OFFICE OF THE TAX OMBUD Limitations to the OTO Mandate and SARS Objections Procedure

Transcription

1 OFFICE OF THE TAX OMBUD Limitations to the OTO Mandate and SARS Objections Procedure

2 MANDATE OF TAX OMBUD s16. Review and address any complaint by a taxpayer regarding a service matter or a procedural or administrative matter arising from the application of the provisions of a tax Act by SARS. (Currently includes Customs & Excise since All legislation administered by the Commissioner). In discharging his or her mandate, the Tax Ombud must (a) review a complaint and, if necessary, resolve it through mediation or conciliation; (b) (c) act independently in resolving a complaint; follow informal, fair and cost-effective procedures in resolving a complaint;

3 MANDATE OF TAX OMBUD (cont.) (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 procedural or administrative provisions of a tax Act that impact negatively on taxpayers.

4 LIMITATIONS ON AUTHORITY s17. The Tax Ombud may not review (a) (b) (c) (d) legislation or tax policy; 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 from the application of the provisions of a tax Act by SARS; a matter subject to objection and appeal under a tax Act, except for an administrative matter relating to such objection and appeal; or a decision of, proceeding in or matter before the tax court.

5 LIMITATIONS ON AUTHORITY (cont.) S259(2) The first Tax Ombud may not review a matter that arose more than one year before the day on which the Tax Ombud is appointed, unless the Minister requests him to do so. (Currently the Ombud has approval from the Minister to review these cases).

6 SARS policy or practice generally Case 1:Rejected Case prevailing: The complaint related to a 2014 tax year of assessment. SARS disallowance medical expenses resulting in a significant tax debt Desired resolution: SARS to open 2014 assessment and take into account taxpayer s business expenditure into account

7 SARS policy or practice generally OTO Findings: prevailing: Notice of objection was lodged Nov 2015 and amended one in Jan 2016 and supporting documents were attached. No grounds for late submission were given. Taxpayer lodged complaint with SARS CMO on 15 Mar 2016 and was rejected stating the objection is still within the service level Lodged complain with OTO on the 17 Mar and was rejected based on SARS policy or practice generally prevailing

8 SARS policy or practice generally Case 2: Rejected prevailing: The complaint related to the 2015 Income Tax refund that was not paid out to the taxpayer Desired outcome: Refund to be paid out OTO Findings: Taxpayer had outstanding returns for 2010, 2011 and 2012 OTO rejected the complaint and advised the taxpayer to submit all the outstanding returns

9 A matter subject to objection and Case 1: Rejected appeal The complaint related to the VAT assessment for 2014/11 period which the taxpayer was not in agreement with and had resulted in a debt Taxpayer lodged complaint with OTO in March 2016 The desired outcome was for the VAT assessment raised on the 2014/11 period to be reversed OTO Findings: Taxpayer had submitted nil returns for period 2014/11

10 A matter subject to objection and Case 1: Rejected appeal SARS conducted audit for 2014/11 period and after finalisation of audit taxpayer lodged an objection which was disallowed with reasons provided OTO rejected the complaint and advised the taxpayer to lodge an appeal.

11 A matter subject to objection and Case 2 :Rejected appeal The complaint related to the 2015 Income Tax assessments that the taxpayer is not in agreement with and resulted in a debt Lodged a complaint with OTO in March 2016 Desired outcome was for OTO to request SARS to revise the 2015 assessments

12 A matter subject to objection and Case 2 Rejected OTO findings: appeal Taxpayer lodged an objection on the 4th Nov 2015 against the 2015 assessment SARS requested supporting documents on 7th Jan 2016 and were never submitted SARS disallowed the objection OTO rejected the complaint and advised the taxpayer to lodge an appeal

13 A decision of proceeding in or matter before the tax court Case 1: Rejected The complaint related to 01/2015 tax period and SARS had disallowed the appeal SARS submitted the case to the governance committee for approval on the 26 June 2015 The committee rejected the taxpayer s submission stating that the taxpayer had made the same error three times regarding invalid tax invoices

