Author: admin_kmos

Section 204 (TAA) – Procedure for compromise of tax debt

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204.    Procedure for compromise of tax debt

 

(1)     To ‘compromise’ a tax debt, a senior SARS official and the ‘debtor’ must sign an agreement setting out-

 

(a)     the amount payable by the ‘debtor’ in full satisfaction of the debt;

 

(b)     the undertaking by SARS not to pursue recovery of the balance of the tax debt; and

 

(c)     the conditions subject to which the tax debt is ‘compromised’ by SARS.

 

(2)     The conditions referred to in subsection (1)(c) may include a requirement that the ‘debtor’ must-

 

(a)     comply with subsequent obligations imposed in terms of a tax Act;

 

(b)     pay the tax debt in the manner prescribed by SARS; or

 

(c)     give up specified existing or future tax benefits, such as carryovers of losses, deductions, credits and rebates.

Section 203 (TAA) – Circumstances where not appropriate to compromise tax debt

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203.    Circumstances where not appropriate to compromise tax debt

 

A senior SARS official may not ‘compromise’ any amount of a tax debt under section 200 if-

 

(a)     the ‘debtor’ was a party to an agreement with SARS to ‘compromise’ an amount of tax debt within the period of three years immediately before the request for the ‘compromise’;

 

(b)     the tax affairs of the ‘debtor’ (other than the outstanding tax debt) are not up to date;

 

(c)     another creditor has communicated its intention to initiate or has initiated liquidation or sequestration proceedings;

 

(d)     the ‘compromise’ will prejudice other creditors (unless the affected creditors consent to the ‘compromise’) or if other creditors will be placed in a position of advantage relative to SARS;

 

(e)     it may adversely affect broader taxpayer compliance; or

 

(f)      the ‘debtor’ is a company or a trust and SARS has not first explored action against or recovery from the personal assets of the persons who may be liable for the debt under Part D of Chapter 11.

Section 202 (TAA) – Consideration of request to compromise tax debt

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202.    Consideration of request to compromise tax debt

 

(1)     In considering a request for a ‘compromise’, a senior SARS official must have regard to the extent that the ‘compromise’ may result in-

 

(a)     savings in the costs of collection;

 

(b)     collection at an earlier date than would otherwise be the case without the ‘compromise’;

 

(c)     collection of a greater amount than would otherwise have been recovered; or

 

(d)     the abandonment by the ‘debtor’ of some claim or right, which has a monetary value, arising under a tax Act, including existing or future tax benefits, such as carryovers of losses, deductions, credits and rebates.

 

(2)     In determining the position without the ‘compromise’, a senior SARS official must have regard to-

 

(a)     the value of the ‘debtor’s’ present assets;

 

(b)     future prospects of the ‘debtor’, including arrangements which have been implemented or are proposed which may have the effect of diverting income or assets that may otherwise accrue to or be acquired by the ‘debtor’ or a connected person in relation to the ‘debtor’;

 

(c)     past transactions of the ‘debtor’; and

 

(d)     the position of any connected person in relation to the ‘debtor’.

Section 201 (TAA) – Request by debtor for compromise of tax debt

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201.    Request by debtor for compromise of tax debt

 

(1)     A request by a ‘debtor’ for a tax debt to be ‘compromised’ must be signed by the ‘debtor’ and be supported by a detailed statement setting out-

 

(a)     the assets and liabilities of the ‘debtor’ reflecting their current fair market value;

 

(b)     the amounts received by or accrued to, and expenditure incurred by, the ‘debtor’ during the 12 months immediately preceding the request;

 

(c)     the assets which have been disposed of in the preceding three years, or such longer period as a senior SARS official deems appropriate, together with their value, the consideration received or accrued, the identity of the person who acquired the assets and the relationship between the ‘debtor’ and the person who acquired the assets, if any;

 

(d)     the ‘debtor’s’ future interests in any assets, whether certain or contingent or subject to the exercise of a discretionary power by another person;

 

(e)     the assets over which the ‘debtor’, either alone or with other persons, has a direct or indirect power of appointment or disposal, whether as trustee or otherwise;

 

(f)      details of any connected person in relation to that ‘debtor’;

 

(g)     the ‘debtor’s’ present sources and level of income and the anticipated sources and level of income for the next three years, with an outline of the ‘debtor’s’ financial plans for the future; and

 

(h)     the ‘debtor’s’ reasons for seeking a ‘compromise’.

