South Africa: Reciprocal Assistance In The Collection Of Taxes

Last Updated: 4 July 2012
Article by Beric Croome and Jerome Brink

Most Read Contributor in South Africa, September 2016

In the case Attorney-General of Canada v RJ Reynolds Tobacco Holdings Inc and Others heard in the US Supreme Court of Appeals for Second Circuit, 12 October 2001, 268 F 3d 103, the 'revenue-rule' principle was confirmed. The 'revenue-rule' stems from the international law principle of sovereignty which advocates that a government has the ultimate judicial authority over the subjects in its land and that foreign states should be in no position to obstruct the country from enforcing its domestic laws. Similarly, the 'revenue-rule' principle suggests that the judicial authority of one country will not enforce the revenue laws of a foreign country.

In COT v MacFarland, 27 SATC 15, it was held that under the common law, South African authorities or the judiciary will not enforce any claim by a foreign state for taxes due and payable.

However, the effect of modern times and the rapid globalisation of the world has forced governments to rethink their strategies with regard to reciprocal collection of taxes, in order to ensure that any loss to their fiscus is minimised.  This new thinking is reflected in the preamble to the OECD Convention on Mutual Administrative Assistance in Tax Matters, which states:

"the development of international movement of persons, capital, goods and services – although highly beneficial in itself – has increased the possibilities of tax avoidance and evasion and therefore requires increasing co – operation among tax authorities"

There has been a growing need in international co-operation between states to combat tax avoidance and tax evasion.

Mutual assistance in the recovery of collection of taxes has therefore seen extensive development internationally, which has been reflected in the current position of South Africa. The OECD Model Tax Convention (MTC) has, since 2003, provided for 'assistance in the collection of taxes' in Article 27. This amended article encourages countries to agree on either a comprehensive assistance article or a narrower one. An agreement of this nature between states is aimed at ensuring that any instances of a 'revenue-claim' would be sufficiently covered and provided for.

From an analysis of the Double Taxation Agreements entered into by South Africa with foreign countries it becomes apparent that African countries lead the way in concluding agreements containing 'assistance in collection of taxes' articles. Interestingly, almost all of our near neighbours have entered into such arrangements with South Africa, including Botswana, Namibia, Swaziland, Lesotho and Mozambique. There have also been further arrangements concluded in Africa with Uganda, Tanzania, Ghana and Algeria. In terms of the rest of the world notable inclusions are Australia, the Netherlands and recently the United Kingdom. On the other hand a notable exclusion is the United States.

However, although recent developments have been a very positive step towards ensuring greater international co–operation in collection of taxes, several shortcomings have become apparent. Firstly, articles contained in some of the tax treaties with foreign countries, in accordance with recommendations in the OECD MTC, have taken a limited form. Where a more limited article is agreed upon, several important issues are not addressed; one being which state covers the costs incurred in the collection of tax claims. This sort of predicament could be a reason for the failure in assistance between countries to get off the ground, as any collecting state would be hesitant to incur costs without a guarantee of recovery. Further, limitations to a request to assist in collection of taxes exist where such a request may be refused by the collecting state. These include:

  • where enforcement of the request would result in a contravention of the laws of either country;
  • where it would also be contrary to public policy, ;
  • where the requesting state has not exhausted all domestic remedies in the collection of tax; and
  • where the benefits of collection to the requesting state outweigh the administrative burden placed on the requested state.

Notably, although these are reasons for the request for assistance to be unsuccessful, they also, on the other hand provide the taxpayer with several legitimate avenues to escape liability.

In light of the importance of the domestic law of the requesting state when trying to obtain assistance in the collection of taxes, it is prudent to examine the South African legislation dealing with cross–border collection of taxes. There are several steps and requirements that need to be met in order for a request for assistance in collection of tax to be granted. Section 93, read with section 108 of the Income Tax Act, No 58 of 1962, ('the Act') sets out the procedure and conditions that need to be met and can be summarised as follows:

  • The country requesting assistance must have entered into a double tax agreement with South Africa in accordance with section 108 of the Act.
  • The South African Revenue Service ('SARS') can request the foreign taxpayer by notice in writing to admit liability (SARS is, however, under no obligation to do so).
  • Where the foreign person admits liability or either fails to respond to the notice, or denies liability but the Commissioner is satisfied that, having consulted with the competent foreign authority:
    • the liability for such amount is not in dispute; or
    • if liability for such amount is in dispute that the dispute is carried on solely to delay collection or for the purpose of concealing assets by such person, the Commissioner may in writing, formally request the foreign taxpayer to pay such amount by a certain date.
  • If a foreign taxpayer fails to pay the outstanding amount owed by the specified date then the normal domestic remedies for collection in outstanding taxes under the Act will apply.

It is submitted that there must be a certain degree of certainty regarding the liability of the foreign taxpayer for outstanding taxes, before a request for assistance will be met by the collecting state. This is as a result of the burdensome procedure involved and the uncertainty regarding the final recovery of costs of collection. A collecting state, which stands to gain very little from ensuring a foreign taxpayer abides by his or her country's domestic revenue laws, while on the other hand subjects itself to the possibility of extensive costs and an onerous procedure, would in all likelihood only follow the requested procedure in a more certain case where the costs of collection are also covered by the requested state. The mere benefit of enhanced diplomacy with the foreign country as well as a higher chance of reciprocal co-operation would not seem enough where the case is not a cut and dried one.

The increasing co-operation between countries in the collection of taxes, in particular in the case of South Africa, is a sign that South African taxpayers and other taxpayers must be aware of such arrangements and must ensure that their income tax  affairs are in order.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.