due; and
(iii) the costs associated with collection;
(c) whether there are any-
(i) complex factual or quantum issues in contention; or
(ii) evidentiary difficulties, which are sufficient to make the case problematic in outcome or unsuitable for resolution through the alternative dispute resolution procedures or the courts;
(d) a situation where a participant or a group of participants in a tax avoidance arrangement has accepted the Commissioner’s position in the dispute, in which case the settlement may be negotiated in an appropriate manner required to unwind existing structures and arrangements; or
(e) whether the settlement of the dispute will promote compliance of the tax laws by the person concerned or a group of taxpayers or a section of the public in a cost-effective way.
[Section 77M effective on 22 December 2003]
77N. Power to settle and conduct of officials
(1) A dispute may be settled, as contemplated in this Part, by the Commissioner personally or any official delegated by the Commissioner for that purpose.
(2) The Commissioner or the relevant delegated official must ensure that he or she does not have, or did not at any stage have, a personal, family, social, business, professional, employment or financial relationship with the person concerned.
[Section 77N effective on 22 December 2003]
77O. Procedure for settlement
(1) The person concerned should at all times disclose all relevant facts in discussions during the process of settling a dispute.
(2) Any settlement will be conditional upon full disclosure of material facts known to the person concerned at the time of settlement.
(3) All disputes settled in whole or in part, as contemplated in this Part, must be evidenced by a written agreement between the parties in the format as may be prescribed by the Commissioner and must include details on-
(a) how each particular issue was settled;
(b) relevant undertakings by the parties;
(c) treatment of that issue in future years;
(d) withdrawal of appeals; and
(e) arrangements for payment.
(4) The written agreement will represent the final agreed position between the parties and will be in full and final settlement of all the specified aspects of the dispute in question between the parties.
(5) The Commissioner must, where the dispute is not ultimately settled, explain the further rights regarding the institution of judicial proceedings to the person concerned.
(6) Subject to section 77P, the Commissioner and delegated official must adhere to the secrecy provisions with regard to the information relating to the person concerned and may not disclose the terms of any agreement to third parties unless authorised by law or by the person concerned.
(7) The Commissioner must adhere to the terms of the agreement, unless it emerges that material facts were not disclosed to it or there was fraud or misrepresentation of the facts.
(8) The Commissioner has the right to recover any outstanding amounts in full where the person concerned fails to adhere to any agreed payment arrangement.
[Section 77O effective on 22 December 2003]
77P. Register of settlements and reporting
(1) The Commissioner must-
(a) maintain a register of all disputes settled in the circumstances contained in this Part; and
(b) fully document the process in terms of which each dispute was settled, which document must be signed on behalf of the Commissioner and the person concerned.
(2) The Commissioner must on an annual basis provide to the Auditor-General and to the Minister of Finance a summary of all disputes which were settled in whole or in part during the period of 12 months covered by that summary, which must-
(a) be in such format which, subject to section 4(3E), does not disclose the identity of the person concerned, and be submitted at such time as may be agreed between the Commissioner and the Auditor-General or Minister of Finance, as the case may be; and
[Paragraph (a) substituted by section 34 of Act 16 of 2004]
(b) contain details of the number of disputes settled or part settled, the amount of revenue forgone and estimated amount of savings in costs of litigation, which must be reflected in respect of main classes of persons or sections of the public.
[Section 77P effective on 22 December 2003]
[Chapter XA inserted by section 147 of Act 45 of 2003]