South Africa: Assessments after three-year limitations period expired (court decision)

The Supreme Court of Appeal of South Africa held that the South African Revenue Service (SARS) was not precluded from raising additional assessments in respect of the taxpayer’s years of assessment (2005 to 2009) on the grounds that those years had been “prescribed” in terms of section 99 of the Tax Administration Act, No. 28 of 2011.

The case is: Commissioner for South African Revenue Service v. Spur Group (Pty) Ltd. (Case no. 320/20) [2021] ZASCA 145 (15 October 2021)

Generally for income tax purposes, after the expiration of a three-year period from the date of an original assessment, SARS may only issue additional assessments when it has been established that there was fraud, misrepresentation or non-disclosure of material facts on the tax return. This “prescription” is a defence available to compliant taxpayers.

In the instant case, the taxpayer had answered “no” to pertinent questions that should have been answered as “yes” on the income tax return. In addition, the taxpayer also failed to separately disclose certain items in the relevant fields provided for in the income tax return, limiting SARS’ ability to flag potential tax risks in relation to the returns through its risk identification processes upon submission of the returns.

These disclosure errors resulted in the Commissioner not being able to correctly assess the taxpayer within the three-year period after the original assessments had been issued in respect of the 2005 to 2009 years of assessment. Consequently, the court found these errors constituted a deliberate misrepresentation and a non-disclosure of material facts, sufficient enough to displace the usual protection afforded by prescription.  
 

Read an October 2021 report [PDF 282 KB] prepared by the KPMG member firm in South Africa