South Africa: Settlements with SARS

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

South Africa: Settlements with SARS

dachs.jpg

Peter Dachs

It has been widely reported that the South African Revenue Service (SARS) is making application for the sequestration of Julius Malema, the head of the Economic Freedom Front political party, after the 'collapse' of a settlement agreement between the parties. These reports state that Malema did not correctly disclose the source of the funds used to settle the tax debt which formed part of the agreement. In determining whether settlement is appropriate the Commissioner of SARS must consider a variety of factors including the potential costs of litigation to SARS and its likelihood of success, factual or evidentiary difficulties which would make litigation or alternative dispute resolution problematic, whether settlement is in the best interest of good management of the tax system, overall fairness and use of SARS' resources.

It is specifically stated that a person participating in a settlement procedure must disclose all relevant facts during the discussion phase of the process of settling a dispute. In addition a settlement is conditional upon full disclosure of material facts known to the person concerned at the time of the settlement.

A written agreement must then be concluded between the parties which includes details on, for example, how each issue is settled, relevant undertakings by the parties and arrangement for payment.

Section 148 of the Tax Administration Act provides that SARS is not bound by the terms of the written agreement if the taxpayer has failed to make full disclosure in settlement discussions or if there was fraud or misrepresentation of the facts. It is this point that SARS has allegedly raised in respect of its settlement agreement with Julius Malema.

In conclusion, while settlement should always be considered in a tax dispute, there are various risks associated with such process including the risk that the settlement agreement is subsequently not adhered to by SARS on the basis that material facts were not disclosed by the taxpayer or that there was fraud or misrepresentation of the facts.

Peter Dachs (pdachs@ensafrica.com)

ENSafrica – Taxand Africa

Tel: +27 21 410 2500

Website: www.ensafrica.com

more across site & shared bottom lb ros

More from across our site

Wim Wuyts, who had been head of the specialist tax network since 2017, is moving on to a new role with WTS’s Belgian member firm
MNEs are increasingly using algorithmic tools in TP. Sahasranshu Dash argues that data ethics should therefore plug directly into the TP design process
The Institute of Chartered Accountants in England and Wales also queried whether HMRC resources could be better spent scrutinising larger entities
Grant Thornton’s Austria tax head likens his practice to an escape room, shares his football coaching ambitions, and explains why tax is cool
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 EMEA Tax Awards
Awards
ITR is delighted to reveal all the shortlisted nominees for the 2025 Asia-Pacific Tax Awards
The fates of pillars one and two hang in the balance after the US successfully threw its weight around in G7 and Canadian negotiations
Rafael Tena tells ITR about the ‘crazy’ Mexican market, ditching the hourly rate, and refusing to grow his fledgling firm in an ‘unstructured way’
It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
Gift this article