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 2018

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.

Similar Articles
Relevancy Powered by MondaqAI
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions