Thomson's Master Tax and Business Accountants

CONTENTS CHAPTER 1 : INTRODUCTION

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CHAPTER 2 : REGISTERING YOUR BUSINESS

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2.1 When do I become liable to register for VAT?

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2.2 Where must I register?

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2.3 What documents must I submit with my application?

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2.4 How do I calculate the value of taxable supplies?

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2.5 Voluntary registration

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2.6 Refusal of a voluntary registration application

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2.7 Separate registration (branches, divisions and separate enterprises)

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2.8 Cancellation of registration

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CHAPTER 3 : TAX PERIODS

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3.1 Which tax periods are available?

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3.2 Allocation and change of tax periods

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3.3 The 10-day rule

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CHAPTER 4 : ACCOUNTING BASIS

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CHAPTER 5 : TAXABLE SUPPLIES

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5.6 Value of supply

REPUBLIC OF SOUTH AFRICA

(The English text is the offıcial text of the Bill)

(MINISTER OF FINANCE)

[B 11—2011] ISBN 978-1-77037-844-5

No. of copies printed .................................... 1 800

[ ] Words in bold type in square brackets indicate omissions from

existing enactments.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:—

ARRANGEMENT OF SECTIONS

1. Definitions

5

7. Conflict of interest

8. Identity cards

21. Confidentiality

CHAPTER 3

34. Definitions

35. Reportable arrangements

General rules for inspection, verification, audit and criminal investigation

40. Selection for inspection, verification or audit

41. Authorisation for SARS official to conduct audit or criminal investigation

49. Assistance during field audit or criminal investigation

Part C

56. Confidentiality of proceedings

57. Incriminating evidence

62. Search of premises not identified in warrant

63. Search without warrant

68. SARS confidential information and disclosure

69. Secrecy of taxpayer information and general disclosure

75. Definitions

76. Purpose of advance rulings

86. Withdrawal or modification of advance rulings

87. Publication of advance rulings

101. Definitions

102. Burden of proof

122. Conflict of interest of tax court members

123. Death, retirement or incapability of judge or member

142. Definitions

143. Purpose of part

150. Definitions

151. Taxpayer

174. Effect of statement filed with clerk or registrar

175. Amendment of statement filed with clerk or registrar

176. Withdrawal of statement and reinstitution of proceedings

180. Liability of financial management for tax debts

181. Liability of shareholders for tax debts

192. Definitions

193. Purpose of Chapter

208. Definitions

209. Purpose of Chapter

217. Remittance of penalty for nominal or first incidence of non-compliance

218. Remittance of penalty in exceptional circumstances

221. Definitions

222. Understatement penalty

225. Definitions

226. Qualifying person for voluntary disclosure

237. Criminal offences relating to filing return without authority

238. Jurisdiction of courts in criminal matters

239. Definitions

240. Registration of tax practitioners

256. Tax clearance certificate

257. Regulations by Minister

1. In this Act, unless the context indicates otherwise, a term which is assigned a

meaning in another tax Act has the meaning so assigned, and the following terms have

‘‘additional assessment’’ is an assessment referred to in section 92;

‘‘administration of a tax Act’’ has the meaning assigned in section 3;

‘‘assessment’’ means the determination of the amount of a tax liability or refund,

by way of self-assessment by the taxpayer or assessment by SARS;

‘‘biometric information’’ means biological data used to authenticate the identity

of a natural person by means of—

(a) facial recognition;

(b) fingerprint recognition;

(c) voice recognition;

(d) iris or retina recognition; and

(e) other, less intrusive biological data, as may be prescribed by the Minister in a

regulation issued under section 257;

‘‘business day’’ means any day which is not a Saturday, Sunday or public holiday,

and for purposes of determining the days or a period allowed for complying with

‘‘Commissioner’’ means the Commissioner for the South African Revenue

Service appointed in terms of section 6 of the SARS Act or the Acting

‘‘company’’ has the meaning assigned in section 1 of the Income Tax Act;

‘‘connected person’’ means a connected person as defined in section 1 of the

Income Tax Act;

‘‘Customs and Excise Act’’ means the Customs and Excise Act, 1964 (Act No. 91

of 1964);

‘‘date of assessment’’ means—

(a) in the case of an assessment by SARS, the date of the issue of the notice of

assessment; or

(b) in the case of self-assessment by the taxpayer—

(i) if a return is required, the date that the return is submitted; or

‘‘date of sequestration’’ means—

(a) the date of voluntary surrender of an estate, if accepted by a court; or

(b) the date of provisional sequestration of an estate, if a final order of

sequestration is granted by a court;

‘‘Diamond Export Levy Act’’ means the Diamond Export Levy Act, 2007 (Act

No. 15 of 2007);

‘‘Diamond Export Levy (Administration) Act’’ means the Diamond Export

Levy (Administration) Act, 2007 (Act No. 14 of 2007);

‘‘document’’ means anything that contains a written, sound or pictorial record, or

other record of information, whether in physical or electronic form;

‘‘effective date’’ has the meaning assigned in section 187(4) and (5);

‘‘Estate Duty Act’’ means the Estate Duty Act, 1955 (Act No. 45 of 1955);

‘‘income tax’’ means normal tax referred to in section 5 of the Income Tax Act;

‘‘Income Tax Act’’ means the Income Tax Act, 1962 (Act No. 58 of 1962);

‘‘information’’ includes information generated, recorded, sent, received, stored or

displayed by any means;

‘‘jeopardy assessment’’ is an assessment referred to in section 94;

‘‘judge’’ means a judge of the High Court of South Africa, whether in chambers or

otherwise;

‘‘Mineral and Petroleum Resources Royalty (Administration) Act’’ means the

Mineral and Petroleum Resources Royalty (Administration) Act, 2008 (Act No. 29

‘‘Minister’’ means the Minister of Finance;

‘‘official publication’’ means a binding general ruling, interpretation note, practice

note or public notice issued by a senior SARS official or the Commissioner;

‘‘original assessment’’ is an assessment referred to in section 91;

‘‘practice generally prevailing’’ has the meaning assigned in section 5;

‘‘prescribed rate’’ has the meaning assigned in section 189(3);

‘‘premises’’ includes a building, aircraft, vehicle, vessel or place;

‘‘presiding officer’’ is the person before whom an inquiry referred to in Part C of

Chapter 5 is held;

‘‘Promotion of Access to Information Act’’ means the Promotion of Access to

Information Act, 2000 (Act No. 2 of 2000);

‘‘public officer’’ means an officer referred to in section 246;

‘‘public notice’’ means a notice published in the Government Gazette;

‘‘reduced assessment’’ is an assessment referred to in section 93;

‘‘relevant material’’ means any information, document or thing that is forseeably

relevant for tax risk assessment, assessing tax, collecting tax, showing noncompliance

‘‘reportable arrangement’’ has the meaning assigned in section 35;

‘‘representative taxpayer’’ has the meaning assigned in section 153;

‘‘responsible third party’’ has the meaning assigned under section 158;

‘‘return’’ means a form, declaration, document or other manner of submitting

information to SARS that incorporates a self-assessment or is the basis on which an

‘‘SARS’’ means the South African Revenue Service established under the SARS

Act;

‘‘SARS Act’’ means the South African Revenue Service Act, 1997 (Act No. 34 of

1997);

‘‘SARS confidential information’’ has the meaning assigned under section 68;

‘‘SARS official’’ means—

(a) the Commissioner,

(b) an employee of SARS; or

(c) a person contracted by SARS for purposes of the administration of a tax Act

and who carries out the provisions of a tax Act under the control, direction or

‘‘Securities Transfer Tax Act’’ means the Securities Transfer Tax Act, 2007 (Act

No. 25 of 2007);

‘‘Securities TransferTax Administration Act’’ means the Securities Transfer Tax

Administration Act, 2007 (Act No. 26 of 2007);

‘‘self-assessment’’ means a determination of the amount of tax payable under a tax

Act by a taxpayer and—

(a) submitting a return which incorporates the determination of the tax; or

(b) if no return is required, making a payment of the tax;

