“Exceptional circumstances” when objecting to an assessment
26 May 2016
by Keelen Snyders, BDO South Africa
A recent tax case highlighted the importance of taxpayers gaining an understanding of the objection process for income tax assessments issued by SARS. The case, which was contested between ABC (Pty) Ltd and the Commissioner, was concerned with the onus on the taxpayer to prove “exceptional circumstances” when objecting to an assessment issued by SARS.
In terms of the Tax Administration Act (TAA), a taxpayer may object to an income tax assessment within 30 business days of the date of the assessment. If a taxpayer wishes to object after expiry of this period, a senior SARS official may extend the period by 21 business days provided SARS is satisfied that “reasonable grounds” exist for late submission.
If a taxpayer wishes to object after the 51-day period, a senior SARS official needs to be satisfied that there were “exceptional circumstances” which caused the delay. SARS may not allow an objection if more than three years have elapsed from the date of assessment. The taxpayer can object to a decision by the senior SARS official not to extend the period.
The TAA does not define the term “exceptional circumstances” but SARS is of the view that the Oxford Dictionary meaning of “exceptional” should apply. The Oxford Dictionary defines “exceptional” as “unusual; not typical.” The term “exceptional circumstances” must therefore refer to circumstances that are out of the ordinary and of an unusual nature.
The TAA lists circumstances deemed to be “exceptional circumstances” although it only relates to the remittance of administrative non-compliance penalties. SARS’ Interpretation Note 15 indicates that the list (below) “provides an indication of the type of things which, taking into account the particular facts and circumstances, may constitute exceptional circumstances for purposes set out in section 104(5)”. This list includes:
- A natural or human-made disaster;
- A civil disturbance or disruption in services;
- A serious illness or accident; and
- Serious emotional or mental distress.
In the case of ABC, the taxpayer objected to an assessment issued by SARS 65 business days after the date of assessment. The taxpayer therefore has the initial 30-day and additional 21-day periods. To condone the late objection a senior SARS official needed to be satisfied of “exceptional circumstances” for the delay. The Tax Court held that no “exceptional circumstances” existed as the taxpayer did indeed have the opportunity to consult with various attorneys but made no effort to do so.
The ideal is if a taxpayer submits an objection to an assessment within 30 business days to avoid possible disputes with SARS of whether “reasonable grounds” or “exceptional circumstances” existed.