The South African Income Service (SARS) has usually been sluggish to refund quantities of extra funds as a consequence of taxpayers, with delayed refunds one of many prime complaints that taxpayers have in regards to the income service.

Regulation agency ENSAfrica stated that the severe delays usually skilled by taxpayers on this regard have been the topic of a systemic investigation by the Tax Ombud, too.

However it appears that evidently this irritating apply will persist for so long as the present stress on the fiscus prevails. Luckily, taxpayers are usually not with out authorized recourse when a refund is due by SARS.

Under the agency outlined 5 vital concerns to bear in mind when SARS owes a refund.

SARS “should” pay a refund when a taxpayer is entitled to it

Part 190(1) of the Tax Administration Act (TAA) states that SARS should pay a refund, along with curiosity on that quantity, to any taxpayer who’s entitled to it.

This provision extends to refunds of: revenue tax, value-added tax (VAT), mineral royalties, or pay-as-you-earn.

Imposing this proper, as a primary step, would usually require the taxpayer to request a refund from SARS in respect of the quantities which might be due, ENSAfrica stated.

“That being stated, the correct afforded to taxpayers is topic to sure additional provisions of part 190,” the agency stated.

SARS has the correct to conduct an audit earlier than paying a refund

Part 190(2) incorporates a possible hurdle for taxpayers ready on a refund to be paid.

This part supplies SARS shouldn’t be required to pay a refund till such time as a “verification, inspection or audit” in respect of that refund has been finalised when it comes to Chapter 5 of the TAA.

“In different phrases, the sub-section preserves SARS’s proper to launch and finalise an audit of the refund  – versus, for instance, a common VAT or mineral royalty audit – earlier than paying a cent to the taxpayer.

“So, arguably, SARS can not use the defence that it’s busy with a common tax audit and due to this fact refuse to make the refund. Nonetheless, every case should be thought of on the related info at hand.”

The current case of Rappa Assets (Pty) Ltd v C:SARS illustrates the potential complications of this part, ENS stated,

“On this matter, Rappa alleged that it was owed a considerable quantity of refunds. Alternatively, SARS argued that the quantities had been nonetheless beneath audit and that no refunds could possibly be paid.

“However, by the point of the judgment, the audit in respect of the March 2020 VAT return had not but been accomplished.”

The Excessive Courtroom cautioned that “SARS can’t be allowed an indefinite time to finish an audit” and, accordingly, the courtroom directed SARS to conclude the audits by 11 December 2020, and by no later.

The take-away is taxpayer who’s subjected to a protracted audit might strategy the courtroom, in precept, for an order directing SARS to conclude its audit by a sure date. The courtroom will, after all, think about varied components earlier than granting such order, ENS stated.

SARS should pay a refund if the taxpayer tenders safety

Part 190(three) supplies that SARS should pay a refund – even earlier than the finalisation of an audit – if the taxpayer has tendered safety “in a kind acceptable to a Senior SARS official”.

Within the Rappa case, the courtroom confirmed taxpayer shouldn’t be required to tender safety for the entire quantity of the refund.

If the taxpayer, as an example, supplies safety for 50% of the refund, then SARS should concomitantly pay 50% of that refund.

A refund can prescribe

It’s vital to needless to say part 190(four) incorporates prescription provisions. This part supplies refund that stems from an misguided overpayment of taxes shall be forfeited to the State, except a refund is made:

  • Within the case of an evaluation by SARS (equivalent to revenue tax), inside three years of sure dates; and
  • Within the case of a self-assessment (equivalent to VAT and mineral royalties), inside 5 years from sure dates.

Accordingly, taxpayers who’re owed refunds ought to make sure that they implement their rights with none delay. Crucially, a refund that has prescribed won’t be recoverable from SARS, ENS stated.

Excellent taxes (and returns) may impression on the cost of refunds

Lastly, taxpayers should take be aware that, when it comes to part 191 of the TAA, SARS might allocate a refund towards sure different excellent taxes.

For example, SARS might set-off a VAT refund towards excellent revenue tax. Fairly often, the results of this provision is that SARS won’t pay any quantity of a refund if there are excellent returns recorded on the taxpayer’s account.

“Taxpayers ought to have interaction with SARS in respect of any refunds due. Nonetheless, if they’re left at midnight or subjected to bureaucratic stonewalling, taxpayers won’t be with none recourse; a taxpayer who’s aggrieved by SARS’ inaction might, in precept, strategy the Excessive Courtroom to compel SARS to pay the refunds which might be due.

“In reaching a choice, the courtroom will invariably think about the entire provisions mentioned above and the relevant factual matrix.”

Commentary by Andries Myburgh and Simon Weber of ENSAfrica.

Learn: Why wealthy South Africans are much less optimistic about their funds heading into 2021

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