Sars disputes – receiving an assessment is not the end of the road

July 1st, 2021

Many taxpayers have now heeded the South African Revenue Service’s (Sars’) call to submit their 2020 tax returns, and some have received automatic assessments as a part of Sars’ new initiative to collect from those taxpayers who previously refrained from submitting their returns. The ensuing assessments issued by Sars may leave some of these taxpayers aggrieved.

Although some taxpayers might think that this is the end of the road and the assessed amount may not be altered or disputed where it is merited, this notion cannot be further from the truth. In order to understand the taxpayer’s specific recourse, we first need to look at the various options available for an aggrieved taxpayer.

The pre-dispute phase

It is not always necessary for a taxpayer to immediately dispute an assessment issued by Sars as there is a difference between an assessment which is the subject of a substantive dispute and just an error in assessment. There are many different alternatives that may be followed by a taxpayer in order to obtain a faster, less time-consuming and in some instances cost effective result. Some of these pre-dispute options may even equip the taxpayer with some extra ammunition to put in their arsenal when finally pulling the trigger on the dispute.

  • Request for correction (RFC)

Section 93 of the Tax Administration Act 28 of 2011 (the Act), makes provision for a taxpayer to request Sars to correct a previous return or declaration submitted. An RFC is available to various tax types namely, income tax, value-added tax (VAT) or Pay-As-You-Earn (PAYE). This remedy is only available to taxpayers where the specific return or declaration has not been selected for verification or audit.

The purpose of this provision is fundamentally to enable Sars to alter an assessment to rectify processing errors and return completion errors where Sars is satisfied that there is an error in the assessment because of an undisputed error by Sars or the taxpayer in a return. The RFC is a quick turnaround mechanism available to taxpayers where they have made an error in their returns or declarations for example, by submitting their returns with an incorrect source code or incorrect amounts.

  • Request for remission of penalties or interest

Where the tax itself is not disputed, a taxpayer may, in some instances have missed a deadline or under declared certain income or VAT, which results in penalties and/or interest being levied. These are instances where the taxpayer has not adhered to the provisions of the Act and, as such, Sars penalises the taxpayer for non-compliance. A taxpayer does, however, have some recourse where they can justify the non-compliance.

While there are many different types of penalties and related interest charges that Sars can levy, for the purpose of this article, I will focus on non-compliance penalties and related interest charges. These penalties may be made up of fixed amount penalties, as well as percentage-based penalties. A non-compliance penalty levied depends on the type of non-compliance. Examples of these penalties and/or interest are –

– late payment penalties for VAT, PAYE, Unemployment Insurance Fund (UIF) and Skills Development Levies (SDL);

– late payment penalties on provisional tax;

– late payment interest on provisional tax; and

– late payment interest on VAT and PAYE (not UIF or SDL).

  • Request for reasons (RFR)

When Sars has issued an assessment and where the grounds for the assessment are not provided, or the grounds provided for the assessment are not sufficient to enable the taxpayer to understand the basis of the decision to formulate an objection, a taxpayer may request reasons for the assessment. It should be noted that Sars is not required to provide reasons for each, and every assessment issued, but a taxpayer may request reasons only for an adverse decision or assessment both under r 6 of the rules promulgated under s 103 of the Act and s 5 of Promotion of Administrative Justice Act 3 of 2000 (PAJA).

The Supreme Court of Appeal (SCA) in Commissioner for the South African Revenue Services v Pretoria East Motors (Pty) Ltd [2014] 3 All SA 266 (SCA), was of the view that Sars must clearly state the grounds on which it bases its assessments and make clear to the taxpayer what it is disputing, so that the taxpayer knows what is required from it to discharge the burden of proof:

‘The raising of an additional assessment must be based on proper grounds for believing that, in the case of VAT, there has been an under declaration of supplies and hence of output tax, or an unjustified deduction of input tax. In the case of income tax, it must be based on proper grounds for believing that there is undeclared income or a claim for a deduction or allowance that is unjustified.

