In terms of section 104 of the Tax Administration Act No. 28 of 2011 (“the TAA”),  a taxpayer who is aggrieved by an assessment made in respect of that taxpayer may object to the assessment. Furthermore, in terms of section 106 of the TAA, SARS must consider a valid objection in the manner and within the period prescribed under the TAA and the rules promulgated under section 103 of the TAA, prescribing the procedures to be followed in lodging an objection and appeal against an assessment or decision subject to objection and appeal (“the Rules”).

Under Rule 7(2) a taxpayer who  lodges an objection must complete the prescribed form in full and specify the grounds of objection in detail including the part or specific amount of the disputed assessment objected to, which grounds of assessment are disputed and the documents required to substantiate the grounds of objection that the taxpayer has not previously delivered to SARS for purposes of the disputed assessment.

If a taxpayer has delivered an objection which does not comply with the requirements of subrule (2), SARS may, in terms of Rule 7(4), regard the objection as invalid and must notify the taxpayer of the ground for invalidity within 30 days of the delivery of the invalid objection and the taxpayer may within 20 days following delivery of the notice submit a new objection.

It is therefore critical that taxpayers ensure that they complete the prescribed forms (namely form NOO or ADR1) in full and specify their grounds of objection in full as required under Rule 7(2) to avoid having their objections being regarded as being invalid by SARS, as this causes a delay in the dispute resolution process.

However, Rule 7 does not address the situation where the taxpayer may not be in agreement with the SARS notice of invalidity if the taxpayer is legitimately of the view that the requirements of subrule (2) have been complied with. It is submitted that the Rules are deficient in this regard, as they do not afford taxpayers the right to object where they are of the view that SARS’s decision to regard the objection as invalid is wrong.

Taxpayers therefore only have the option of making an application to the Tax Court under Rule 52(2)(b) of the Rules for an order that the objection is valid. In trying to avoid the route of having to make an application to Tax Court - which can lead to considerable delays in finalizing the main dispute - for an order that the objection is valid taxpayers have in some instances addressed correspondence providing reasons to SARS why they are of the view that their objection is valid but have failed to elicit a response from SARS as the Rules do not prescribe any period or obligation on SARS to respond to such correspondence.

What is also of major concern, is that SARS is issuing the notices of invalid objection even after the 30 day period prescribed in Rule 7(4) has passed. This causes unnecessary delays in finalizing the dispute and is very prejudicial to taxpayers as taxpayers have to resubmit their objections when they had a legitimate expectation that their objection is valid and is being dealt with accordingly by SARS.

It is therefore important that SARS exercises its discretionary powers to regard an objection as invalid very carefully, and likewise, taxpayers should be meticulous in preparing their objections so as to avoid unnecessary delays in the resolution of their disputes with SARS.