MO Chartered Services (Pty) Ltd
TAX CLEARANCECERTIFICATE (TCC)
Compelling SARS to issue TCC, a legal cul de sac
A Tax Clearance Certificate (TCC) has become one of the most important document that any organisation may need especially those dealing with state owned enterprises in South Africa. For example, you cannot submit a tender without a valid TCC. The taxation landscape is changing at an unprecedented pace to such an extent that an average entrepreneur is often left at a loss. Before the advent of the Tax Administration Act 28 of 2011 (TAA 2011), SARS used to issue TCC based on an internal policy. Although it was difficult to try and persuade SARS to issue a TCC, taxpayers at least had some hope in that you could reason with SARS and if well executed, you can end up winning them over.
The advent of the TAA 2011 flipped this over by dealing with the issuance of TCC specifically through legislation with the result that the discretionary power by SARS to condone a miner noncompliance by a taxpayer and issue a TCC is now limited. TCCs are now being issued in terms of section 256 (3) of the TAA 2011 which provides for a SARS senior official to provide a taxpayer with a TCC provided inter alia, that the taxpayer does not have any:
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Tax debt outstanding, excluding a tax debt contemplated in section 167 or 204 or a tax debt that has been suspended under section 164 or does not exceed the amount referred to in section 169(4) [namely R100]; or
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Outstanding return unless an arrangement acceptable to SARS has been made for the submission of the return.
What this means is that, should a taxpayer have any outstanding tax debt or return as described above SARS cannot legally issue a TCC. The requirements for getting the TCC may sound simple but in practice it is not if you consider how simple a taxpayer can end up having a substantial tax debt for unknowingly doing a simple thing like offering a low interest loan to a shareholder.
The question is now can a taxpayer compel SARS to issue a TCC and if so what options are available and at what cost? The short answer is a resounding NO, the available options are not only very expensive but also doomed to fail. Although the decision by SARS not to issue a TCC is an administrative action which will adversely affect a taxpayer and thus reviewable by a court through the provisions of the Promotion of Administrative Justice Act 3 of 2000 (PAJA), such a route is a legal cul de sac in that a court cannot compel SARS into committing an act that is legally impossible.
With SARS modernization process proceeding so fast (leaving taxpayers behind catching up) leading to an effective use of SARS resources and the general trend in the world of revenue authorities consolidating their tax bases, SARS audits are becoming an everyday business. Accordingly, tax debt risk in South Africa have increasingly become so prominent that business are well advised to use services of professionally trained Tax Advisers. Emphasis is hereby placed on being proactive as it can be very difficult, expensive and time consuming to undo simple acts committed due to ignorance.