Challenging restrictions on tax refunds and bank accounts

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Challenging restrictions on tax refunds and bank accounts

• 28 October 2026
• Tax Dispute Resolution
• Dr Stiaan Klue

Source: TaxCafe, Carmen Westermeyer CA(SA), October 2026. Available on Webinar-on-Demand: TaxCafe with Carmen Westermeyer - October 2026

At a glance

A client who reports that “SARS froze my refund” may be describing several different events. SARS may not yet have authorised payment; a bank may have restricted transactions; a third-party notice may require payment to SARS; or funds may be subject to another legal process. The remedy depends on identifying which event occurred.

Begin with the documents establishing the restriction. A bank’s contractual decision and a SARS collection notice can operate at different times and require different challenges. The client’s entitlement to the funds must also be supported, especially where the money was transferred from another taxpayer.

Obtain the documents and reconstruct the sequence

Section 190(5) of the Tax Administration Act 28 of 2011 addresses a refund not properly payable and treats the amount, with the relevant interest, as an outstanding tax debt. Section 190(5A) addresses a bank holding an account into which such an amount is deposited and reasonably suspecting a tax offence. It requires immediate reporting and a transaction hold for a period not exceeding two business days, subject to the specified SARS or court direction or a section 179 notice. Tax Administration Act, section 190.

That provision is not a universal two-day limit on every bank restriction. Another lawful basis may govern the account, including the contractual position examined in Dumakude. Equally, an indefinite restriction should not be accepted without identifying its continuing basis.

Obtain the bank’s communication, relevant account terms, SARS notices, refund calculation and transaction history. Record the time each restriction began, the amount affected, who made the decision and whether money has actually been remitted to SARS. A screenshot of an unavailable balance does not answer those questions.

Client conversation trigger: When funds become unavailable, ask the bank and SARS to identify the instrument, affected amount and effective date, and preserve the transaction chronology immediately.

Distinguish final demand from the statutory exception

Section 179 permits an authorised notice to a person holding or owing money for or to a taxpayer, requiring payment towards the taxpayer’s outstanding tax debt. Section 179(5) ordinarily requires a final demand delivered at least ten business days before the notice. Section 179(6) provides an exception where a senior SARS official is satisfied that issuing the demand would prejudice collection.

The exception is a statutory condition to be established, not a general licence to omit demands. The affected person should examine the identified debtor, outstanding debt, money held and the basis relied on for dispensing with notice. Where appropriate, section 179 also provides mechanisms concerning amendment of the notice and hardship-related relief.

In Cuba Dumakude v Bidvest Bank Limited and Another (054716/25), Gauteng Division, Johannesburg, 8 September 2026, R900 000 had reached the applicant’s account from a fraudulent value-added tax (VAT) refund of R3 279 667.63. The bank first restricted the account under its contractual terms. SARS later issued section 179 notices. The court accepted the collection-prejudice basis for dispensing with final demand and treated the bank as holding funds belonging to Hill Side Trading. It dismissed the application with costs on Scale B. Judgment, paragraphs 4–15 and 22–23.

Client conversation trigger: Where a section 179 notice is involved, test each statutory element and obtain the explanation for any omitted final demand before framing the challenge.

Prove entitlement to the money and choose the right proceeding

A recipient who claims that transferred money belongs to them should produce the underlying transaction: contract, invoice, performance, source and reason for payment. The account holder’s name alone may not settle entitlement to disputed funds. Conversely, receipt from a taxpayer under investigation does not automatically establish that every subsequent transaction is fraudulent.

Separate the challenge to a bank’s contractual decision from the challenge to SARS’s statutory action. The necessary parties, evidence and relief may differ. If urgent relief is contemplated, the chronology must explain the urgency and the right said to be infringed. A generic demand to “release the refund” may address the wrong decision-maker.

Do not allow an ongoing complaint to obscure an assessment or collection deadline. The file should address the tax merits, the banking restriction and any immediate cash-flow consequences as distinct issues.

Client conversation trigger: Prepare a single evidence bundle establishing the client's right to the funds, while keeping separate legal instructions for the bank restriction and SARS recovery.

Practitioner action checklist

Identify the decision-maker, legal instrument and affected funds before selecting the remedy. The resulting evidence bundle should establish both the client’s entitlement and the precise basis of the challenge.

Related reading: Frozen bank accounts: what Dumakude requires the tax accountant to prove; Reconciling bank deposits before disputing an assessment; Responding to verification requests and identifying audit.

Frequently asked questions

Why has my bank account been frozen after a SARS refund?

It may be a bank’s contractual decision, a SARS third-party notice or another legal process. Each operates differently and requires a different challenge, so begin with the documents establishing the restriction.

Can a bank hold my account for only two business days?

Section 190(5A) of the Tax Administration Act requires reporting and a transaction hold not exceeding two business days in specified circumstances. That is not a universal two-day limit on every bank restriction, because another lawful basis may govern the account.

What evidence do I need to release restricted funds?

Identify the decision-maker, legal instrument and affected funds. The evidence bundle should establish both your entitlement to the money and the precise basis of the challenge.

Build your expertise: to apply these principles in practice, explore The Tax Faculty’s SARS Dispute Resolution: A Focus on Objections and Appeals webinar on demand.

About the author

Dr Stiaan Klue is Executive Dean and CEO of The Tax Faculty. He was the founding CEO of the South African Institute of Taxation (SAIT) and is the founding author of Silke on Tax Administration (LexisNexis).

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