Page 1107 - SAIT Compendium 2016 Volume2

MEMORANDUM ON THE OBJECTS OF TAX ADMINISTRATION LAWS AMENDMENT BILL, 2015
of the inter-governmental agreement concluded with the United States of America and the associated Foreign Account Tax Compliance Act (FATCA).
2.39 Tax Administration Act, 2011: Amendment of section 34
The proposed amendment aims to include any person who is a party to an arrangement listed in a public notice by the Commissioner in terms of section 35(2) in the de nition of a participant thereby imposing a reporting obligation on such persons.
2.40 Tax Administration Act, 2011: Amendment of section 36
The proposed amendment is a technical correction. This section still refers to the Securities Services Act, 2004 (Act No. 36 of 2004), that was repealed with effect from 3 June 2013 and replaced by the Financial Markets Act, 2012 (Act No. 19 of 2012).
2.41 Tax Administration Act, 2011: Insertion of section 42A
In the context of information requests, interviews and eld audits, legal professional privilege is often asserted in respect of information required by SARS. This section seeks to clarify the requirements that must be met for such assertion and provides for a procedure for matters where SARS does not accept the assertion of legal professional privilege. The rst objective of section 42A is to resolve the matter between SARS and the taxpayer as opposed to starting with an adjudicative and generally more protracted process. This approach is followed elsewhere in the Act, for example section 66 which provides that a taxpayer subjected to a search and seizure and who intends to bring an application for the return of the seized relevant material or costs of damages, must rst request this from SARS and only if SARS refuses, bring a High Court application. Applying this approach to assertions of legal professional privilege regarding relevant material required by SARS means there will be a process to handle the volumes of such matters. The proposed amendment ensures that SARS will have a basic set of information to enable it to determine whether a document is subject to legal professional privilege. In the absence of this information SARS has no basis for determining whether it agrees or not with the taxpayer’s assertion of privilege or a decision in this regard by an independent legal practitioner or court. The courts have warned against overreliance on a ‘judicial peek’ to decide matters of con dentiality in decisions of the High Court in the case of privilege in a tax matter and the Constitutional Court in the case of promotion of access to information. If SARS and the taxpayer agree that the material is privileged, alternative methods such as redaction of the privileged part and providing SARS with the remainder can be pursued. This will substantially reduce the number of cases that require adjudication by an independent legal practitioner or the High Court.
2.42 Tax Administration Act, 2011: Amendment of section 46
This amendment deals with foreign information requests. During the course of an audit of a South African member of a multinational group it may be necessary to obtain relevant material that is held by other members of the group located outside South Africa. While the South African members of some groups are willing to obtain and furnish such material to SARS, others assert that they are not in a position to do so. In Practice Note 6 of 1999 SARS noted that ‘taxpayers may face diffıculties obtaining information from foreign connected persons’. Such dif culties would not be encountered if taxpayers were required to produce only their own documents. However, due to the relationship between the parties the Commissioner considers it reasonable to expect taxpayers to obtain such information where necessary. An amendment is proposed to ensure that taxpayers do not assert that they are unable to obtain and provide relevant material, only to provide it at a later stage, for tactical reasons. A minimum period for requesting relevant material held by a group member that is not in South Africa is proposed (i.e. 90 days from the date of the request unless reasonable grounds for an extension are submitted), together with a prohibition of a taxpayer’s subsequent production of that material if it was not produced when requested. If SARS is able to obtain the information under an international tax agreement or standard, which is a more protracted process, both parties may use it subject to the conditions of con dentiality imposed under the treaty. The prohibition against producing the documents at a later stage may be relaxed by a competent court on the basis of circumstances outside the control of the taxpayer and any connected person in relation to the taxpayer. Furthermore, the proposed amendment clari es that a request by SARS for relevant material from third parties is limited to information maintained or kept or that should reasonably be maintained or kept by the person in relation to the taxpayer.
2.43 Tax Administration Act, 2011: Amendment of section 47
The proposed amendment aims to clarify which persons may be interviewed or requested to submit relevant material where the person whose tax affairs is under veri cation or audit is a company or other legal entity. A legal entity comprises of people and if they have knowledge of the tax affairs of the legal entity that employs them, they are the people that SARS must interview for purposes of the veri cation or audit. It is the function of SARS auditors to evaluate the various sources of information which are placed before them to ascertain the correct tax liability. SARS auditors are regularly confronted by discrepancies between documents, statements and other information available to them which they must reconcile in order to clarify issues of concern regarding the tax liability of the taxpayer. Hence, the proposed amendment provides that a senior SARS of cial may require—
• a current employee of the entity; or
• a person who holds an of ce in that entity,
to attend in person at a time and place designated in the notice for the purpose of being interviewed by a SARS of cial concerning the tax affairs of the relevant taxpayer, where the interview is intended to clarify issues of concern to SARS to render further veri cation or audit unnecessary or to expedite the completion of a current audit or veri cation. The person so interviewed may also be required to submit relevant material under his or her control.
SAIT CompendIum oF TAx LegISLATIon VoLume 2 1099