It is also the only basis upon which it can, as it must, provide grounds for raising the assessment to which the taxpayer must then respond by demonstrating that the assessment is wrong’.

The aim for requesting reasons is to place the taxpayer in a position to properly understand the reasoning behind Sars’ decision to issue the assessment and the basis thereof, which will in turn enable the taxpayer to formulate the objection. Furthermore, the RFR will bind Sars to the basis for their assessment, which will preclude it from later raising new grounds for the assessment.

Sars dispute phase

A substantive dispute means that there is a disagreement on the interpretation of either the relevant facts involved or the law applicable thereto, or of both the facts and the law, which arise due to the assessment. Where a taxpayer is aggrieved by an assessment raised, outcome of verification or audit, or a decision taken by Sars, there are three main variants to challenge Sars. These mechanisms should only be perused on exhaustion of the pre-dispute phase or where the pre-dispute phase is not applicable.

  • Objections

A taxpayer has the right to object to an assessment raised by Sars where the pre-dispute phase mechanisms mentioned above were not allowed by Sars such as the taxpayer’s request for remission of such penalty/interest. An objection in terms of r 7 must be submitted within 30 business days after the date of the assessment or Sars’ decision.

The crux of an objection is to submit all of the relevant grounds of the objection the first-time round. The grounds will be a mirror of the reasons why the assessment issued by Sars does not reflect the correct tax stance taken by the taxpayer. The grounds must address the part, or the amount disputed, the specific grounds raised by Sars that are disputed and any documentation that the taxpayer has at its disposal to dispute the grounds raised by Sars.

When the objection is submitted to Sars and then considered, Sars will issue that taxpayer, within 60 business days, an allowance or disallowance letter which will either allow the objection, or partially allow, or disallow.

  • Tax appeals

Where Sars has decided to partially allow or disallow a taxpayer’s objection, the taxpayer is able to submit an appeal to the decision, should the taxpayer disagree with the decision taken.

When submitting an appeal, the taxpayer may appeal to either the Tax Board established in terms of s 108 of the Act, or the Tax Court established in terms of s 116 of the Act. A taxpayer must always consider whether they are of the view that the matter is appropriate for alternative dispute resolution (ADR) prior to lodging the appeal. Should the taxpayer be of the view that the matter should be considered for ADR, Sars must first consider dispute resolution process prior to proceeding with submitting its statement of grounds.

Should Sars not deem the matter appropriate for ADR the matter may be directed to the Tax Board, which hears tax appeals involving a disputed amount not exceeding of R 1 million. Both the taxpayer and Sars must agree that the matter be heard by the Tax Board. The decisions made by the Tax Board are binding between the parties, not appealable, does not have precedent value and may be heard on a de novo basis in the Tax Court.

Where the Tax Board is not the appropriate platform, the matter will be heard in the Tax Court, which deals with tax appeals lodged in terms of s 103 of the Act; and may also hear other interlocutory applications pertaining to the appeal. In the Tax Court there is no restriction on the monetary jurisdiction and any matter may be ventilated herein. The decisions of Tax Courts are not binding on other courts, but hold persuasive value in other Tax Courts, the High Courts and the SCA. The judgments are, however, only binding between the parties.

  • Other courts

If taxpayers so wish they may approach the High Court for review applications or appeals from the Tax Court. Where the taxpayer is still aggrieved and wishes to pursue the matter even further, they may appeal to the SCA and where it is merited to the Constitutional Court.


With all the possible remedies available to the taxpayer, it is clear that where a taxpayer receives an assessment that does not reflect the correct tax position, a four-eyes principle can be taken to obtain the correct result, by either utilising the pre-dispute or dispute mechanisms.

Ruan Botha BA LAW LLB (UP) GTP (SAIT) CBP (C4) CAFCA (ACAMS) is a tax practitioner at Tax Africa in Pretoria.

This article was first published in De Rebus in 2021 (July) DR 8.


South African COVID-19 Corona Virus. Access the latest information on: