South African Business Gets a Win Against SARS After Major Court Ruling

• The Johannesburg High Court overturned two SARS decisions after the tax authority refused to reconsider assessments linked to returns filed without the company's knowledge
• The case centred on a subcontractor who handled TEG Asset & Risk Management CC's tax compliance without the business ever approving the arrangement
• The ruling carries significant implications for South African businesses that outsource their bookkeeping and tax compliance to external practitioners

A Johannesburg High Court ruling has put the South African Revenue Service on the back foot after a judge found that SARS acted unlawfully when it dismissed a company's request to have its tax assessments reduced.

According to a report, the case involved TEG Asset & Risk Management CC, which had been hit with income tax and value-added tax assessments covering the 2015 to 2017 period. The company had hired an accountant to manage its finances, but that accountant quietly passed the tax compliance work to an outside consultant without telling the business or getting its approval. When that consultant's involvement led to missing documents and unfavourable tax calculations, SARS began debiting the company's bank account directly.

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TEG applied for reduced assessments under Section 93(1)(e)(iii) of the Tax Administration Act, a provision that allows relief where assessments result from fraudulent returns submitted without the taxpayer's authorisation. SARS turned the application down flat, arguing that because the accountant held a formal public officer appointment, any work done under that arrangement was legally authorised.

Why the court sided with TEG

Judge Wright rejected that reasoning. The court found a critical distinction between holding a public officer appointment and actually having authority to delegate tax submissions to a third party. Because SARS never contradicted TEG's claim that the outside consultant acted without permission, the revenue authority could not simply point to the public officer's status as a reason to deny relief.

The court set aside both of SARS's rejection decisions and ordered the tax authority to pay TEG's legal costs. The matter has been referred back to SARS for a proper, thorough reconsideration.

What this means for SA businesses

The ruling is a significant reminder for companies that outsource their tax and bookkeeping functions, a common practice across South Africa's commercial sector. However, legal experts stress that the judgment does not hand businesses a blanket escape from tax obligations by blaming their accountants.

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The court stopped short of declaring the disputed returns fraudulent or automatically granting TEG reduced assessments. Taxpayers must still produce solid factual evidence satisfying both the fraud and unauthorisation requirements under the Tax Administration Act before any relief is granted. The responsibility for statutory submissions ultimately remains with the business itself.

More on SARS and South African tax

• Briefly News recently reported that SARS changed how it collects unpaid tax from SA employees, giving employers more time to process deductions.
• SARS warned South African influencers to declare online earnings and free gifts, including PR packages, hotel stays and flights.
• SARS officials raided Tshwane CFO Gareth Mnisi’s office as the City of Tshwane confirmed the operation and his departure with revenue service officials.

Source: Briefly News