Sars puts through a sneaky change

The law now allows the revenue service to reduce the amount of interest it must pay a taxpayer in the event of an overpayment.
Sars has awarded itself a 30-day interest-free holiday on taxpayer money. Image: Moneyweb

The South African Revenue Service (Sars) is mandated to pay a taxpayer interest if they have overpaid their taxes, and likewise, the taxpayer is mandated to pay Sars interest if Sars has made an overpayment to the taxpayer.

The rationale for the payment of interest is to compensate a party for the economic loss of not having had use of those funds. The interest should run from the date that the party is short of the funds, to the date that the shortfall is paid.

This holds true for when the taxpayer has to pay Sars interest, but not when Sars is mandated to pay the taxpayer interest.

In fact, in a recent amendment to the Tax Administration Act (TAA), Sars has awarded itself a 30-day “interest-free” holiday.

Common law right

There is a common law right to claim interest on a contract, unless interest is waived by agreement between the parties.

If the contract is silent on the rate of interest, the court has held that interest should then be paid at the prescribed rate. (Crookes Brothers Ltd v Regional Land Claims Commission for the Province of Mpumalanga & others (590/2011) [2012] ZASCA 128).

The act prior to amendment

The TAA has provided for the payment of interest as follows:

Where an overpayment is made by:

  • Sars to a taxpayer – interest runs from the time the excess amount was paid by Sars (the effective date) until the date that the taxpayer has repaid Sars (Section 187(3)(g)).
  • The taxpayer – interest runs from the later of the effective date or the date that the excess was received by Sars, until the date the taxpayer is refunded (Section 188(3)(a)).

At this stage, the taxpayer and Sars were on an equal footing.

The sneaky amendment

The TAA was updated when the proposed amendments were promulgated in January 2021.

Included in the amendments was a new insertion, Section 187(3)(h), which provides that Sars is only required to calculate interest on an overpayment after a 30-day period has elapsed – in effect giving Sars an “interest-free” window.

Taxpayers however remain liable to Sars for the interest on Sars’s overpayment from the date of payment.

Read: Tax Ombud launches #TaxpayersRightsMatter campaign

Bowmans senior associate Julia Choate says the insertion “appears to skew the status quo in Sars’s favour”.

“Although we have yet to see how Sars will implement this amendment in practice,” she adds.


Choate explains that the “rationale for this amendment is to provide Sars with enough time to review and correctly classify any overpayments, so that if the taxpayer has existing tax debts, the ‘excess’ amount can be set off, so that Sars does not calculate and pay interest to taxpayers who simultaneously owe Sars outstanding tax and interest”.

But surely Sars should not be given an interest-free period – at the expense of a taxpayer who suffers the loss of interest – to do work that it is mandated to do in administering the tax system?

Choate cautions that “taxpayers will need to be considerably more vigilant when submitting returns and making payment to Sars, to ensure that they are not ‘penalised’ for accidentally paying Sars too much money”.

Ongoing problems in paying refunds

There have been ongoing problems in the payment of refunds.

The full payment of interest on a delayed refund should be the least a taxpayer can expect.

To give Sars a 30-day interest-free period to carry out various crosschecks would make most taxpayers choke.

In a judgment handed down in November 2020, taxpayer Rappa Resources had to urgently request a court order for Sars to pay value-added tax (Vat) refunds.

The taxpayer also requested an order that Sars complete a Vat audit that was instituted in March 2020. Sars stopped the payment of Rappa’s Vat refunds while the audit was taking place. But there didn’t appear to be a finishing line.

The total amount of refunds withheld from February to June 2020 approximated R1.6 billion.

Read: Tax Ombud holding Sars to account for actions of questionable legality

Sars had “reason to believe that Rappa is either directly or indirectly involved in unlawful activities”, and wanted to hold the proceedings in camera.

The court found that Sars “disclosed the information and then sought to protect its confidentiality after disclosing it”.

The court referred to this as Sars’s “slapdash approach to the confidentiality issue”.

