Is it possible for a client to reclaim tax from SARS that was taken off his retirement fund commutation while resolving his tax and submitting outstanding returns?
Important:
This answer is based on tax law for the tax year ending 28 February 2018.
Answer:
The law enables SARS to collect the tax debt even if it is under dispute and the taxpayer would only be able to prevent that if a suspension of debt request was made.
Section 179(1) allows a senior SARS official to authorise the issue of a notice to a person who holds or owes or will hold or owe any money, including a pension, salary, wage or other remuneration, for or to a taxpayer, requiring the person to pay the money to SARS in satisfaction of the taxpayer’s outstanding tax debt. This would include the taxpayer’s fund.
SARS may only issue this notice after delivery to the tax debtor of a final demand for payment which must be delivered at the latest 10 business days before the issue of the notice, which demand must set out the recovery steps that SARS may take if the tax debt is not paid and the available debt relief mechanisms under this Act, including, in respect of recovery steps that may be taken under this section—
(a) if the tax debtor is a natural person, that the tax debtor may within five business days of receiving the demand apply to SARS for a reduction of the amount to be paid to SARS, based on the basic living expenses of the tax debtor and his or her dependants; and
(b) if the tax debtor is not a natural person, that the tax debtor may within five business days of receiving the demand apply to SARS for a reduction of the amount to be paid to SARS, based on serious financial hardship.
If SARS didn’t deliver a final demand to the taxpayer, the client may be able to use the above to indicate that SARS didn’t follow due process. A refund can then be requested.