In terms of the 'pay now and argue later principle' taxpayers are obliged to pay the South African Revenue Service any taxes due; albeit any pending court decisions or objections against any assessments.

This principle has been challenged on constitutional grounds but the Constitutional Court in Metcash Trading Ltd v C: SARS affirmed its validity. The Constitutional Court held that the pay now and argue later rule is not unfair and its limitations are justifiable in terms of section 36 of the Constitution. In other words, not paying the full

Pursuant to the Metcash Trading judgement in the year 2000, sections 13(1) and 38(1) of the Taxation Laws Second Amendment Act of 2009 substituted section 88 of the Income Tax Act and section 36 of the Value Added Tax Act respectively. The Minister of Finance announced that both sections would come into operation on 1 February 2011.

Both sections deal with the payment of tax pending objection or appeal. Specifically that an obligation to pay tax is not suspended as a result of an objection or appeal. Furthermore, a taxpayer may request the Commissioner to suspend the taxpayer's obligation to pay tax where the liability for tax is disputed; until the matter has been resolved.

Also, the amendments provide the Commissioner with a guideline for deciding on whether a taxpayer's application to suspend their tax obligation should be approved.

The Commissioner is required to consider amongst other things:

  • the taxpayer's compliance history;
  • the amount of tax involved;
  • the taxpayer's ability to provide security; and
  • whether there is fraud involved.

The South African Revenue Service issued a media statement on 14 February 2011 indicating that the relevant amendments make it clear that disputed tax debts will still be due and they provide guidance on the factors that are considered by the Commissioner in deciding on whether to suspend an obligation to pay tax on the part of the tax payer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.