‘‘senior SARS official’’ means a SARS official referred to in section 6(3);

‘‘serious tax offence’’ is a tax offence for which a person may be liable on

conviction to a fine or to imprisonment for a period exceeding two years;

‘‘shareholder’’ means a person who holds a beneficial interest in a share in a

company as defined in the Income Tax Act;

‘‘Skills Development Levies Act’’ means the Skills Development Levies Act,

1999 (Act No. 9 of 1999);

‘‘tax’’, for purposes of administration under this Act, includes a tax, duty, levy,

royalty, fee, contribution, penalty, interest and any other moneys imposed under a

‘‘taxable event’’ means an occurrence which affects or may affect the liability of

a person to tax;

‘‘tax Act’’ means this Act or an Act, or portion of an Act, referred to in section 4 of

the SARS Act, excluding the Customs and Excise Act;

‘‘tax board’’ means a tax board established under section 108;

‘‘tax court’’ means a court established under section 116;

‘‘tax debt’’ means an amount of tax due by a person in terms of a tax Act;

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‘‘tax offence’’ means an offence in terms of a tax Act or any other offence involving

fraud on SARS or on a SARS official relating to the administration of a tax Act;

‘‘Tax Ombud’’ means the person appointed by the Minister under section 14;

‘‘tax period’’ means, in relation to—

(a) income tax, a year of assessment as defined in section 1 of the Income Tax Act;

(b) provisional tax or employees’ tax, skills development levies as determined in

section 3 of the Skills Development Levies Act, and contributions as

(c) value-added tax, a tax period determined under section 27 of the Value-Added

Tax Act or the period or date of the taxable event in respect of which the

(d) royalty payable on the transfer of minerals and petroleum resources, a year of

assessment as defined in section 1 of the Mineral and Petroleum Resources

Royalty (Administration) Act;

(e) the levy on diamond exports as determined under section 2 of the Diamond

Export Levy Act, the assessment period referred to in section 1 of the

(f) securities transfer tax, the period referred to in section 3 of the Securities

Transfer Tax Administration Act;

(g) any other tax, the period or date of the taxable event in respect of which the

amount of tax payable must be determined under a tax Act; or

(h) in relation to a jeopardy assessment, the period determined under this Act;

‘‘taxpayer’’ has the meaning assigned under section 151;

‘‘taxpayer information’’ has the meaning assigned under section 67(1)(b);

‘‘taxpayer reference number’’ is the number referred to in section 24;

‘‘thing’’ includes a corporeal or incorporeal thing;

‘‘this Act’’ includes the regulations and a public notice issued under this Act;

‘‘Transfer Duty Act’’ means the Transfer Duty Act, 1949 (Act No. 40 of 1949);

‘‘Unemployment Insurance Contributions Act’’ means the Unemployment

Insurance Contributions Act, 2002 (Act No. 4 of 2002);

‘‘Value-Added Tax Act’’ means the Value-Added Tax Act, 1991 (Act No. 89 of

1991);

‘‘withholding agent’’ has the meaning assigned under section 156.

CHAPTER 2

2. The purpose of this Act is to ensure the effective and efficient collection of tax by—

(a) aligning the administration of the tax Acts to the extent practically possible;

(b) prescribing the rights and obligations of taxpayers and other persons to whom

this Act applies;

(c) prescribing the powers and duties of persons engaged in the administration of

a tax Act; and

(d) generally giving effect to the objects and purposes of tax administration.

Administration of tax Acts

3. (1) SARS is responsible for the administration of this Act under the control or

direction of the Commissioner.

