Mastering ADR and Settlements: A Procedural Guide for Tax Practitioners

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Mastering ADR and Settlements: A Procedural Guide for Tax Practitioners

• 25 March 2026
• Tax Administration
• Louise Swart

Alternative Dispute Resolution (ADR) is one of the most effective yet underutilised tools for resolving tax disputes with the South African Revenue Service (SARS). Operating as a confidential, without-prejudice process, ADR provides a structured environment for dialogue that can yield outcomes ranging from full concessions to partial settlements—all without the high costs and delays of Tax Court proceedings.

However, the framework governing ADR under the Tax Administration Act (TAA) and the ADR Rules is technically demanding. Procedural missteps—from incorrectly completing the Notice of Appeal to missing strict deadlines—can undermine even the strongest substantive case.

Understanding the ADR Framework

ADR operates similarly to mediation, providing a protected space for taxpayers and SARS to engage in open discussion. Under Rule 14, all oral or written submissions made during the process are strictly without prejudice and cannot be disclosed if the matter proceeds to formal litigation.

When to Use ADR

Practitioners should assess a dispute's suitability for ADR before defaulting to court. It is particularly effective for:

• Clarifying misunderstandings and narrowing disputed issues.
• Resolving disputes involving factual gaps or evidentiary issues rather than novel points of law.

When ADR is Not Suitable

SARS will exclude certain disputes from the process, including:

• Test cases or unique disputes where adjudication is required to develop the law.
• Cases where no existing case law applies to the issue.
• Disputes involving fraud or intentional tax evasion identified during the audit.

The ADR Procedure: Step-by-Step

The process follows a rigorous timeline and structure that practitioners must navigate carefully:

1. Commencement: The taxpayer elects ADR on the Notice of Appeal (NOA) via the eFiling wizard.
2. SARS Response: SARS must issue a Rule 13 notice within 30 business days confirming if the dispute is appropriate for ADR.
3. The 90-Day Period: Rule 15(3) requires the ADR process to be completed within 90 business days.
4. The Session: The session includes an opening by a neutral facilitator, a presentation of the taxpayer's narrative, and a question-and-answer period.

Role Players and Authority

It is a critical procedural point that the facilitator and auditor present during the session do not have the authority to approve settlements. Only the SARS committee holds the exclusive legislative authority to approve concessions. Consequently, all written representations must be designed to influence this committee's final decision.

A settlement under Section 142 of the TAA represents a negotiated compromise rather than one party accepting the other's full interpretation.

Statutory Factors: Sections 145 and 146

Before making a formal written offer, practitioners must evaluate the statutory factors:

• Section 145: Factors that indicate a dispute is appropriate for settlement.
• Section 146: Factors that render settlement inappropriate, specifically fraud or intentional tax evasion.

The offer should apply the client's specific facts to these statutory criteria rather than providing extensive quotations of the legislative text.

Critical Pitfalls: The 20-Day Rule

The most dangerous pitfall in the entire process occurs after ADR terminates. Under Rule 25(3), a taxpayer has only 20 business days to act (e.g., requesting a Tax Board set-down or filing a notice to proceed to Tax Court) to prevent the appeal from lapsing. This is a hard deadline with no provision for extension; missing it means the loss of the right to formal adjudication.

Practitioner Action Checklist

Area	Action Required	Timing
Election	Correctly elect ADR on NOA via eFiling wizard.	Time of appeal
Preparation	Prepare organised, indexed document bundle and written representations.	2 weeks before ADR
Settlement	Structure offer around Sections 145/146; apply facts to criteria.	During/After ADR
Preservation	Act within 20 business days after ADR termination.	CRITICAL DEADLINE
Verification	Confirm revised assessments reflect agreed adjustments.	After execution

Conclusion

The ADR and settlement framework rewards thorough preparation. Practitioners who master these procedures—particularly the strict 20-day post-termination deadline and the nuances of committee-level persuasion—position themselves to deliver faster, more cost-effective resolutions for their clients.

This article is based on a CPD webinar presented by Louis Swart on ADR and Settlements. If you would like to watch the full on-demand webinar, please click the link below:

Access the On-demand Webinar Here

Disclaimer: This article provides general information and should not be construed as professional advice. Practitioners should consult the relevant legislation, including the Tax Administration Act and the ADR Rules, and seek professional guidance for specific circumstances.

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