Effective resolution of SARS’ requests for relevant material process

Effective resolution of SARS’ requests for relevant material process

• 21 April 2023
• Tax Administration
• Lebo Motsumi-Nkoloti

Section 46(1) of the Tax Administration Act 28 of 2011 (TAA) provides the South African Revenue Service (SARS) with discretion to require a taxpayer or another person to submit relevant material that SARS requires for the administration of a tax Act in relation to a taxpayer. According to the legislature, section 46 was introduced into the TAA to address ‘the problem that too many requests for information by SARS result in protracted debates as to SARS’ entitlement to certain information’. 

The phrase ‘relevant material’ is defined in the TAA as ‘any information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act …’. (own emphasis). The ‘administration of a tax Act’ is defined very broadly to include, amongst others, to obtain full information in relation to anything that may affect a person’s liability for tax in respect of a previous, current or future tax period; and to ascertain whether a person has filed or submitted correct returns, information or documents in compliance with the provisions of the tax Act. 

SARS is granted extremely wide powers under section 46 of the TAA. These include the right to:

• ask for material that is held or kept by a connected person in relation to the taxpayer who is outside of South Africa¹ (i.e., other members of the taxpayer’s group located outside South Africa);  

• direct that the relevant material be provided under oath or solemn declaration, or if required for purposes of a criminal investigation, be provided under oath or solemn declaration and, if necessary, in accordance with the requirements of section 212 or 236 of the Criminal Procedure Act 51 of 1977,²; and 

• request relevant material that a person has available for purposes of revenue estimation. ³

Despite the wide powers under section 46, there are some ‘limitations’ to SARS’ rights. For example,⁴ SARS’s request must refer to the material sought with ‘reasonable specificity’. SARS may only request material from a person other than the taxpayer if this material is maintained or kept or should reasonably be maintained or kept by that person.⁵ The taxpayer or person receiving a request for relevant material from SARS is only required to submit the relevant material to SARS at the place and in the format that is ‘reasonably accessible’ to them.⁶  Where the material requested by SARS relates to the taxpayer’s foreign connected person, then they are afforded a slightly longer period (90 days, instead of 21 business days that is normally afforded in practice) to respond. 

Common issues that arise during requests for information

There are instances where SARS may request information that it is technically not entitled to in terms of section 46 of the TAA. Examples include the following: 

• A request for a taxpayer to provide its ‘opinions’ or ‘comments’ on why a transaction was structured in a certain way.

• A request for information from the taxpayer in order to ascertain the correctness of information that SARS has in its possession. 

• A generic request for information about a third party, or request for material that belongs to someone else, and not the taxpayer’s own material. 

• A request for documents outside of the record retention period, or a request for material that the taxpayer did not keep because they did not consider it to be a ‘tax record’.

• A request for a taxpayer to confirm how a certain transaction will be treated in the taxpayer’s tax returns before the relevant tax return is due. 

• The request for relevant material is too vague or too broad. 

When dealing with requests like these, the first important factor that a taxpayer must consider is whether the information sought constitutes ‘relevant material’ in terms of the TAA. The definition of ‘relevant material’ (discussed above) is problematic as it makes the relevance of the information subject to SARS’ ‘opinion’. Meaning that, if the SARS official who is requesting the information views the information as being relevant, then they would arguably be entitled to ask for the information.  

The legislature has made it clear that the term ‘foreseeably relevant’ “does not imply that taxpayers may unilaterally decide relevant and refuse to provide access thereto, …’⁷.  Accordingly, when a taxpayer is faced with a request for relevant material, it is immaterial whether the requested, once provided, proves to be relevant.  A taxpayer may not decline an information request where a definitive determination of the relevance of the material requested can only be made following the receipt of the material.  Taxpayers are required to first produce the material, and only then can a definite determination occur.⁸ 

In the Explanatory Memorandum, it is stated that the fact that SARS determines what relevant material it requires in order to administer a tax Act does not mean that taxpayers do not have remedies during the audit process. It states that the taxpayer’s remedies include a section 9 request for SARS to withdraw or amend its decision to request material; pursuing SARS’ internal administrative complaints resolution process; approaching the tax ombud; or approaching the public protector. 

Tips on how to respond to SARS requests for relevant material

In circumstances where SARS asks for information that can be explained by providing the underlying document (i.e., when SARS asks for the purpose for implementing a transaction, where the legal agreement between the parties already documents the purpose), one should provide the actual document itself to SARS as opposed to summarising or explaining the content thereof.

When preparing a response to the request for relevant material, it is essential to consider whether there are other documents or information which, although SARS has not specifically requested, the taxpayer has reason to believe that the provision thereof may help resolve the matter or provide SARS with the information it needs. In this instance, it may be appropriate to volunteer the provision thereof to SARS to assist with the speedy resolution of the audit, investigation or verification request. 

Taxpayers must properly consider information and documents before providing them to SARS, being careful not to provide documents that are legally privileged. Where possible, a taxpayer must first discuss an appropriate response with their attorney or in-house corporate lawyer. Where a taxpayer seeks to assert legal privilege over a document that is included in SARS’ request, the requirements set out under section 42A of the TAA must be met. 

There is no obligation for a taxpayer to keep records and documents outside of the statutory timeframes for the retention of records (i.e., five years from the date of submission of the return, or from the end of the relevant period (if not required to submit a return). Accordingly, if SARS’ request for relevant material includes a request that falls outside of the statutory retention period, a taxpayer does not have to provide this information. 

Taxpayers must always timeously respond to requests for relevant material (i.e., within the timeframe stated by SARS in the request), as failure to do so may result in SARS extending prescription. If the timeframe provided by SARS to respond is not sufficient to obtain the necessary documents and information sought by SARS, the taxpayer must apply for an extension of time to respond, setting out the reasonable grounds for extension as required under section 46(5) of the TAA. 

Footnotes:

1 46(2)(b).

2 46(7)

3 46(8).

4 46(6).

5 46(3).

6 46(4)

7 Memorandum on the objects of the Tax Administration Laws Amendment Bill, 2014

8 Memorandum on the objects of the Tax Administration Laws Amendment Bill, 2014

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