WHEN CAN SARS WITHHOLD THE PAYMENT OF A TAX CREDIT?

After issuing an assessment to me, which reflected a credit, SARS recently informed me that it would not pay that amount to me, because my provisional tax return for 2015, is apparently outstanding, even though the return was indeed submitted.

There is no legal basis for such a decision. In terms of section 190 of the Tax Administration Act, SARS is only authorised to withhold payment of a refund, or a credit, until its verification, inspection, audit or criminal investigation of that amount, has been finalised.

In the matter of Top Watch (Proprietary) Limited v C,SARS, the High Court confirmed this legislation, and held that SARS is not entitled to withhold the payment of a tax credit, which it had verified, because it was still verifying the declaration for another tax period.

Despite this judgment, SARS continues to withhold refunds for the most spurious reasons. Clearly, they do not respect the judgments of the High Court, or the law.

However, VAT is another matter. In terms of the VAT Act, SARS is entitled to withhold the payment of  a VAT credit, even when that credit has been audited, until all outstanding returns have been submitted.