South Africa: Pay Now Argue Later

Last Updated: 17 July 2014
Article by Peter Dachs and Bernard Du Plessis

Most Read Contributor in South Africa, September 2016

Possession, as they say, is nine tenths of the law. Generally in commercial litigation where, for example, a claim for an outstanding amount is brought against a party, such party is not required to make payment to the claimant until a court has adjudicated on the matter.

However, when it comes to matters of tax, the Tax Administration Act, No. 28 of 2011 ('TAA') requires taxpayers to first make payment to SARS on assessment and then to pursue their various remedies against SARS.

It is true that if the taxpayer eventually persuades SARS or a court that the assessment was incorrect and the tax was not owed by it, the disputed amount will be refunded to the taxpayer with interest. However, the payment of the tax generally places the taxpayer at a disadvantage as it may have to fund the tax payment for a number of years whilst it pursues its various remedies. One recent tax case took approximately ten years from date of assessment until judgment by the Supreme Court of Appeal in Bloemfontein.

It is therefore important that a taxpayer understands in what circumstances it may not have to make payment to SARS of the disputed tax.

The "pay now argue later" principle was dealt with in the case of Metcash Trading Ltd v Commissioner, South African Revenue Service. In this case, the legality of the concept survived scrutiny by the Constitutional Court in the context of VAT when a taxpayer sought to impugn the VAT legislation contending it to be incompatible with section 34 of the Bill of Rights.

It was held in the case of Capstone 556 (Pty) Ltd and Commissioner, South African Revenue Service that:

"the considerations underpinning the "pay now, argue later" concept include the public interest in obtaining full and speedy settlement of tax debts and the need to limit the ability of recalcitrant taxpayers to use objection and appeal procedures strategically to defer payment of their taxes".

The court went on to say the following:

"There are material differences distinguishing the position of self-regulating vendors under the value- added tax system and taxpayers under the entirely revenue authority – regulated income tax dispensation. Thus the considerations which persuaded the Constitutional Court to reject the attack on the aforementioned provisions of the VAT Act in Metcash might not apply altogether equally in any scrutiny of the constitutionality of the equivalent provisions in the [Income Tax] Act".

However not every taxpayer has the appetite for a constitutional challenge to the "pay now argue later" principle. Instead taxpayers generally wish to understand the provisions set out in the TAA dealing with a suspension of their obligation to make payment to SARS.

In this regard, the TAA provides that a taxpayer is liable to pay tax once an assessment has been raised by SARS. In terms of section 164 of the TAA, unless a senior SARS official otherwise directs in terms of subsection (3), the obligation to pay tax and the right of SARS to receive and recover tax will not be suspended by an objection or appeal or pending the decision of a court of law.

In terms of section 164(2) a taxpayer may request a senior SARS official to suspend the payment of tax or a portion thereof due under an assessment if the taxpayer intends to dispute or disputes the liability to pay that tax.

Section 164(3) provides that a senior SARS official may suspend the payment of the disputed tax or a portion thereof having regard to:

  • The compliance history of the taxpayer;
  • The amount of tax involved;
  • The risk of dissipation of assets by the taxpayer concerned during the period of suspension;
  • Whether the taxpayer is able to provide adequate security for the payment of the amount involved;
  • Whether the payment of the amount involved would result in irreparable financial hardship to the taxpayer;
  • Whether sequestration or liquidation proceedings are imminent;
  • Whether fraud is involved in the origin of the dispute; or
  • Whether the taxpayer has failed to furnish information requested under the Tax Administration Act for purposes of a decision under section 164.

Section 164(6) states that from the date that SARS receives a request for suspension and ending ten business days after notice of SARS' decision, no recovery proceedings may be taken against the taxpayer unless SARS has a reasonable belief that there is a risk of dissipation of assets by the taxpayer.

Therefore, as soon as the taxpayer receives an assessment from SARS which it intends to challenge, it should consider making application for a suspension of payment under section 164(2) of the TAA.

The taxpayer should refer to and argue its case in terms of each of the grounds set out in section 164(3). The test is a composite one and therefore it is not necessary for a taxpayer to "pass" each of these tests.

One of the key grounds is whether payment of the amount of tax would result in irreparable financial hardship to the taxpayer.

One suspects that if a taxpayer states that the payment of the disputed tax will not result in irreparable financial hardship then SARS will simply argue that the tax should be paid. Conversely, if the taxpayer argues that the tax will result in irreparable financial hardship then SARS may be concerned that the taxpayer will not be good for the money at a later stage and therefore refuse to suspend payment.

However, this is simply one of the grounds that the senior SARS official must consider. In addition, the concept of irreparable financial hardship does not mean that the taxpayer will likely go into liquidation if it is required to make payment of the tax. Instead it covers circumstances where, for example, the taxpayer may be required to dispose of illiquid investments in a "fire sale" thereby resulting in irreparable financial hardship since the taxpayer will lose money which it is unlikely to recoup in the future.

If SARS decides not to grant the request for suspension of payment, a taxpayer cannot object and appeal against such decision. However, the exercise of the power granted to SARS to approve or refuse a request for a suspension of payment constitutes administrative action and is therefore reviewable by a court in terms of the principles of administrative law.

Review proceedings are instituted by the filing by the applicant of a notice of motion (which sets out the relief sought) supported by a founding affidavit in which all of the relevant facts are set out under oath, together with the basics of the applicant's case. If the applicant requires the record of the decision that is being challenged, the applicant may call upon the administrator (in this case SARS) to dispatch the record within fifteen days. Once the applicant receives the record, it may amend its notice of motion and file a supplementary founding affidavit within ten days.

The respondent (SARS in this case) has fifteen days after receipt of the notice of motion or any amendment thereof within which to file a notice of intention to oppose the application, and has thirty days after receipt of the amended notice of motion or supplementary affidavit within which to file an answering affidavit in which the respondent sets out the facts on which it relies, the basics of its case in law and responds to the applicant's case.

The applicant then has ten days within which to file a replying affidavit in which the applicant replies to the matters raised by the respondent in its answering affidavit. Further affidavits can only be filed with the consent of the court. Accordingly, all of the relevant evidence is placed before the court on affidavit and as a result witnesses are not called.

If the applicant does not require the record of decision (because it already has reasons for the decision and accordingly does not need it) then the process of asking for the record and filing supplementary affidavits can be dispensed with, resulting in a shorter and simpler procedure.

As stated above, in terms of section 164(6) of the TAA, once SARS has refused a request by a taxpayer for a suspension of payment of tax, there is an obligation on the taxpayer to pay the tax to SARS. This obligation remains, regardless as to whether or not the taxpayer is of the view that the decision by SARS constitutes unfair administrative action and makes application to court for a judicial review of such decision. Therefore, the only way in which the taxpayer can prevent SARS from taking collection steps against it, is by obtaining an interim interdict from a court prohibiting SARS from taking any steps to collect the tax pending the outcome of the review application.

An interim interdict can only be obtained by way of motion proceedings. The prescribed time periods will apply, unless it would result in the applicant not being able to obtain the required relief, in which event the applicant can bring proceedings on an urgent basis. The evidence is presented on affidavit and accordingly, no witnesses are called to give evidence. The applicant must make out its case in the founding affidavit, including establishing a basis for the urgency and expedited timetable, and must show that it will suffer irreparable harm if the tax is collected. The applicant will also have to act as expeditiously as possible in order to satisfy the court that the matter is indeed urgent.

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.