(a) obtain full information in relation to—

(i) anything that may affect the liability of a person for tax in respect of a

(b) ascertain whether a person has filed or submitted correct returns, information

or documents in compliance with the provisions of a tax Act;

(c) establish the identity of a person for purposes of determining liability for tax;

(d) determine the liability of a person for tax;

(e) collect tax and refund any tax overpaid;

(f) investigate whether an offence has been committed in terms of a tax Act, and,

if so—

(g) enforce SARS’ powers and duties under a tax Act to ensure that an obligation

imposed by or under a tax Act is complied with;

(h) perform any other administrative function necessary to carry out the

provisions of a tax Act; and

(i) give effect to the obligation of the Republic to provide assistance under an

arrangement made with the government of any other country by an agreement

(3) If SARS has, in accordance with any arrangement referred to in subsection (2)(i)

made with the government of any other country, received a request for—

(a) information, SARS may obtain the information requested for transmission to

the competent authority of the other country as if it were relevant material

(b) the conservancy or the collection of an amount alleged to be due by a person

under the tax laws of the requesting country, SARS may deal with the request

(c) the service of a document which emanates from the requesting state, SARS

may effect service of the document as if it were a notice, document or other

4. (1) This Act applies to every person who is liable to comply with a provision of a

tax Act (whether personally or on behalf of another person) and binds SARS.

specifically provided for in the relevant tax Act, the provisions of that tax Act apply.

(3) In the event of any inconsistency between this Act and another tax Act, the other

5. (1) A practice generally prevailing is a practice set out in an official publication

regarding the application or interpretation of a tax Act.

(a) the provision of the tax Act that is the subject of the official publication is

repealed or amended to an extent material to the practice, from the effective

(b) a court overturns or modifies an interpretation of the tax Act which is the

subject of the official publication to an extent material to the practice from the

(ii) the decision is fact-specific and the general interpretation upon which the

official publication was based is unaffected; or

based was obiter dicta; or

(c) the official publication is withdrawn or modified by the Commissioner, from

the date of the official publication of the withdrawal or modification.

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6. (1) The powers and duties of SARS under this Act may be exercised for purposes

of the administration of a tax Act.

(a) the Commissioner;

(b) a SARS official who has specific written authority from the Commissioner to

exercise the power; or

(c) a SARS official occupying a post designated by the Commissioner for this

purpose.

(a) an official under the senior SARS official’s control; or

(b) the incumbent of a specific post under the senior SARS official’s control.

(5) Powers not specifically required by this Act to be exercised by the Commissioner

personally or by a senior SARS official, may be exercised or performed by a SARS

7. The Commissioner or a SARS official may not exercise a power or become

involved in a matter pertaining to the administration of a tax Act, if—

(a) the power or matter relates to a taxpayer in respect of which the Commissioner

or the official has or had, in the previous three years, a personal, family, social,

business, professional, employment or financial relationship presenting a

conflict of interest; or

(b) other circumstances present a conflict of interest,

that will reasonably be regarded as giving rise to bias.

8. (1) SARS must issue an identity card to each SARS official exercising powers and

duties for purposes of the administration of a tax Act.

9. (1) A decision made by a SARS official and a notice to a specific taxpayer issued

by SARS, excluding a decision given effect to in an assessment or a notice of

(a) is regarded as made by a SARS official, authorised to do so or duly issued by

SARS, until proven to the contrary; and

(b) may, subject to this Act in the discretion of the SARS official described in

subparagraphs (i) to (iii) or at the request of the relevant taxpayer, be

(a) date of the written notice of that decision; or

(b) date of assessment of the notice of assessment giving effect to the decision (if

applicable).

10. (1) A delegation by the Commissioner under section 6—

(a) must be in writing;

(b) becomes effective only when signed by the person to whom the delegation is

made;

(c) is subject to the limitations and conditions the Commissioner may determine

in making the delegation;

(d) may either be to—

(i) a specific individual; or

(ii) the incumbent of a specific post; and

(e) may be amended or repealed by the Commissioner.

(2)Adelegation does not divest the person making the delegation of the responsibility

11. (1) No SARS official other than the Commissioner or a SARS official duly

authorised by the Commissioner may institute or defend civil proceedings on behalf of

12. (1) Despite any law to the contrary, a senior SARS official may on behalf of SARS

or the Commissioner in proceedings referred to in a tax Act, appear ex parte in a judge’s

chambers in the tax court or in any other High Court.