14 A decision of proceeding in or matter before the tax court.. Case 1: Rejected The committee stated that the penalties and interest should remain payable by the taxpayer ADR proceedings were terminated and SARS advised the taxpayer to submit a request to the tax board for hearing within 20 days from the termination of the ADR procedures Taxpayer lodged a complaint with OTO

15 A decision of proceeding in or matter before the tax court Case 1: Rejected His desired resolution was for OTO to determine a fair and appropriate outcome to the dispute resolution and for the penalties to be waived as they are unreasonable OTO rejected the matter based on the fact that it was a matter subject to tax court

16 A decision of proceeding in or matter before the tax court Case 2: Rejected The complaint related to the audits which were being conducted by SARS for a particular company group The group was struggling to comply with the tight deadlines and request SARS to allow sufficient time to gather documentation as the volume is too high and documents date back to 10 years which is difficult to obtain. Group made voluntary disclosure on their tax affairs in 2010 which resulted in a payment of a liability. Taxpayer complained that since that disclosure their group had been subjected to unnecessary audits.

17 A decision of proceeding in or matter before the tax court Case 2: Rejected Taxpayer lodged a complaint with OTO November 2015 Desired outcomes were the following: Intervention by OTO for a fair trial SARS to conduct one audit for the group at a time SARS to allow sufficient time before next audit SARS to change the audit team

18 A decision of proceeding in or matter before the tax court Case 2: Rejected During our investigation we found the following: Taxpayer was under forensic audit Taxpayer was linked to ghost exports and fabricating invoices to solicit undue vat refunds from SARS There were CIT and VAT debts due and on Appeal. The appeals were already set down in Tax Court. The matter was rejected.

19 REVIEW OF COMPLAINT 18. (2) The Tax Ombud may (a) (b) determine how a review is to be conducted; and determine whether a review should be terminated before completion. (4) The Tax Ombud may only review a request if the requester has exhausted the available complaints resolution mechanisms in SARS, unless there are compelling circumstances for not doing so. (5) To determine whether there are compelling circumstances, the Tax Ombud must consider factor such as whether:

20 REVIEW OF COMPLAINT (cont.) (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.

21 RESOLUTION AND RECOMMENDATIONS s20. (2) The Tax Ombud s recommendations are not binding on taxpayers or SARS.

22 OTO PROCEDURE If the CMO rejects the complaint or does not resolve it within 21 days as promised by SARS you can complain to the OTO. If the CMO procedure was not exhausted the OTO cannot review the complaint unless there are compelling circumstances for the taxpayer to not exhaust it first. The OTO complaints form must be completed in full. The complaint must be submitted to the OTO via the designated channels. The OTO will acknowledge the complaint and determine if it falls within our mandate and if it does, whether or not any of the limitations thereto apply.

23 OTO PROCEDURE (cont.) If the complaint does not fall within our mandate or the limitations apply, the complaint must be rejected. If the complaint falls within our mandate and no limitations apply, the OTO will investigate the factual background to determine if and how a review should be conducted. If the complaint has no merit the review will be terminated. If the complaint is valid the OTO will take the appropriate steps to engage SARS and resolve the complaint.

24 DISPUTE RESOLUTION PROCEDURE: OBJECTIONS

25 1. Assessment SARS raises an assessment and must provide the Taxpayer with notice which must include: Section 96 Taxpayer s name; Tax Reference Number; Date of the Assessment; Amount of the assessment; Tax Period; Date for payment; and Summary of the Dispute Resolution Procedure.

26 2. Reasons for the Assessment The Taxpayer can request reasons for the assessment: Within 30 days of the assessment. Rule 6 Timeframe may be extended with 45 days if SARS regards reasons for delay as reasonable. If SARS decides proper reasons were already delivered, must notify the Taxpayer within 30 days after delivery of the request and refer it to document wherein reasons were provided. Otherwise SARS must provide reasons for the assessment within 45 days after date of the request. SARS extend the period to provide reasons by 45 days only if they notify the Taxpayer of the extension before the first 45 days lapse.

