Ceasefire of Section 164 in SARS’ war on non-compliance


Jashwin Baijoo | Head | Strategic Engagement & Compliance | Tax Consulting SA | mail me |








Taryn Govender | Admitted Attorney | Tax Consulting SA | mail me |

Dispelling accusations of any revenue collector can feel like the fight of your life, especially where you are factually not on the wrong side of the law! Amongst these collectors, the South African Revenue Service (SARS) stands firm as one of the most strategic movers, turning the fight into an all-out war, the war on non-compliance!

It is often the case, that sneak attacks on your treasure chest, may disparage your pursuit of victory in the little battles, such as protecting your own financial interests, whilst fighting SARS on the correct legal fronts.

Section 164 of the Tax Administration Act (TAA) No. 28 of 2011 is potentially one of the most effective means of allowing you the much-needed time to rally the troops and build your case of righteousness. However, it must be noted that when used incorrectly, or not available to taxpayers, there is no hiding from the eye of SARS, as can be evidenced in the recent judgements passed down by the High Courts of Western Cape and Gauteng, respectively.

Know your rights to win the fight

The complexities of tax laws often leave taxpayers feeling overwhelmed and uncertain about their rights and options.

Section 164(1) of the TAA states that, unless a senior SARS official directs otherwise in terms of section 164(3), the obligation to pay tax; and the right of SARS to receive and recover tax, will not be suspended by an objection or appeal or pending the decision of a court of law pursuant to an appeal.

In contrast, the very next provision, being section 164(2) seemingly offers relief to taxpayers who are entangled in tax debt with SARS, which they intend contesting, or cannot settle upfront. This protective mechanism acts as a legal stopper, preventing SARS from commencing with lawful recovery proceedings.

From the above it is evident that when read together, the law is clear that a suspension of payment must accompany other legal requests and serve to ensure no collection measures are enforced by SARS, whilst separate legal proceedings are underway.

The armour of Section 164(2)

Section 164(2) of the TAA combats against the commonly referred to “pay-now-argue-later” principle by empowering taxpayers to request a senior SARS official to suspend the payment of tax of the purported tax debt, where there is intention to contest its accuracy.

Suspensions of payment serve as a legal armour, protecting your vital financial organs by blocking SARS from commencing recovery proceedings. This can offer a glimmer of hope to taxpayers grappling with tax liabilities that cannot be paid upfront. Notably, a taxpayer is not required to have lodged an objection before making a Section 164(2) request for the suspension of payment.

For example, if a taxpayer requests reasons for an assessment prior to filing an objection, they still maintain the right to simultaneously request the suspension of payment for the tax debt as there is the element of “intention”.

Pitfalls of precedent

The courts have typically demonstrated a readiness to uphold the taxpayer’s rights, especially when SARS prepares to initiate recovery proceedings for a tax debt which is in contention. This was once more enforced in the recent judgement handed down by the Western Cape High Court in the case of Petroleum Oil and Gas Corporation of South Africa (SOC) Limited v The Commissioner for SARS (21471/20) [2020].

PetroSA, being the targeted taxpayer successfully applied for suspension of payment for the amount demanded, pending the outcome of its appeal. The twist in this case was that SARS had set their own precedent back in 2012, when they received PetroSA’s business model, which model is that in dispute, and did not at that stage raise any objections.

As taxpayer’s intending to, or having already entered into dispute proceedings, are entitled to the relief envisaged in section 164 of the TAA, the Court upheld PetroSA’s request for suspension, and further noted supporting merit being that SARS failed to provide any reasons for its change of heart.

Third-party liability outside the ambit of Section 164

Although taxpayers have the right to apply for a suspension of payment, this right does not extend to third parties against whom claims are instituted for the recovery of the primary taxpayer’s tax debt.

Section 179(1) of the TAA states that a senior SARS official may authorise the issue of a notice to a person who holds or owes or will hold or owe any money, including a pension, salary, wage or other remuneration, for or to a taxpayer, requiring the person to pay the money to SARS in satisfaction of the taxpayer’s outstanding tax debt.

In the recent judgement handed down by the Gauteng High Court in the matter of Diroshini Pather v The Commissioner for the South African Revenue Service (52782/21) [2024], the court dismissed Ms. Pather’s claim that she had the right to submit a request for Suspension of Payment. The Court’s contention sat with the fact that Ms Pather was here not the primary taxpayer against whom collections were being made, but rather a 3rd party whose liability stems from a 3rd party appointment.

As such, Ms Pather was not entitled to the same rights and remedies as the primary taxpayer would be and could not rely on a suspension of payment to combat SARS’ powers of recovery. The crafty caveat that SARS will often rely on, is that third party taxpayers, such as Ms. Pather, will not be afforded the same remedies as a taxpayer in the ordinary course. Third party taxpayers are in fact prevented from relying on suspensions of payment.

Gain the first-mover advantage

Despite its protective umbrella, securing a suspension of payment can prove to be a complex and challenging endeavour. When confronted with the mounting pressure from SARS enforcement, every decision becomes a strategic manoeuvre in the battle for financial survival.

Individuals and businesses who are faced with looming tax debts must be mindful of the legal limitations and ramifications of attempting to secure a suspension of payment, unassisted. Time is of the essence in securing a suspension of payment. With each passing moment, SARS will inch closer to unleashing its arsenal of enforcement measures. As the window of opportunity narrows, failure to act swiftly may result in irreversible consequences.

Where you find yourself on the wrong side of SARS, there is a first-mover advantage in seeking the appropriate tax advisory, and legal muscle, ensuring the necessary steps are taken to protect your war chest from being raided. However, where things do go wrong, SARS must be engaged legally, and we generally find them utmost agreeable where a correct tax strategy is followed.

As a rule of thumb, any and all correspondence received from SARS should be immediately addressed, by a strong multi-faceted tax, legal, and financial team. This will not only serve to safeguard you against SARS implementing collection measures but also being specialists in their own right, you will be correctly advised on the most appropriate solution to ensure your tax compliance.



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