(a) is an advocate duly admitted under—

(i) the Admission of Advocates Act, 1964 (Act No. 74 of 1964); or

(b) is an attorney duly admitted and enrolled under—

(i) the Attorneys Act, 1979 (Act No. 53 of 1979); or

13. (1) The powers conferred and the duties imposed upon the Minister by or under

the provisions of a tax Act may—

(a) be exercised or performed by the Minister personally; and

(b) except for the powers under sections 14 and 257, be delegated by the Minister

to the Deputy Minister or Director-General of the National Treasury.

14. (1) The Minister must appoint a person as Tax Ombud—

(a) for a term of three years, which term may be renewed; and

(b) under such conditions regarding remuneration and allowances as the Minister

may determine.

(a) is accountable to the Minister;

(b) must have a good background in customer service as well as tax law; and

(c) may not at any time during the preceding five years have been convicted

(whether in the Republic or elsewhere) of—

exceeding two years without the option of a fine or to a fine exceeding the

amount prescribed in the Adjustment of Fines Act, 1991 (Act No. 101 of

15. (1) The staff of the office of the Tax Ombud must be employed in terms of the

SARS Act and be seconded to the office of the Tax Ombud by the Commissioner after

16. (1) The mandate of the Tax Ombud is to, subject to section 18(4), review and

address any complaint by a taxpayer regarding a service matter or a procedural or

(a) review a complaint and, if necessary, resolve it through mediation or

conciliation;

(b) act independently in resolving a complaint;

(c) follow informal, fair and cost-effective procedures in resolving a complaint;

(d) provide information to a taxpayer about the mandate of the Tax Ombud and

the procedures to pursue a complaint;

(e) facilitate access by taxpayers to complaint resolution mechanisms within

SARS to address complaints; and

(f) identify and review systemic and emerging issues related to service matters or

the application of the provisions of this Act or any procedural or administrative

17. The Tax Ombud may not review—

(a) legislation or tax policy;

(b) SARS policy or practice generally prevailing, other than to the extent that it

relates to a service matter or a procedural or administrative matter arising

(c) a matter subject to objection and appeal under a tax Act, except for any

administrative matter relating to such objection and appeal; or

(d) any decision of, proceeding in or matter before, the tax court.

Review of complaint

18. (1) The Tax Ombud may review any issue within the Tax Ombud’s mandate on

receipt of a request from a taxpayer.

(a) determine how a review is to be conducted; and

(b) determine whether a review should be terminated before completion.

(3) In exercising the discretion set out in subsection (2), the Tax Ombud must consider

(a) the age of the request or issue;

(b) the amount of time that has elapsed since the requester became aware of the

issue;

(c) the nature and seriousness of the issue;

(d) the question of whether the request was made in good faith; and

(e) the findings of other redress mechanisms with respect to the request.

(4) The Tax Ombud may only review a request if the requester has exhausted the

(a) the request raises systemic issues;

(b) exhausting the complaints resolution mechanisms will cause undue hardship

to the requester; or

(c) exhausting the complaints resolution mechanisms is unlikely to produce a

result within a period of time that the Tax Ombud considers reasonable.

19. (1) The Tax Ombud must—

(a) report directly to the Minister;

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(b) submit an annual report to the Minister within five months of the end of

SARS’ financial year; and

(c) report to the Commissioner quarterly or at such other intervals as may be

agreed.

(a) contain a summary of at least ten of the most serious issues encountered by

taxpayers, including a description of the nature of the issues;

(b) contain an inventory of the issues described in subparagraph (a) for which—

(i) action has been taken and the result of such action;

(c) contain recommendations for such administrative action as may be appropriate

to resolve problems encountered by taxpayers.

20. (1) The Tax Ombud must attempt to resolve all issues within the Tax Ombud’s

mandate at the level at which they can most efficiently and effectively be resolved and

must, in so doing, communicate with any SARS officials that may be identified by

SARS.

21. (1) The provisions of Chapter 6 apply with the changes required by the context for

the purpose of this Part.

22. (1) A person—

(a) obliged to apply to; or

(b) who may voluntarily,

register with SARS under a tax Act must do so in terms of the requirements of this

(a) apply for registration within the period provided for in a tax Act or, if no such

period is provided for, 21 business days of so becoming obliged or within the

(b) apply for registration for one or more taxes in the form and manner as the

Commissioner may direct; and

(c) provide SARS with the further particulars and any documents as SARS may

require for the purpose of registering the person for the tax or taxes.

(a) proper identification of the person; or

(b) counteracting identity theft or fraud.

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23. A person who has been registered under section 22 must communicate to SARS

within 21 business days any change that relates to—

(a) postal address;

(b) physical address;

(c) representative taxpayer;

(d) banking particulars used for transactions with SARS;

(e) electronic address used for communication with SARS; or

(f) such other details as the Commissioner may require by public notice.

Taxpayer reference number

24. (1) SARS may allocate a taxpayer reference number in respect of one or more

taxes to each person registered under a tax Act or this Chapter.

25. (1)Aperson required under a tax Act to submit or who voluntarily submits a return

must do so—

(a) in the form and manner prescribed by the Commissioner; and

(b) by the due date specified by law or, in its absence, by the due date indicated by

the Commissioner in the public notice requiring the submission.

(6) SARS may extend the time period for filing a return in a particular case, in

accordance with procedures and criteria in policies published by the Commissioner.

(7) The Commissioner may also extend the filing deadline generally or for specific

classes of persons by public notice.

26. The Commissioner may by public notice, at the time and place specified, require

a person who employs, pays amounts to, receives amounts on behalf of or otherwise

return with the required information in the form specified and in the manner as may be

prescribed by the Commissioner in the notice.

27. SARS may require a person to submit further or more detailed returns regarding

any matter for which a return is required or prescribed by a tax Act.

28. (1) SARS may require a person who submits financial statements or accounts

prepared by another person in support of that person’s submitted return, to submit a

certificate or statement by the other person setting out the details of—

(a) the extent of the other person’s examination of the books of account and of the

documents from which the books of account were written up; and

(b) whether or not the entries in those books and documents disclose the true

nature of the transactions, receipts, accruals, payments or debits in so far as

(2) A person who prepares financial statements or accounts for another person must,

at the request of that other person, submit to that other person a copy of the certificate or

statement referred to in subsection (1).

29. (1) A person must keep the records, books of account or documents that—

(a) enable the person to observe the requirements of a tax Act;

(b) are specifically required under a tax Act; and

(c) enable SARS to be satisfied that the person has observed these requirements.

(2) The requirements of this Act to keep records for a tax period apply to a person

(a) has submitted a return for the tax period;

(b) is required to submit a return for the tax period and has not submitted a return

for the tax period; or

(c) is not required to submit a return but has, during the tax period, received

income, has a capital gain or capital loss, or engaged in any other activity that

(a) subsection (2)(a), after a period of five years from the date of the submission

of the return; and

(b) subsection (2)(c), after a period of five years from the end of the relevant tax

period.

30. (1) The records, books of account, and documents referred to in section 29, must

be kept or retained—

(a) in their original form in an orderly fashion and in a safe place;

(b) in the form, including electronic form, as may be prescribed by the

Commissioner in a public notice; or

(c) in a form specifically authorised by a senior SARS official in terms of

subsection (2).

31. The records, books of account and documents referred to in section 29 whether in

the form referred to in section 30(1) or in a form authorised under section 30(2), must at

(a) determining compliance with the requirements of sections 29 and 30; or

(b) an inspection, audit or investigation under Chapter 5.

Retention period in case of audit, objection or appeal

32. Despite section 29(3), if—

(a) records are relevant to an audit or investigation under Chapter 5; or

(b) a person lodges an objection or appeal against an assessment or decision under

section 104(2),

audit is concluded or the assessment or the decision becomes final.

Translation

33. (1) In the case of information that is not in one of the official languages of the

Republic, a senior SARS official may by notice require a person who must furnish the

(a) be produced at a time and at the place specified by the notice; and

(b) if required by SARS, be prepared and certified by a sworn and accredited

translator or another person approved by the senior SARS official.

