Most Read Contributor in South Africa, September 2016
Prescription of a tax assessment is an important and powerful
tool for a taxpayer when it comes to obtaining certainty in respect
of one's tax affairs and can serve as an important defence when
disputing an assessment. Prescription is governed by section
99 of the Tax Administration Act No. 28 of 2011
A three year prescription period applies where the South African
Revenue Service ("SARS") has had a
previous opportunity to assess a taxpayer (such as in the case of
income tax) and a five year prescription period applies in the case
of a self-assessment tax (such as value-added tax (VAT) and
employees' tax (PAYE)).
Generally, the prescription period that prohibits SARS from
issuing an assessment does not apply if the reason why the full
amount of tax was not charged was due to fraud, misrepresentation
or non-disclosure of material facts. When the tax is a
self-assessment tax, the basis on which the period of limitation
does not apply differs in that it refers to fraud, as well as
intentional and negligent misrepresentation or non-disclosure.
The prescription period that prohibits SARS from issuing an
assessment will also not apply where SARS and the taxpayer so agree
prior to the expiry of the limitations of time. Practically,
such agreements are often entered into when SARS is conducting an
investigation into a complex matter which involves the auditing of
substantial information and facts.
Clause 34 of the 2013 Draft Tax Administration Laws Amendment
Bill ("the Bill") provides for an
additional circumstance where the period of prescription can be
extended. It proposes to amend section 99 of the TAA by
inserting a new subsection (3) which will provide for the extension
of the prescription periods where "a taxpayer without just
cause fails to submit relevant material requested by SARS for
purposes of verification, inspection or audit ... commencing on the
day that the relevant material was required to be submitted and
ending on the day that the taxpayer submits the relevant
The proposed amendment accordingly appears to have the effect of
allowing SARS to extend the prescription periods provided for in
section 99 of the TAA where a taxpayer exhibits a certain behaviour
vis a vis the provision of information to SARS, assuming SARS was
entitled to request the information in the first place. What
is unclear from the provision is what would constitute
"without just cause" where there is a delay in a taxpayer
providing information and practically, what interaction is
required, if any, where the period for prescription is extended in
terms of this provision. In challenging any assessment, a
taxpayer can raise prescription as a ground of objection.
Accordingly, where SARS has relied on this proposed new provision
in issuing an adverse assessment on the basis that the period of
prescription has been extended due to the taxpayer's behaviour,
this should be able to be dealt with by a taxpayer in the objection
and appeal process.
This new proposed provision certainly places an additional
burden on taxpayers as regards the timeous provision of information
to SARS and may have the effect of weakening the important defence
for a taxpayer which prescription presents. It is certainly a
departure from the tool which is currently available to SARS to
extend a prescription period which involves participation by the
relevant taxpayer, namely where SARS and a taxpayer may enter into
an agreement in respect thereof and it could be used by SARS to its
strategic advantage when it comes to late requests for information
when the prescription date for an assessment is looming.
Due to the important role which prescription can play in tax
disputes, it is crucial for taxpayers to be aware of the
prescription status of assessments and what rights are available in
respect thereof. Should the new proposed amendment to section
99 of the TAA be adopted by Parliament in the form discussed in
this article, taxpayers should be vigilant in respect of
information requests from SARS and deal with same fully and
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.
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