On 1 October 2012, a new Tax Administration Act (Act 28 of 2011) came into force. The Tax Administration Act (“the Act”) seeks to create an orderly and more coherent manner of dealing with tax administration legislation, fused into a single Act.

It removes duplication and aligns the various obligations that currently exist in the different tax Acts. These tax Acts include, among others, the Transfer Duty Act, 1949; Estate Duty Act, 1955; Income Tax Act, 1962; and Value-Added Tax Act, 1991.

The Act, however, states that in the event of any inconsistency between the Tax Administration Act and any tax Act, the tax Act in question shall prevail.

The Act has extended the information gathering powers of the South African Revenue Service (“SARS”). Therefore SARS may, without prior notice, arrive at premises where they have a reasonable belief that a trade or enterprise is being carried on and conduct an inspection.

Such an inspection must only seek to determine the identity of the person occupying the premises; whether the person occupying the premises is registered for tax; or whether the person is complying with the duty to keep the requisite records in the prescribed manner.

However a SARS official may not enter a dwelling-house or domestic premises, except any part thereof used for the purposes of trade without the consent of the occupant.

Provision has also been made for warrantless searches where a senior SARS official may, without a warrant, exercise the powers of search and seizure under the following circumstances:

  • where the owner or person in control of the premises so consents in writing; or
  • where the senior SARS official on reasonable grounds is satisfied that:
    • there may be an imminent removal or destruction of relevant material likely to be found on the premises; or
    • if he or she applies for a search warrant, a search warrant will be issued; and
    • the delay in obtaining a warrant would defeat the object of the search and seizure.

Before carrying out the search, a SARS official must inform the owner or person in control of the premises of the reason for the search. However, as with inspections, a SARS official requires consent before entering a dwelling-house or domestic premises, with the exception of those parts used for the purposes of trade.

The Act closely guards taxpayer information as demonstrated by the requirement for the disclosure of such information only to the extent that the disclosure is necessary, relevant and appropriate.

This is also reflected in the sittings of Tax Courts which are generally not public, but such Courts have discretion to order sittings to be public on application by any person and if exceptional circumstances exist.

In order to collect the full amount of tax due, SARS may seize assets pending the outcome of an application for a preservation order to prevent the disposal or removal of realisable assets.

A Court can also order the repatriation of offshore assets to satisfy tax debts. Moreover, a senior SARS official may also request relevant material that a person has available for the purposes of revenue estimation.

SARS’s collection powers have been strengthened and thus third parties incur personal liability in the case of:

  • Responsible third parties who part with the assets or money of a tax debtor contrary to a notice by SARS to transfer the assets or money to SARS;
  • Shareholders who benefit from the ‘asset stripping’ of a tax debtor;
  • Transferees who receive property from tax debtors for below fair market value; and
  • Any person who assists in the dissipation of assets.

The period of limitation on the collection of outstanding tax debts has been amended. Thus, the prescription period for tax has been reduced to 15 years.

In this way, SARS benefits from a more practical approach to debt management, while the taxpayer benefits from the attainment of finality within a more reasonable period.

General statutory offences are included in the Act and include non-compliance offences, tax evasion, contravention of secrecy provisions and filing tax returns without authority.

However, tax-type specific offences may remain in the other tax Acts.

Importantly, the reverse onus on taxpayers in tax evasion offences has been replaced with an evidentiary burden, which means that the taxpayer must prove that there is a reasonable possibility that they were ignorant of the falsity of the fraudulent statement in question and that the ignorance was not due to negligence.

A person found guilty of an offence is, upon conviction, subject to a fine or to imprisonment.

Written by Molisa Cheda.