34. In this Part and in section 212, unless the context indicates otherwise, the

following terms, if in single quotation marks, have the following meanings:

‘arrangement’ means a transaction, operation, scheme, agreement or understanding

(whether enforceable or not);

‘financial benefit’ means a reduction in the cost of finance, including interest,

finance charges, costs, fees and discounts on a redemption amount;

‘financial reporting standards’ means, in the case of a ‘participant’ that is a

company required to submit financial statements in terms of the Companies Act,

2008 (Act No. 71 of 2008), financial reporting standards as defined in section 1 of

that Act, or in any other case, the International Financial Reporting Standards;

‘participant’, in relation to an arrangement, means—

(a) a ‘promoter’; or

(b) a company or trust which directly or indirectly derives or assumes that it

derives a ‘tax benefit’ or ‘financial benefit’ by virtue of an arrangement;

‘pre-tax profit’, in relation to an ‘arrangement’, means the profit of a ‘participant’

resulting from that ‘arrangement’ before deducting any normal tax, which profit

must be determined in accordance with Statements of Generally Accepted

‘promoter’, in relation to an ‘arrangement’, means a person who is principally

responsible for organising, designing, selling, financing or managing the reportable

arrangement;

‘tax benefit’ includes avoidance, postponement or reduction of a liability for tax.

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35. (1) An ‘arrangement’ is a reportable arrangement if it is listed in terms of

subsection (2) or if a ‘tax benefit’ is or will be derived or is assumed to be derived by any

‘participant’ by virtue of the ‘arrangement’ and the ‘arrangement’—

(a) contains provisions in terms of which the calculation of ‘‘interest’’ as defined

in section 24J of the Income Tax Act, finance costs, fees or any other charges

is wholly or partly dependent on the assumptions relating to the tax treatment

(b) has any of the characteristics contemplated in section 80C(2)(b) of the Income

Tax Act, or substantially similar characteristics;

(c) gives rise to an amount that is or will be disclosed by any ‘participant’ in any

year of assessment or over the term of the ‘arrangement’ as—

purposes of ‘financial reporting standards’; or

(ii) revenue for purposes of ‘financial reporting standards’ but not as gross

income for purposes of the Income Tax Act;

(d) does not result in a reasonable expectation of a ‘pre-tax profit’ for any

‘participant’; or

(e) results in a reasonable expectation of a ‘pre-tax profit’ for any ‘participant’

that is less than the value of that ‘tax benefit’ to that ‘participant’ if both are

discounted to a present value at the end of the first year of assessment when

that ‘tax benefit’ is or will be derived or is assumed to be derived, using

consistent assumptions and a reasonable discount rate for that ‘participant’.

(2) The Commissioner may list an ‘arrangement’ by public notice, if satisfied that the

‘arrangement’ may lead to an undue ‘tax benefit’.

(3) This section does not apply to any excluded ‘arrangement’ contemplated in

36. (1) An ‘arrangement’ is an excluded ‘arrangement’ if it is—

(a) a loan, advance or debt in terms of which—

(i) the borrower receives or will receive an amount of cash and agrees to

(b) a lease;

(c) a transaction undertaken through an exchange regulated in terms of the

Securities Services Act, 2004 (Act No. 36 of 2004); or

(d) a transaction in participatory interests in a scheme regulated in terms of the

Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002).

(a) is undertaken on a stand-alone basis and is not directly or indirectly connected

to any other ‘arrangement’ (whether entered into between the same or

(b) would have qualified as having been undertaken on a stand-alone basis as

required by paragraph (a), were it not for a connected ‘arrangement’ that is

entered into for the sole purpose of providing security and if no ‘tax benefit’

is obtained or enhanced by virtue of the security ‘arrangement’.

(a) with the main purpose or one of its main purposes of obtaining or enhancing

a ‘tax benefit’; or

(b) in a specific manner or form that enhances or will enhance a ‘tax benefit’.

(4) The Commissioner may determine an ‘arrangement’ to be an excluded

‘arrangement’ by public notice, if satisfied that the ‘arrangement’ is not likely to lead to

an undue ‘tax benefit’.

