With the 2020 tax filing season in full swing, many taxpayers will likely engage in dispute proceedings as SARS issues their income tax assessments. This will particularly be the case where errors are contained on the so-called “auto-assessments” (which in itself is a misnomer). But how should the dispute process begin?
When an assessment is issued by SARS, they (usually) provide a short description of the reason for the assessment. Importantly, the SARS official is often restricted in what he/she can include on such an assessment as a reason (such as a selection from a “drop-down” list). For example, for additional VAT assessments (VAT217), taxpayers often find the following:
- “Burden of proof not discharged”;
- “Invalid tax invoice”; or
- “Not a valid input claim”.
Such descriptions are not a clear indication of the relevant matter, particularly if it is evident that the alleged transgression is not present. The risk of such an unclear description is that a taxpayer essentially only has one opportunity to state its grounds of objection. This could seriously jeopardise a taxpayer’s case, since taxpayers may not appeal on a ground that constitutes a new objection against a disputed assessment. If a valid ground of objection is therefore not addressed in the objection itself, taxpayers may lose the opportunity to object to a specific ground.
In the example above – the assessment may indicate that the reason for the assessment is that there is not a valid tax invoice, but in fact, the issue relates to the time of supply, or the value of supply for VAT purposes – clearly not remotely related to the reason provided for on the assessment.
In terms of Rule 6 of the dispute resolution rules, a taxpayer who is aggrieved by an assessment may request SARS to provide reasons for an assessment. The reasons provided by SARS must enable the taxpayer to formulate its grounds of objection. The reasons for any administrative action must include the reasons for the conclusion reached, and it is not enough to merely state the statutory grounds on which the decision is based or repeat the wording of the legislation. The decision-maker should furthermore set out his understanding of the relevant law.
Requests for reasons for an assessment can be made on the eFiling system under the dispute section, as part of a taxpayer’s profile. When there is even the slightest uncertainty as to the reasons for an assessment, taxpayers are strongly advised to request reasons to ensure that they provide themselves with the best possible chance of success in a dispute.
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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).