 

(2)     The request must be accompanied by the evidence supporting the ‘debtor’s’ claims for not being able to make payment of the full amount of the tax debt.

 

(3)     The ‘debtor’ must warrant that the information provided in the application is accurate and complete.

 

(4)     A senior SARS official may require that the application be supplemented by such further information as may be required.

Section 200 (TAA) – Compromise of tax debt

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200.    Compromise of tax debt

 

A senior SARS official may authorise the ‘compromise’ of a portion of a tax debt upon request by a ‘debtor’, which complies with the requirements of section 201, if-

 

(a)     the purpose of the ‘compromise’ is to secure the highest net return from the recovery of the tax debt; and

 

(b)     the ‘compromise’ is consistent with considerations of good management of the tax system and administrative efficiency.

Section 199 (TAA) – Procedure for writing off tax debt

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199.    Procedure for writing off tax debt

 

(1)     Before deciding to ‘write off’ a tax debt, a senior SARS official must-

 

(a)     determine whether there are any other tax debts owing to SARS by the ‘debtor’;

 

(b)     reconcile amounts owed by and to the ‘debtor’, including penalties, interest and costs;

 

(c)     obtain a breakdown of the tax debt and the periods to which the outstanding amounts relate; and

 

(d)     document the history of the recovery process and the reasons for deciding to ‘write off’ the tax debt.

 

(2)     In deciding whether to support a business rescue plan referred to in Part D of Chapter 6 of the ‘Companies Act’ or ‘compromise’ made to creditors under section 155 of the ‘Companies Act’ a senior SARS official must, in addition to considering the information as referred to in section 150 or 155 of that Act, take into account the information and aspects covered in the provisions of sections 200, 201(1), 202 and 203 with the necessary changes.

Section 272 (TAA) – Short title and commencement

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272.    Short title and commencement

(1)     This Act is called the Tax Administration Act, 2011, and comes into operation on a date to be determined by the President by proclamation in the Gazette.

(2)     The President may determine different dates for different provisions of this Act to come into operation and for the purposes of Chapter 12 and the provisions relating to interest in Schedule 1, the Minister may determine by public notice the date on which they come into operation in respect of a tax type.

[Subsection (2) substituted by section 30 of Act 13 of 2017 effective on 18 December 2017]

(3)     Subparagraphs (g), (h), (i) and (j) of paragraph 60 of Schedule 1 come into operation on the date on which Part VIII of Chapter II of the Income Tax Act, 1962, comes into operation.

(4)     Paragraph 78 of Schedule 1 is deemed to have come into operation on 1 January 2011 and applies in respect of premiums incurred on or after that date.

(5)     Paragraph 184 of Schedule 1 is deemed to have come into operation on 1 March 2010 and applies in respect of a mineral resource transferred on or after that date.

Section 270 (TAA) – Application of Act to prior or continuing action

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270.    Application of Act to prior or continuing action

(1)     Subject to this Chapter, this Act applies to an act, omission or proceeding taken, occurring or instituted before the commencement date of this Act, but without prejudice to the action taken or proceedings conducted before the commencement date of the comparable provisions of this Act.

(2)     The following actions or proceedings taken or instituted under the provisions of a tax Act repealed by this Act but not completed by the commencement date of the comparable provisions of this Act, must be continued and concluded under the provisions of this Act as if taken or instituted under this Act:

(a)     a decision by a SARS official in terms of a statutory power to do so;

(b)     a request by a person for the withdrawal or amendment of a decision or notice by SARS, registration for tax, form of record keeping, information, taxpayer record, advance ruling, refund, reduced assessment, suspension of a disputed tax debt, deferral, write off, compromise or waiver of a tax debt and the remittance of interest or a penalty;

(c)     an inspection, verification, request for information, audit, criminal investigation, inquiry or search and seizure;

(d)     an objection, appeal to the tax board, tax court or higher court, alternative dispute resolution, settlement discussions or other related High Court application;

(e)     suspension of a disputed tax debt;

(f)      a deferment, write off or compromise of a tax debt; or

(g)     recovery of a tax debt, including the appointment of an agent to satisfy a tax debt, execution of a civil judgment or sequestration, liquidation or winding-up instituted by SARS or any other related court application.