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37. (1) The ‘promoter’ must disclose the information referred to in section 38 in

respect of a reportable arrangement.

(a) the ‘promoter’ that the ‘promoter’ has disclosed the ‘arrangement’; or

(b) any other ‘participant’, if subsection (2) applies, that the other ‘participant’

has disclosed the ‘arrangement’.

first received by or has accrued to a ‘participant’ or is first paid or actually incurred by

a ‘participant’ in terms of the ‘arrangement’.

38. The ‘promoter’ or ‘participant’ must submit, in relation to a reportable

arrangement, in the form and manner and at the time or place that may be prescribed by

(a) a detailed description of all its steps and key features, including, in the case of

an ‘arrangement’ that is a step or part of a larger ‘arrangement’, all the steps

(b) a detailed description of the assumed ‘tax benefits’ for all ‘participants’,

including, but not limited to, tax deductions and deferred income;

(c) the names, registration numbers, and registered addresses of all ‘participants’;

(d) a list of all its agreements; and

(e) any financial model that embodies its projected tax treatment.

Reportable arrangement reference number

39. SARS must, after receipt of the information contemplated in section 38, issue a

reportable arrangement reference number to each ‘participant’ for administrative

40. SARS may select a person for inspection, verification or audit on the basis of any

consideration relevant for the proper administration of a tax Act, including on a random

41. (1) A senior SARS official may grant a SARS official written authorisation to

conduct a field audit or criminal investigation, as contemplated in Part B.

(2) When a SARS official exercises a power or duty under a tax Act in person, the

42. (1) A SARS official involved in or responsible for an audit under this Part must,

in the form and in the manner as may be prescribed by the Commissioner by public

(a) the audit or investigation was inconclusive, SARS must inform the taxpayer

accordingly within 21 business days; or

(b) the audit identified potential adjustments of a material nature, SARS must

within 21 business days, or the further period that may be required based on

(3) Upon receipt of the document described in subsection (2)(b), the taxpayer must

within 21 business days of delivery of the document, or the further period requested by

(5) Subsections (1) and (2)(b) do not apply if a senior SARS official has a reasonable

belief that compliance with those subsections would impede or prejudice the purpose,

43. (1) If at any time before or during the course of an audit it appears that a person

may have committed a serious tax offence, the investigation of the offence must be

(3) If an investigation is referred under subsection (1) the relevant material and files

relating to the case must be returned to the SARS official responsible for the audit if—

(a) it is decided not to pursue a criminal investigation;

(b) it is decided to terminate the investigation; or

(c) after referral of the case for prosecution, a decision is made not to prosecute.

Conduct of criminal investigation

44. (1) During a criminal investigation, SARS must apply the information gathering

powers in terms of this Chapter with due recognition of the taxpayer’s constitutional

45. (1) A SARS official may, for the purposes of the administration of a tax Act and

without prior notice, arrive at a premises and conduct an inspection to determine only—

(a) the identity of the person occupying the premises;

(b) whether the person occupying the premises is conducting a trade or an

enterprise;

(c) whether the person occupying the premises is registered for tax; or

(d) whether the person is complying with sections 29 and 30.

(2)ASARS official may not enter a dwelling-house or domestic premises (except any

46. (1) SARS may, for the purposes of the administration of a tax Act in relation to a

taxpayer, whether identified by name or otherwise objectively identifiable, require the

taxpayer or another person to, within a reasonable period, submit relevant material

respect of taxpayers in an objectively identifiable class of taxpayers.

(3) A request by SARS for relevant material from another person is limited to the

to SARS at the place and within the time specified in the request.

(5) SARS may extend the period within which the relevant material must be

request with reasonable specificity.

(7)Asenior SARS official may direct that relevant material be provided under oath or

47. (1) A senior SARS official may, by notice, require a person, whether or not

chargeable to tax, to attend in person at the time and place designated in the notice for

(a) is intended to clarify issues of concern to SARS to render further verification

or audit unnecessary; and

(b) is not for purposes of a criminal investigation.

(2) The senior SARS official issuing the notice may require the person interviewed to