VAT REFUNDS AND DISPUTE RESOLUTION

It is one of those things you must personally experience; otherwise you will never fully comprehend how frustrating things can become. When you get audited by certain SARS officials before payment of your Value-Added Tax (VAT) refund, expect the long road and frustration, often when your business really needs the cash flow.

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But, why is this so difficult?

There are many theories – that is also why the Tax Ombudsman was granted permission to investigate VAT refunds and released its rather damning report.

It is understandable that, given the number of fraudsters and chance-takers in the market, hesitance on the part of SARS should be present, rather than simply handing out refunds to every VAT claimant without careful scrutiny. The SARS auditor is obligated to correctly apply the law.

Perfect Storm

Many compliant taxpayers feel they are mistreated on their VAT refunds. This may be partly due to the perfect storm of a shrinking economy, financial strain, administrative delays and perceived deliberate delays in when SARS owes you money, compared to their super efficiency when you owe them. These delays and difficulties are placing financial strain on the small to medium enterprise fraternity, and with some of our clients we have seen this comes down to survival.

SARS Auditors and Dispute Resolution

The first rule is being courteous with your SARS auditor. The tax law has plenty of teeth and please do not underestimate the auditing powers bestowed upon SARS officials. But what do you do when you are faced with bureaucratic hoops created by constant requests for documentation that support the rebate, and obviously SARS is not allowed to be vexatious?

The Tax Administration Act, read with the Rules promulgated under section 103, provides a very strong and balanced SARS dispute resolution process. The normal accountant or attorney can deal with the process of Alternative Dispute Resolution, complaint escalation and even Tax Ombudsman submission, but we find this sometimes has limited results.

When you know you are correct, there is always the right of access to the Tax Board or Tax Court. It is never a good idea to approach the court on weak facts, so we insist that our first step of professional engagement is a proper review of the merits. Where you are one of the compliant taxpayers, consider fast tracking your matter.

Submit an appeal without the “ADR” option. This means the matter goes straight to Tax Board / Tax Court and everyone knows you mean business. ADR is frequently approached for the purposes of settling and one has a different discussion where you are after an outright win.
The correct Tax Board / Court application normally gets resolved way before the steps of court. Highly competent persons concede before SARS decides to litigate and this is almost always a totally different experience that dealing with an auditor who does not want to release a refund.
Do not take on the legal route lightly. It is essential that you comply with the Rules to the letter to ensure your matter is compliant so that no further administrative delays occur, or, even worst you have an adverse decision due to administrative failure;
Your well-constructed heads of argument submitted with your notice to the appropriate forum should be presented to the SARS NAC by the assigned clerk or court specialist for the purpose of deciding on the appropriate steps for SARS to take; and

The legal route is very much embedded in our tax law as part of the Dispute Resolution process and we foresee that the correct representation will become an integral part of resolving complex and high value SARS matters.

Click here to read more about the Dispute Resolution (ADR) process.

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Kindly note that our offices are closed between 25 December 2024 and 1 January 2025 and as such there will be a delay in our normal expeditious response times. Our teams are taking a short festive season break and will address your query upon their return on Thursday, 2 January 2025.