(3)     A form, notice, demand or other document issued, given or received by a person or SARS under the provisions of a tax Act repealed by this Act, must be regarded as issued, given or received in terms of any comparable provision of this Act, as from the date that the form, notice, demand or other document was issued, given or received under the repealed provisions.

(4)     A record kept or retained by a person as required under the provisions of a tax Act repealed by this Act, must be regarded as kept or retained as required under the comparable provisions of this Act from the date that record was kept or retained under the repealed provisions of the tax Act.

(5)     If the period for an application, objection, appeal or prosecution had expired before the commencement date of this Act, nothing in this Act may be construed as enabling the application, objection, appeal or prosecution to be made under this Act by reason only of the fact that a longer period is specified in this Act.

(6)     Additional tax, penalty or interest may be imposed or levied as if the repeal of the legislation in Schedule 1 had not been effected and may be assessed and recovered under this Act, if-

(a)     additional tax, penalty or interest which but for the repeal would have been capable of being imposed, levied, assessed or recovered by the commencement date of this Act, has not been imposed, levied, assessed or recovered by the commencement date of this Act; or

(b)     an understatement penalty, administrative non-compliance penalty or interest under this Act cannot be imposed, levied, assessed or recovered in respect of an understatement as defined in section 221, non-compliance or failure to pay that occurred before the commencement date of this Act.

(6A)  For the purposes of subsection (6), “capable of being imposed” means that the verification, audit or investigation necessary to determine the additional tax, penalty or interest had been completed before the commencement date of this Act.

(6B)  If a return was due by the commencement date of this Act, the requirement under section 223(3)(b)(i) is regarded as having been met for the purposes of remittance of a substantial understatement penalty.

(6C)  A person who made a valid voluntary disclosure before the commencement date of this Act, qualifies for the relief referred to in section 229(b) if the audit or investigation of the person’s affairs has commenced before but only concluded after commencement date of this Act and the requirements of Part B of Chapter 16 have been met.

(6D)  If an understatement penalty is imposed as a result of an understatement, as defined in section 221, made in a return submitted before the commencement date of this Act, a taxpayer may object against the penalty under Chapter 9 (whether or not the taxpayer has previously objected against the assessment imposing the penalty) and if the return was required under-

(a)     the Income Tax Act, excluding returns required under the Fourth Schedule to that Act, a senior SARS official must, in considering the objection, reduce the penalty in whole or in part if satisfied that there were extenuating circumstances; or

(b)     the Value-Added Tax Act or the Fourth Schedule to the Income Tax Act, a senior SARS official must reduce the penalty in whole if the penalty was imposed under circumstances other than the circumstances referred to in item (vi) of the understatement penalty table in section 223(1).

[Paragraph (b) substituted by section 65 of Act 44 of 2014 and section 64 of Act 16 of 2016 effective on 19 January 2017]

(6E)   Until the date on which the whole of Chapter 12 and of Schedule 1 to this Act come into operation in respect of a tax type-

(a)     the accrual and payment of interest on an understatement penalty imposed under section 222 must be calculated in the manner that interest upon an additional tax penalty imposed under a tax Act, prior to the repeal of the penalty by this Act, was calculated in terms of the interest provisions of the relevant tax Act; and

(b)     the effective date referred to in section 187(3)(f) for tax understated before 1 October 2012 must be regarded as the commencement date of this Act.

[Subsection (6E) inserted by section 74 of Act 23 of 2015 and substituted by section 29 of Act 13 of 2017 effective on 18 December 2017]

(6F)   From the date on which the whole of Chapter 12 and of Schedule 1 to this Act come into operation, the accrual and payment of interest on an understatement penalty imposed under section 222 must be calculated in the manner prescribed by Chapter 12 in respect of an understatement penalty imposed after such date.

[Subsection (6F) inserted by section 74 of Act 23 of 2015 effective on 1 Octoober 2012]

(7)     Interest arising before the commencement date of this Act must be-

(a)     calculated in accordance with the relevant tax Act until the commencement date; and

(b)     regarded as interest payable under this Act from the commencement date of the comparable provisions of this Act.