The Minister of Finance approved and published new dispute resolution rules (new Rules) under section 103 of the Tax Administration Act 28 of 2011 (TAA) shortly before 16:00 on Friday, 10 March 2023. The new Rules came into effect on the date of publication and replace the previous set of Rules promulgated in 2014 (old Rules).

Considering the lack of any prior announcement or stakeholder engagement, it is crucial for taxpayers to familiarise themselves with the amendments to the Rules, particularly those pertaining to time periods.

In terms of the transitional arrangements (Rules 66 – 68), the new Rules apply to all current Chapter 9 dispute proceedings, without prejudice to anything done under the old Rules. New procedures may be conducted under the new Rules, provided that the time period under the applicable previous Rule has not yet expired.

For existing disputes, the procedures contained in the new Rules may be adopted, provided that the period provided for under the old Rules has not expired. However, Rule 68(3) explicitly provides that where an objection or appeal could have been lodged before the commencement date of the new Rules but is lodged after the period prescribed under the old Rules, an application for the condonation of the late lodging of the objection or appeal must be submitted to, and considered by SARS under the new Rules.

For your convenience, we have summarised the most significant changes to the Rules below.

Extension of the time period within which taxpayers may submit an objection

The period within which a taxpayer may lodge an objection against an assessment (or other appropriate ‘decision’) has been extended from 30 to 80 business days. This is the period within which a taxpayer may lodge an objection – taxpayers are not obliged to wait the full 80-day period.

This is a welcome amendment, as the previous 30-day period often proved challenging for taxpayers, particularly in complex disputes involving large volumes of information and documentation.

Obligation to attach all substantiating documents to an objection

Previously, taxpayers were only required to specify which documents they intended to rely on to substantiate the grounds of objection. An objection would not be considered invalid if some of the substantiating documentation was not submitted together with the objection. In practice, taxpayers often need more than the 30-day period previously provided for under Rule 7 to collate all substantiating documentation (particularly in large and/or complex disputes). No change has been made to Rule 8, which affords SARS specific powers to request any substantiating documentation that is outstanding following the submission of the objection.

The amendment to Rule 7 requires taxpayers to submit all substantiating documentation in order for an objection to be valid.

The new 80-day period afforded to taxpayers to submit an objection should ensure that this position does not unduly prejudice taxpayers in large and complex disputes.

Given the amendments to Rule 7, it is unclear whether SARS will allow taxpayers to submit new or additional substantiating documentation at the appeal stage. If SARS takes the view that a valid objection under Rule 7 requires a single submission containing all substantiating documents, this could complicate practical scenarios where the need for additional supporting information or documentation only becomes apparent following the communication of SARS’ grounds for disallowing (or partially disallowing) an objection. It thus becomes even more important to request reasons for an assessment, to ensure that all substantiating documents are submitted at objection stage.

Shortening of the time periods provided for in the Rules

While Rule 4 has always provided for the extension of dispute resolution time periods, it now also provides for the shortening of time periods. The periods provided for in the new Rules may only be shortened by agreement between the parties or alternatively, agreement between one of the parties and the clerk or Registrar of the Tax Board or Tax Court.

No discretion has been afforded to SARS to shorten the time periods provided for by the new Rules, so this change will not allow SARS to unilaterally reduce any dispute resolution time periods. However, it will allow taxpayers and SARS to speed up the dispute resolution process where appropriate, by agreement.

Changes in respect of alternative dispute resolution (ADR) facilitators and subpoenas

The categories of persons who can serve as an ADR facilitator have been broadened, and an important new requirement has been added (which generally reflects SARS’ established practice), which is that the facilitator must be a person acceptable to both parties.

A deadline for the delivery of the ADR facilitator’s interim report has also been introduced: Rule 20 now provides for the facilitator’s ‘interim’ report to be delivered within five days after the conclusion of the ADR meeting, in addition to the deadline of 10 days following the end of ADR proceedings that is applicable to the final report.

Rule 22(4) no longer provides for a court to permit the issuing of subpoenas of persons involved in ADR proceedings, to compel the disclosure of representations made or documents tendered during ADR proceedings. This will enhance the confidentiality of ADR proceedings (which are intended to be conducted on a without prejudice basis).

Subpoenas

In addition to the changes referred to above, a number of amendments have been introduced regarding the issuing of subpoenas as part of the Tax Board and Tax Court processes, ostensibly to avoid the use of subpoenas as an abuse of process.

Deadline for SARS assessments giving effect to Tax Court judgments

A very welcome amendment to Rule 44 is the insertion of sub-rule 8, which compels SARS to issue the assessment to give effect to the Tax Court’s decision within a period of 45 days after receipt of the Tax Court’s decision from the Registrar, provided that no appeal is lodged by SARS under section 133 of the TAA.

The often-significant delays in SARS issuing assessments to give effect to judgments has been a longstanding issue prejudicing taxpayers in practice. The introduction of sub-rule 8 should allow taxpayers to compel SARS to adhere to the 45-day period.

Initiation of proceedings under Rules 51 to 56

Rule 50(4) now clarifies the provisions of Rule 57(2), which deals with the time period within which to bring applications. Applications under Rules 51 – 56 must  now be brought within 20 days after the date of the cause of the application, unless the parties agree, or the Tax Court directs that a different period is applicable.

The clarification of this Rule arguably limits opportunities for SARS and taxpayers to settle pending interlocutory applications before the initiation of legal proceedings against SARS.  These Rules are most frequently used by taxpayers to compel SARS to adhere to the timelines prescribed in the Rules (and/or the TAA) when SARS fails to do so.

However, Rule 50(4) arguably serves an important purpose in limiting frivolous threats of litigation from taxpayers, and compelling SARS officials to apply their minds to the settlement of pending disputes within a reasonable period, hopefully reducing the need for taxpayers to incur the time and costs of initiating legal proceedings against SARS.

Less significant (but nonetheless noteworthy) changes and clarifications

• Rule 2 now expressly includes an email address as an ‘address for delivery’, confirming a method of delivery that was always implied by the Rules and accepted by SARS in practice.
• New grounds of assessment or appeal: Rules 10, 31, and 32 have been amended, presumably to clarify when a new ground of objection or assessment may be included at objection phase, or in the Rule 31 and Rule 32 Statements. Neither SARS nor taxpayers may introduce new grounds of assessment or appeal (as the case may be) that would constitute a novation of the grounds of assessment or appeal. The practical impact of these rules is that new grounds of appeal (or assessment) are largely limited to procedural issues and to the amplification of the existing grounds.
• Limitation of the 45-day period within which SARS must issue an assessment giving effect to an ADR settlement agreement to instances where all of the issues in dispute are settled.
• SARS is now obligated to set down tax dispute matters being heard by the Tax Board if the taxpayer fails to set the matter down, within 30 days of the expiry of the period afforded to the taxpayer (this replicates the provisions of Rule 39 in the Tax Court).
• Rule 38(3) now specifically provides for pre-trial conferences to take place at a venue agreed between the parties.
• The period for delivery of the Tax Court’s judgment by the Registrar has been reduced from 21 days to 10 days.
• Procedural interlocutory applications in terms of section 117(3) of the TAA must be heard separately unless the Tax Court directs that the application is heard as part of the appeal.