South Africa: Preservation Orders And The Tax Administration Act

Last Updated: 19 June 2014
Article by Beric Croome

Most Read Contributor in South Africa, September 2016

Prior to the enactment of the Tax Administration Act No. 28 of 2011 ("TAA"), the Commissioner: South African Revenue Service ("Commissioner") was required to apply for a preservation order under the common law, as the Income Tax Act did not itself contain a mechanism whereby the Commissioner could apply for a preservation order under the fiscal statutes to ensure the preservation of assets where there was a concern that a taxpayer may dissipate assets and frustrate SARS' attempts to recover the tax due.

Section 163 of the TAA regulates the manner in which SARS may obtain a preservation order from the High Court to prevent the dissipation of assets. The High Court was recently required to adjudicate the application of section 163 of the TAA in the case of The Commissioner for the South African Revenue Service v C van der Merwe in re: In the exparte application of: The Commissioner for the South African Revenue Service and G van der Merwe and various others.

The case has as yet not been reported but judgment was handed down by Savage AJ of the Western Cape Division of the High Court on 28 February 2014 in respect of case number 13048/13.

The judgment indicates that Ms C van der Merwe worked as a model declaring taxable income ranging from R20,023.00 in 2009 to R45,366.00 in the 2012 year of assessment. During May 2013 she acquired an Audi R8 and during June 2013 she acquired a Land Rover SD4 coupe. Both vehicles were not financed and the purchase price was paid in cash by unknown persons. During May 2013 Standard Bank received the amount of USD$15.3 million for the benefit of C van der Merwe. The person remitting the funds from abroad was identified as a Mr Rawas and the funds were transferred from a bank in Lebanon. C van der Merwe instructed the bank to sell the foreign currency in her favour and gave as the contact details those of her father and she indicated that the funds constituted a gift received from Mr Rawas. On 30 August 2013 a provisional preservation order was granted ex parte by Rogers J on application by the Commissioner under the provisions of section 163 of the TAA. In accordance with the order granted by Rogers J, the respondents were required to show why a final preservation order should not be granted and Savage AJ had to determine whether the provisional preservation order granted should be confirmed.

The judgment reports that C van der Merwe's father is engaged in various disputes with the Commissioner over a number of years and that her father and various other entities controlled by him are liable to SARS for payment of approximately R291 million in respect of tax, additional tax penalties and interest. Furthermore, criminal charges have been instituted against C van der Merwe's father.

SARS contends that Mr van der Merwe, together with the assistance of other parties, intentionally manipulated the value of certain assets owned by non-registered VAT entities which sold second hand goods, comprising aircraft vessels and spare parts to vendors in order to enable the registered vendors to claim national input tax under section 16(3) of the VAT Act. The judgment indicates that payment in terms of the various agreements was largely made by transferring shares, the values of which have been manipulated according to SARS. The Commissioner contended that the various transactions undertaken by Mr van der Merwe constituted a scheme as envisaged by section 73 of the VAT Act and that C van der Merwe, either in her own right owes SARS taxes or holds assets on behalf of her father, or some of the other respondents against which assets SARS may execute in order to ensure the collection of taxes due.

A curator bonis is envisaged in section 163(7)(b) of the TAA, was appointed in accordance with the provisional preservation order to take charge of the assets of the various respondents and to identify assets which can be executed against for the collection of taxes due to SARS.

The van der Merwe family opposed the confirmation of the preservation order on the basis that C van der Merwe has no interest in the business affairs of her father and that the funds received by her were received for her own benefit.

The Commissioner submitted that C van der Merwe's opposition to the preservation order lacked merit and that she had not raised any bona fide dispute of the fact that she had not adequately explained who Mr Rawas is, nor the rationale for the alleged gift she received of USD$15.3 million.

The Court reviewed the provisions of section 163 of the TAA and confirmed that the preservation order is granted to prevent realisable assets from being disposed of or removed, which may frustrate the collection of the full amount of tax that is due and payable.

Savage AJ indicated that it is not required that the Court determines whether the tax is as a matter of fact due and payable by a taxpayer or other person contemplated in section 163 of the TAA, as that will be determined by a subsequent inquiry. At the preservation stage it is necessary that the Court is supplied sufficient information to determine whether the preservation order should be granted against the persons it is sought. The Commissioner argued that the receipt of the R142 million by Mr van der Merwe's daughter, over which he had signing powers, indicated that Mr van der Merwe had control over his daughter's funds. SARS argued that the daughter held the assets on behalf of her father or some of the other respondents and that the assets should be preserved to secure the collection of tax. Furthermore, SARS submitted that receipt of the amount of R142 million by C van der Merwe probably has tax complications itself which need to be investigated. The Court therefore decided that reasonable grounds were shown for the preservation order against C van der Merwe to secure tax in relation to assets while the receipt of the funds is being investigated. Savage AJ reached the following conclusion insofar as the receipt of the alleged gifts is concerned:

"the probabilities that a young model, earning in the region of R20,000 per annum, would following a few short visits to a resort in the Seychelles, enjoy the serial generosity of a donor or benefactor on an unparalleled scale I find to be far-fetched and implausible."

The Court was therefore not prepared to accept the explanation provided by C van der Merwe as to the nature of the funds she received from Mr Rawas. In addition, no details were provided in respect of the donor who purchased the two vehicles which were made available and registered in the name of C van der Merwe.

C van der Merwe asked the Court to dismiss the preservation order, or alternatively to postpone the matter pending the determination of constitutional and other relevant issues which may be raised by her or the other respondents. The Court reached the conclusion that there was no basis on which to grant either order requested by C van der Merwe.

At the end of the day the Court therefore reached the conclusion that the provisional preservation order granted in terms of section 163(3) of the TAA should be confirmed.

In reviewing the judgment it is clear that SARS has the power to apply to the High Court for a preservation order to protect assets where there is a concern that a taxpayer may dissipate assets which would otherwise be available to SARS to settle tax debts due. The Court will also not likely refuse to confirm a preservation order where a taxpayer does not adequately explain the nature of amounts received by them.

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.