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  • Emily


The High Court of South Africa in Pretoria recently ruled that taxpayers have a right to be notified before the South African Revenue Service (SARS) appoints an agent to collect ‘outstanding tax debt’. The High Court ordered the Commissioner to refund the taxpayer together, with interest as well as the costs of litigation.

The costs of litigation often discourages taxpayers who want to take action against SARS to recover their funds, but this Judgment places an importance on the rights of the taxpayer in situations where proper processes are not followed.


In this case, the SARS issued a letter notifying the taxpayer that there was a debt on their account which fell due at a later date and the letter was issued before the expiry date for payment specified in the notice. SARS used this notice as evidence that the taxpayer had been notified that SARS would be appointing the bank as an agent.

The High Court had to consider whether that notice (issued before the due date of the debt) constituted a notice in terms of Section 179 of the Tax Administration Act 28 of 2011 (“TAA”), and whether such notice was sufficient to allow SARS to appoint the bank as an agent to collect the outstanding tax debt.

In this regard, the Court ruled against the Commissioner, stating –

“…the respondent may only use the method in sec 179 to obtain payment through a third party if it complies with the requirements of the section. The wording of section 179(5) is unambiguous and clear – the notice to a third party “may only be issued after delivery of a final demand for payment which must be delivered at least 10 business days before the issue of the notice…This is a peremptory requirement before the step can be taken to issue a third party notice for the recovery of an outstanding tax debt.”

The Court highlighted that the purpose of Section 179(5) was to limit the powers of SARS in recovering outstanding tax debts and appointments of third party collection agents, and to ignore the provisions of Section 179(5) would be condoning an unlawful process and render such provision in the TAA redundant.

This decision makes it clear that before SARS can appoint a third party as an agent to collect outstanding debts, the following requirements must be met:

  • There must be a tax debt;

  • The due date for payment of the tax debt must have expired;

  • A letter of demand must be delivered to the taxpayer at least 10 days prior to issuing a notice to a third party collection agent;

  • The letter of demand must set out the recovery steps to be taken should the taxpayer fail to settle the outstanding tax debt; and

  • The letter of demand must specify the relief mechanisms available to the taxpayer;

  • The Commissioner must notify the taxpayer of its intention to use collection methods before making use of such provisions.

Another important aspect of the judgement is that the letter of demand must be delivered to the taxpayer – either by way of electronic platform or to the last known address of the taxpayer. A notice generated on the eFiling system does not satisfy the requirement of delivery unless such notice is uploaded on to the taxpayer’s profile. Taxpayers should be aware of the fact that should the taxpayer have failed to update their last known address with SARS, the notice may be sent to an old address and may be deemed to be sufficient service in the eyes of the Court, as the obligation to notify SARS of any change of address lies with the taxpayer.

What the Tax Administration Act says

Section 179 of the TAA provides the SARS Commissioner with the power to appoint a third party to hold money on behalf of a taxpayer, and to pay such money over to SARS in respect of an outstanding tax debt. This third party is often the bank with which the taxpayer holds an account.

However, this is not an absolute power conferred on the Commissioner. There are certain steps that must be taken by the Commissioner before appointing this third party agent. This includes:

  • notifying the taxpayer of the outstanding tax debt, and that further steps will be taken should the tax debt remain outstanding; and

  • allowing the taxpayer a specified period in which to pay the outstanding tax debt; and

  • allowing the tax payer to provide the Commissioner with reasons for his or her inability to comply with the period specified in the notice.

The purpose of this is to align the SARS procedures with the Promotion of Administrative Justice Act, which places an obligation on public entities to notify any person of their intention to take a decision that has an adverse material external effect on such person’s rights, such as the decision to appoint a third party as a collecting agent for outstanding tax debt.

Importantly, a key aspect of the Section 179 process is that the debt must be outstanding. Any notice then served to a taxpayer by the Commissioner before expiry of the aforementioned date does not qualify as a ‘notice’ in terms of Section 179 of the TAA, and SARS cannot invoke these provisions against any third party who holds monies or assets on behalf of the taxpayer to collect on a tax debt.

This is a revolutionary decision held in respect of collection of tax debt from taxpayer’s bank accounts without any sufficient notification and/or response from the taxpayer required. There have been many instances where taxpayer’s have found that tax debt has been merely released from various banking accounts without explanation. The requirements entrenched in this judgment make it clear that the Commissioner must allow the taxpayer a reasonable notice period as well as an explanation of their rights and the right of recourse which SARS may have should the debt remain outstanding.

For any assistance in respect of monies collected by SARS through a third party agent, and/or the receipt of a letter of demand from SARS, contact or call 010 109 1055 to set up a consultation.

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