Charging of Contingency Fees

Charging of Contingency Fees

• 02 November 2023
• Tax Administration
• SARS

Tax practitioners’ fees for work they undertake on behalf of a client must be proportional to the nature and complexity of the task. In consultation with Recognised Controlling Bodies (RCBs), SARS has updated the criteria for the recognition of controlling bodies and the registration of tax practitioners. These criteria include rules on charging contingency fees. A contingency fee is a fee that a tax practitioner charges a taxpayer based on the percentage of a refund the taxpayer will receive or the percentage of a reduction of the taxpayer’s tax liability. To protect the interests of taxpayers and prevent revenue loss to fiscus, SARS wishes to clarify that:

• The charging of a contingency fee for completing or correcting tax returns is not an acceptable form of remuneration for tax practitioners.
• The charging of a contingency fee is acceptable:
  • when there is a dispute between the taxpayer and SARS under Chapter 9 of the TA Act, and
  • when the taxpayer brings an application for SARS to review its decisions under section 9 of the TA Act.

Note:

• Charging of contingency fees for submission of tax returns has been forbidden since 2013.
• Charging of contingency fees is not allowed for correcting tax returns from 14 September 2023.

Where contingency fees are allowed, the tax practitioner must enter into a written agreement with his/her client. The agreement should contain sufficient information on:

• The details of the tax practitioner and the taxpayer,
• The outcome upon which the contingency fees are based and its percentage,
• The consequences if the outcome is not achieved, and
• When the contingency fees are charged.

The agreement should also contain a clause that gives:

• The taxpayer client has the right to refer the agreement to the relevant RCB for review, and
• The RCB has the authority to set aside any provision of the agreement or any fees claimable in terms of the agreement if the RCB finds such provision or fees unreasonable or unjust.

Source: SARS

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