Joon Chong, Partner, Webber Wentzel
New tax dispute resolution rules provide for, amongst others, 80 days to submit an objection and more independence of an ADR facilitator.
On 10 March 2023, the Minister of Finance published new dispute resolution rules in the Government Gazette in terms of the Tax Administration Act (TAA). These rules describe the procedures for objections and appeals, for the alternative dispute resolution (ADR) mechanism and for the conduct and hearing of appeals before a Tax Board or Tax Court.
The rules came into effect on 10 March 2023 and will apply to matters already underway. Requests for reasons, objections, appeals to the Tax Board or Tax Court, ADR, settlement discussions, or interlocutory applications that were instituted under the previous rules but have not been completed, will have to be continued and concluded under the new rules.
The notable changes in the new rules are as follows.
1. Extension of time periods (rule 4): Parties can agree to shortened time periods for various procedures if the timelines are not already regulated by the rules. The 2014 rules only allowed for parties to agree to extensions.
2. Objection against assessment (rule 7(1)): A taxpayer objecting to an assessment must deliver a notice of objection (NOO) within 80 days (2014 rules: 30 days) of the date of the assessment. If the taxpayer requested reasons, the NOO must be delivered within 80 days of the delivery of (i) the SARS notice that adequate reasons have been provided, or (ii) the SARS letter with the reasons requested. The 80-day period excludes the 30-day extension where a taxpayer may still request additional time on reasonable grounds, and up to 3 years extension on exceptional grounds.
3. Appealing on new grounds (rule 10(3)): A taxpayer may appeal on a new ground not raised in the NOO unless the new ground is a new objection against a part of the assessment not previously objected to. This rule has been the subject of a few court decisions and is now couched in the positive. (See also item 6 below.)
4. ADR facilitator appointment (rules 16 and 17): One of the biggest issues with the ADR process in the 2014 rules is the perceived lack of independence of the facilitator as the facilitator is appointed by SARS and a SARS employee. Rule 16 has been amended to remove the requirement that a senior SARS official must establish a list of facilitators. The new rules also provide that the facilitator must have appropriate tax experience and be acceptable to both SARS and the taxpayer. Although the facilitator once accepted by all parties, is still appointed by a senior SARS official within 15 days of the ADR commencement date, rule 17(3) now expressly provides that the facilitator must act independently and impartially. We welcome these positive amendments.
5. Delivery of facilitator’s report (rule 20): The facilitator is required to deliver a report within five days of a meeting, and a final report within 10 days after the ADR process ends.
6. New grounds in the SARS statement of grounds of assessment and opposing appeal (rule 31): If an appeal proceeds to the Tax Court, SARS is required to deliver a rule 31 statement setting out the grounds, and their facts and legal basis of the assessment, and the facts and legal basis relied on by SARS in opposing the appeal. Rule 31(3) has been amended to provide for SARS to include a new ground of assessment or basis for the partial or full disallowance of the objection. A new ground is allowed unless (i) the new ground is a novation of the whole of the factual or legal basis of the disputed assessment; or (ii) the new ground requires SARS to issue a revised assessment. As with the amendment to rule 10(3), rule 31(3) is now couched in the positive, whereas previously it was worded in the negative.
7. Subpoenas of witnesses to the Tax Board and Tax Court (rules 27 and 43): A person may be subpoenaed by the Tax Board clerk or the Tax Court registrar to attend the appeal and give evidence or provide documents on issues relevant to the appeal. The new rules also provide that the subpoena must also not be an abuse of process. If a party is of the view that the subpoena is not relevant or an abuse of process, the new rules provide for them to request the withdrawal of the subpoena, and if not withdrawn to apply to the Tax Board or Tax Court for the withdrawal of the subpoena. The same where an issued subpoena was then withdrawn by the clerk or registrar, the aggrieved party can also apply to the Tax Board or Tax Court, as the case may be, for the issue of the subpoena.
8. SARS to issue assessment within 45 days of a Tax Court decision (rule 44): Where the Tax Court confirms or alters the SARS decision or assessment, SARS must issue the relevant assessment within 45 days of the registrar receiving the Tax Court decision.
9. Applications on notice (rule 50): must be brought within 20 days of the cause of the application, unless parties agree to a longer period or the Tax Court grants an extension on good cause shown.
The new rules are a positive step forward in many ways. We would advise taxpayers and their advisers to be aware of the new rules, particularly on the changes to timelines.