The ‘pay now, argue later’ rule contained in section 164 of the Tax Administration Act, 28 of 2011, requires taxpayers to pay any tax debts due in terms of an assessment, irrespective thereof that the assessment in question may be disputed by the taxpayer. In other words – and as the name suggests – even where SARS has issued a taxpayer with an assessment in error, a taxpayer is still required to pay the tax reflected in that assessment irrespective, and will have to claim a refund for that amount only once the error has been corrected. This is obviously quite onerous to taxpayers, and may adversely affect cash flows even where a taxpayer is at no fault whatsoever, or where there is a misunderstanding of the relevant facts on SARS’ side.

Section 164 does offer a limited form of reprieve though, and taxpayers may request the suspension of payment of a tax liability pending the resolution of a dispute. The provision provides that the payment of tax may be suspended by SARS after considering the following factors:

• whether the recovery of the disputed tax will be in jeopardy or 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 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; or
• whether the taxpayer has tendered adequate security for the payment of the disputed tax and accepting it is in the interest of SARS or the fiscus.

Notwithstanding the above, SARS may deny a request for suspension of payment of tax, or revoke a decision to suspend payment, if it is satisfied that:

• after the lodging of the objection or appeal, the objection or appeal is frivolous or vexatious;
• the taxpayer is employing dilatory tactics in conducting the objection or appeal;
• on further consideration of the factors referred to above, the suspension should not have been given; or
• there is a material change in any of the factors upon which the decision to suspend payment of the amount involved was based.

What few people know is that merely by virtue of submitting an application to suspend the payment of tax, SARS is prohibited from instituting proceedings to recover the amount in dispute until it has duly considered the application to suspend payment of tax (which applications are typically considered by a designated committee within SARS). Only once such an application has been considered and denied may SARS institute recovery proceedings within 10 business days after the decision not to grant the relevant request. Therefore, suspension of payment is effectively achieved by submission of an application, and the status quo only affected once the taxpayer has been advised otherwise by SARS after it has duly considered the application and applied its mind thereto.

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)