Seeing Sars in court

Isaac Moledi

Isaac Moledi

A taxpayer who thinks he or she has been wrongly assessed by Sars has the right to challenge the assessment in the tax court.

But, advises Mark Badenhorst, a tax specialist at PricewaterhouseCoopers, first find out if Sars will be ordered to reimburse your legal costs if you are successful or whether you will be ordered to pay the taxman's legal costs if the case goes against you.

Badenhorst said that the general principle in litigation is that the loser pays his opponent's, as well as his own, legal costs.

"But the rule as to legal costs is different in the tax court. Where a taxpayer is challenging a tax assessment in the tax court, the general rule is that the court makes no order as to costs, with the result that, irrespective of who wins or loses, Sars and the taxpayer each pay their own costs."

Badenhorst cautions that this is clearly a double-edged sword.

"Even if the taxpayer is successful in the tax court, he will still have to pay his own legal costs. But if he loses, at least he will not have to pay Sars' costs."

Badenhorst said that section 83(17) of the Income Tax Act provides for circumstances in which the tax court can deviate from the ordinary rule and order Sars or the taxpayer to pay the other's legal costs.

This section provides that, if Sars' claim is held to be unreasonable, the taxman can be ordered to pay the taxpayer's costs.

But if the taxpayer's grounds for contesting the assessment are held to be frivolous, then the taxpayer can be ordered to pay Sars' costs.

According to Badenhorst, the general principle of litigation costs will apply if either the taxpayer or Sars appeals to the high court against the judgment of the tax court; the loser will be ordered to pay the winner's costs of the appeal.