27 3. Objection Timeframes The Objection must be filed within 30 days after the date of the assessment; or 30 days after SARS provided reasons ito Rule 6. SARS may extend the 30 day period with: Section 104 (4) & (5) Up to 21 days if there are reasonable reasons; Between 22 days and 3 years if exceptional circumstances exist; If more than 3 years have lapsed, SARS cannot legally entertain the objection. The Taxpayer can request extension before the expiration of the 30 day period or request condonation if the period has already passed. Section 104(2) If SARS does not grant extension the Taxpayer can object to the decision not to. This is a new and separate objection that must be dealt with on its own. Section 100(1)(b) If the Taxpayer did not object before 3 years have lapsed or withdrew the objection, the assessment becomes final and conclusive and the Taxpayer looses all rights to dispute any portion thereof.

28 4. Validity of the Objection Rule 7(4) & (5) Once received SARS determines if the objection complies with all the requirements and if not they must: Notify the Taxpayer that the objection is invalid within 30 days after receipt; Allow the Taxpayer 20 days to submit an amended objection without having to request extension/condonation; Rule 7(6) If the Taxpayer submits the amended objection after the deadline, the objection will be regarded a new objection and will only be valid if submitted with all requirements met and accompanied by a request for condonation.

29 5. Request for further Information Rule 8 Within 30 days after receipt of a valid objection, SARS can request substantiating documentation or information. The Taxpayer must submit the documents within 30 days after requested by SARS. The deadline can be extended by SARS for another 20 days if the Taxpayer provides reasonable grounds.

30 Request for further Information Rule 56 read with Section 129(2) SARS cannot invalidate the objection where a Taxpayer failed to provide information or supporting documentation on its request within the prescribed period. In order to finalise the objection, SARS must apply to Tax Court to make an order confirming the assessment.

31 6. Decision Rule 9 SARS must notify the Taxpayer of their decision on the objection within 60 days after receipt of the objection / 45 days after further information is provided. SARS can extend the 60 day period by 45 days only if the Taxpayer is notified before the 60 days lapse. If SARS requested further documents under Rule 8, it must notify the Taxpayer of the decision within 45 days after receipt of the requested documentation. If the Taxpayer fails to provide the requested documentation, SARS must notify the Taxpayer of the decision on the day the deadline for submission lapses.

32 Decision.. Section 106(1) A decision can only be made if the objection is valid. Section 106(2) &(3) SARS can only make 3 decisions on the objection: Allow it in full In which case the assessment must be revised in full and the dispute resolution procedure is finalised. Partially allowed In which case the allowed portion is revised and the Taxpayer can still elect to appeal the portion that was not allowed. Disallowed No revision is made and the Taxpayer can elect to appeal the decision in full or in part.

33 Difference Between Validity and Validity Decision Validity relates to format and substantive requirements of the objection. The merits are not taken into account. If a matter is invalid, SARS does not even look at the merits. The Taxpayer cannot Appeal if an objection is invalid. The Taxpayer can challenge the validity of the objection by making application to the Tax Court ito Rule 52(2)(b). Only if the matter is valid, will the objection be taken to the objections committee to look at the merits and decide if SARS was correct of not.

34 Difference Between Validity and Decision Decision.. A decisions relate to the merits of the matter and whether SARS was correct in raising the assessment or not. SARS will not make a decision on a matter if it is invalid. Only if SARS makes a decision to disallow or partially allow an objection, will the Taxpayer be able to appeal that decision.

35 HOW TO CONTACT THE OTO Phone: or (+27) Fax: (+ 27) or Download the complaints form from our website: www. taxombud.gov.za, or request a manual form. Physical address: Menlyn Corner, 2 nd Floor, 87 Frikkie de Beer Street, Menlyn Postal address: P O Box 12314, Hatfield, 0028

36 THANK YOU