The draft Tax Administration Laws Amendment Bill 2014 (“DTLAB 2014”) was published for public comment by National Treasury on 17 July 2014 and proposes a number of amendments to the Tax Administration Act No. 28 of 2011 (“the TAA”). In this article, we deal with some of the most pertinent proposals set out in the DTLAB 2014.
Requests for relevant material
In terms of section 46 of the TAA, the South African Revenue Service (“SARS”) may, for the purposes of the administration of a tax Act, require a taxpayer or another person to submit “relevant material” (whether orally or in writing) that SARS requires. “Relevant material” is currently defined in section 1 of the TAA as any information, document or thing that is foreseeably relevant for the administration of a tax Act. The DTLAB 2014 proposes that the definition of “relevant material” be amended to refer to any information, document or thing that in the opinion of SARS is foreseeably relevant. The draft memorandum on the objects of the Tax Administration Laws Amendment Bill 2014 (“the Draft EM”) states that the purpose of this proposal is to clarify that the statutory duty to determine the relevance of any such information is that of SARS and the term foreseeably relevant does not imply that taxpayers may unilaterally decide relevance and refuse to provide SARS access thereto.
Furthermore, section 46(4) of the TAA currently provides that a person receiving a request for relevant material from SARS must submit the relevant material to SARS at the place and within the time specified in the request. The DTLAB 2014 proposes that section 46 be amended to allow SARS to not only specify the place and time for the submission of the relevant material, but also the format in which the person must submit the relevant information. The Draft EM states in this regard that it has happened that taxpayers refused to provide information in a certain format, particularly electronic format. Accordingly, if this amendment is introduced, taxpayers will not be able to provide print-outs to SARS if SARS specifies the relevant material to be provided in electronic format.
Requests for suspension of payment pending objection or appeal
In terms of section 164 of the TAA, 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 that tax. A senior SARS official may then suspend payment of the disputed tax or a portion thereof having regard to a number of factors set out in section 164(3) including, inter alia, the compliance history of the taxpayer, the amount of tax involved, the risk of dissipation of assets by the taxpayer, whether the taxpayer is able to provide adequate security for the payment of the amount involved, whether payment of the amount involved would result in irreparable financial hardship to the taxpayer or whether any fraud is involved in the origin of the dispute. The DTLAB 2014 proposes that the merits of the taxpayer’s basis of disputing the assessment and the strength of the disputed assessment, as are evident from any document related to the assessment, should also be included in the list of factors to be considered.
The Draft EM in this regard states that the proposed amendment clarifies that the factors listed in section 164(3) were never intended to be exhaustive as a SARS official is administratively obliged to consider all relevant factors, but that the amendment will clarify that the merits are relevant to the extent available.
The DTLAB 2014 proposes a number of amendments to the reportable arrangement provisions contained in Part B of Chapter 4 of the TAA. In terms of the current provisions, the primary reporting obligation is on the “promoter”, being the person who is principally responsible for organising, designing, selling, financing or managing the reportable arrangement. Only when there is no promoter or when the promoter is a non-resident, must the other participants disclose the required information. The DTLAB 2014 proposes that the reporting obligation will no longer fall primarily on the promoter. All participants (including the promoter) will have the obligation to report the required information within 45 business days of the arrangement qualifying as a reportable arrangement or within 45 business days of such person becoming a participant in a reportable arrangement. A participant need not report the arrangement if that participant has a written statement from any other participant that the arrangement has been reported.
Currently, a “participant” is (i) the promoter, or (ii) a company or a trust which directly or indirectly derives or assumes that it derives a tax benefit or financial benefit by virtue of an arrangement. The DTLAB 2014 proposes that the definition of “participant” be expanded to not only refer to companies or trusts, but a person who derives a tax benefit or financial benefit. Accordingly, individuals would also fall within the ambit of the reportable arrangement provisions.