On 1 October 2012, the long – awaited Tax Administration Act, Act 28 of 2011 (‘the TAA’) came into force. As a result of the commencement of the TAA several sections of the Income Tax Act, Act 58 of 1962 (‘the Act’) were repealed and replaced by corresponding provisions in the TAA. Such changes are aimed at consolidating the existing tax administration legislation into a single, more comprehensive statute which will hopefully ensure that tax administration is managed more efficiently and effectively. The transformation of the administration of tax in South Africa will have consequences for taxpayers, their advisers as well as the South African Revenue Service (‘SARS’). It is therefore important to ensure that all parties are aware of the changes to the legislation, as this will have an effect on several aspects of how the administration of tax is managed. One such change is to the definition of ‘date of assessment’, the importance of which plays out in the realm of tax dispute resolution.

the definition of ‘date of assessment’ and dispute resolution under the Act

Section 81(1) of the Act stated the following:

“Objections to any assessment made under this Act shall be made in the manner and under the terms and within the period prescribed by this Act and the rules promulgated in terms of section 107A by any taxpayer who is aggrieved by any assessment in which that taxpayer has an interest”

Rule 4(e) of the Rules promulgated under section 107A of the Act, prescribing the procedures to be observed in lodging objections and noting appeals against assessments (‘the Rules’) states:

“A taxpayer who is aggrieved by an assessment may object to an assessment, which objection must –

(e) be delivered to the Commissioner at the address specified in the assessment for this purpose, within 30 days after –

in the case where the taxpayer has requested reasons under rule 3, either the date of the notice by the Commissioner that adequate reasons have been provided or the date that reasons were furnished by the Commissioner, as the case may be, or;

in any other case, the date of assessment.”

The Rules fail to define the meaning of the words ‘date of assessment’ and hence it is necessary to refer to the definitions section contained in section 1 of the Act, which defined it as follows:

“in relation to any assessment, means the date specified in the notice of such assessment as the due date or, where a due date is not so specified, the date of such notice.”

Lastly, the meaning of ‘day’ in the definitions section contained in section 1 of the Rules means:

“a day as contemplated in section 83(23) of the Act.”

Section 83(23) of the Act defines ‘day’ as:

“Any reference in this Part and the rules to “day” means any day other than a Saturday, Sunday or public holiday: Provided that the days between 16 December of a year and 15 January of the following year, both inclusive, shall not be taken into account in determining days or the period allowed for complying with any provision in this part or the rules.”

Furthermore paragraph 6.1 of SARS Guide on Tax Dispute Resolution, last updated on 30 November 2004 (‘the Guide’), sets out when an aggrieved taxpayer may object to an assessment. It refers to the definition of ‘date of assessment’ contained in section 1 of the Act and thereafter states the following:

“Please note that where an assessment has a ‘date of assessment’ on the assessment form, as well as a due date and a second date, the 30 day period must still be calculated with reference to the due date, in accordance with the definition of “date of assessment” in the Act. The ‘date of notice’ or ‘date of assessment’ only applies where there is no ‘due date’ on the notice.”

It goes on to provide an example, summarised in the table below and which provides clarity on the matter.

Click here to view table.

the definition of ‘date of assessment’ and dispute resolution under the TAA

The TAA repeals section 81 of the Act and hence objections and appeals against income tax assessments issued by SARS, are now governed by section 104 of the TAA. Section 104(3) of the TAA directs that an objection to an assessment or decision must be lodged in a manner and within the time period prescribed in the ‘rules’. The aforementioned ‘rules’ have not yet been made by public notice under the direction of section 103 of the TAA and thus until such time as they are, the ‘old rules’ promulgated under the Act, remain the relevant rules in terms of section 264(2) of the TAA.

As discussed above, there is no definition of ‘date of assessment’ in the ‘old rules’, it is therefore necessary to look to the definition as contained in the TAA which took effect on 1 October 2012. Section 1 of the TAA defines ‘date of assessment’ as follows:

“(a) in the case of an assessment by SARS, the date of the issue of the notice of assessment;”

It is therefore apparent that as a result of this change, the period granted for the submission of an objection has changed and has effectively reduced the time period taxpayers previously had. In reference to the example in the table above, the objection must be filed 30 days after 29 September 2003, that is, 7 November 2003, which is a reduction of time allocated for submission of over a month. Were a taxpayer unaware of this change and thus followed the old rules in conjunction with the old definition of ‘date of assessment’, they would have to seek condonation for late filing which is unlikely to be continuously entertained by SARS on the basis of ignorance of the law. The example shows the importance of this (seemingly insignificant) amendment to the legislation, and it is important for all relevant parties, especially taxpayers to ensure that they are aware of these changes that the TAA has introduced and seek advice where uncertainty arises.

further consideration

Where a taxpayer has been subjected to an audit, the taxpayer will, in most cases, receive a letter from SARS advising that the taxpayer’s taxable income is being amended. Often these letters are referred to as a letter of assessment, and if the letter complies with the definition of assessment contained in section 1 of the TAA read with paragraph 23(a) of schedule 1 of the TAA, the taxpayer must object within 30 days of the date of the letter of assessment. (See further C: SARS v South African Custodial Services (Pty) Ltd [2012] 74 SATC 61).