Category: Part F – Settlement of dispute (TAA)

Section 143 (TAA) – Purpose of Part

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143.    Purpose of Part

 

(1)     A basic principle in tax law is that it is the duty of SARS to assess and collect tax according to the laws enacted by Parliament and not to forgo a tax which is properly chargeable and payable.

 

(2)     Circumstances may require that the strictness and rigidity of this basic principle be tempered, if such flexibility is to the best advantage of the State.

 

(3)     The purpose of this Part is to prescribe the circumstances in which it is appropriate for SARS to temper the basic principle and ‘settle’ a ‘dispute’.

Section 145 (TAA) – Circumstances where settlement is inappropriate

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145.    Circumstances where settlement is inappropriate

 

It is inappropriate and not to the best advantage of the State to ‘settle’ a ‘dispute’ if in the opinion of SARS-

 

(a)     no circumstances envisaged in section 146 exist and-

 

(i)      the action by the person concerned that relates to the ‘dispute’ constitutes intentional tax evasion or fraud;

 

(ii)     the ‘settlement’ would be contrary to the law or a practice generally prevailing and no exceptional circumstances exist to justify a departure from the law or practice; or

 

(iii)    the person concerned has not complied with the provisions of a tax Act and the non-compliance is of a serious nature;

 

(b)     it is in the public interest to have judicial clarification of the issue and the case is appropriate for this purpose; or

 

(c)     the pursuit of the matter through the courts will significantly promote taxpayer compliance with a tax Act and the case is suitable for this purpose.

Section 146 (TAA) – Circumstances where settlement is appropriate

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146.    Circumstances where settlement is appropriate

The Commissioner may, if it is 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 to SARS, having regard to-

(a)     whether the ‘settlement’ would be in the interest of good management of the tax system, overall fairness, and the best use of SARS’ resources;

(b)     SARS’ cost of litigation in comparison to the possible benefits with reference to the prospects of success in court;

[Paragraph (b) substituted by section 55 of Act 23 of 2015 effective on 8 January 2016]

(c)     whether there are any-

(i)      complex factual 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 in which a participant or a group of participants in a tax avoidance arrangement has accepted SARS’ 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 ‘settlement’ of the ‘dispute’ is a cost-effective way to promote compliance with a tax Act by the person concerned or a group of taxpayers.

Section 147 (TAA) – Procedure for settlement

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147.    Procedure for settlement

 

(1)     A person participating in a ‘settlement’ procedure must disclose all relevant facts during the discussion phase of the process of ‘settling’ a ‘dispute’.

 

(2)     A ‘settlement’ is conditional upon full disclosure of material facts known to the person concerned at the time of ‘settlement’.

 

(3)     A dispute ‘settled’ in whole or in part must be evidenced by an agreement in writing between the parties in the prescribed format and must include details on-

 

(a)     how each particular issue is ‘settled’;

 

(b)     relevant undertakings by the parties;

 

(c)     treatment of the issue in future years;

 

(d)     withdrawal of objections and appeals; and

 

(e)     arrangements for payment.

 

(4)     The agreement must be signed by a senior SARS official.

 

(5)     SARS must, if the ‘dispute’ is not ultimately ‘settled’, explain to the person concerned the further rights of objection and appeal.

 

(6)     The agreement and terms of a ‘settlement’ agreement must remain confidential, unless their disclosure is authorised by law or SARS and the person concerned agree otherwise.

Section 148 (TAA) – Finality of settlement agreement

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148.    Finality of settlement agreement

 

(1)     The settlement agreement represents the final agreed position between the parties and is in full and final ‘settlement’ of all or the specified aspects of the ‘dispute’ in question between the parties.

 

(2)     SARS must adhere to the terms of the agreement, unless material facts were not disclosed as required by section 147(1) or there was fraud or misrepresentation of the facts.

 

(3)     If the person concerned fails to pay the amount due pursuant to the agreement or otherwise fails to adhere to the agreement, a senior SARS official may-

 

(a)     regard the agreement as void and proceed with the matter in respect of the original disputed amount; or

 

(b)     enforce collection of the ‘settlement’ amount under the collection provisions of this Act in full and final ‘settlement’ of the ‘dispute’.