Sars argued that “no decision had been made to withhold the refunds” as refunds will automatically be held when an audit commences. Hence, the “decision” to withhold the refunds was not reviewable!

The court held that this was “patently inconsistent with both the TAA and with Sars’s practice”.

Read: Sars cannot be allowed an indefinite time to complete a Vat audit

The court directed Sars:

  • To pay to Rappa the refunds for which Rappa could provide acceptable security;
  • To complete “the March audit”; and
  • To pay the costs of the court application, including the costs of two counsel.

The 30-day interest-free holiday is likely to cause tension between Sars and taxpayers, particularly where Sars is dragging its feet in completing an audit, or in ascertaining that the refund amount is correct.



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It is a good idea to have a tub of Vaseline handy when dealing with SARS.

One day – soon, I predict – taxpayers are just going to stop working and paying and then corrupt, insolvent SA would be in more serious trouble.
Sounds terrible – and lots of suffering, but thats about the only chance for SA to pick up and improve and build – treating taxpayers with respect.

How is that “sneaky?”

It’s downright arrogant!

You just cannot beat Big Brother, especially when Big Brother is an ANC run Government

More money to line the pockets of the Elite!

Ja no well fine — Just another government agency treating people with disdain !!!

I’ve become increasingly wary of SARS since the new commissioner took over. He is not the savior everyone hoped he’d be

These boys plays by their own rules

He has been deployed by the anc and is a proud member of this corrupt, thieving and backward organization.

So what should we expect???

The first thing he did in the job was to wave his finger at these these terrible people that dodge tax on rental profit on their granny flat and no mention of the speedy Gupta VAT claims or an update on the progress they are making on this matter.

is this organisation really “at your service” as the ad goes or is it rather the other way round?????

to me it simply represents the milking machine part of a useless incompetent government – simple as that

@ Johannes

I somehow think that their understanding of ” servicing ” you might be somehow of a different nature.

Watch this space. One month will become two and two months will become three and 3 will become 6 and so on. Finally, we will look just like the tax authorities in other African countries where refunds simply don’t exist. You will be lucky to get a credit against your account. Moreover, even if you go to court and win, the tax authorities will simply ignore the court judgment. Nobody ever wins against the all-powerful state in Africa. And then they say “Africa is open for business” or whatever.

It’s the kind of thing you expect from the Mafia collection agency.

Ja look I think it becomes ever clearer that we are dealing with Soviet style bureaucracy with an African or third world twist. Like millions of other Africans and third worlders there is really only one remedy; get out to the first world; walk, stowaway, swim or leaky boat. Almost any hardship will be worth it.

You haff been warned.

There is already billions of Rands of cash floating around that SARS is not aware of. Expect this it increase substantially at high speed.

I was paid zero interest on a stopper on my account when I was owed money. They buggered me around with FICA documents and it took me months just to verify my new bank account. Where’s the interest then??!

Notice just how more and more of our constitutional rights have been bulldozed by this rogue organisation. The Chief Thief seems to have any freedom to amend the tax act as it deems fit to undermine taxpayers. Nowadays, you cannot even be afforded the right to defend yourself, since this right has also been pulled from under you! If they deem you to have contravened the act, you are automatically guilty!

This article is wrong on several counts. The most important is that the 30 day period does not apply to all refunds. It does not apply to refunds of provisional tax overpaid or VAT. It only applies when a taxpayer pays more than reflected on assessment. Who does that? If you got an assessment from SARS or you prepared a self-assessment that showed R100 was due, why would you pay R105?

What was the R5 for? Perhaps it was R5 for another tax, which should have been paid separately. Perhaps it was finger trouble. If SARS just sends the excess back and it was the first, then you get to pay interest on the unpaid debt. Does that make sense or would you prefer that SARS tried to work out what it was that you were trying to achieve? Originally that was going to be 90 days but the feedback (probably from those prone to finger trouble 🙂 ) was that was too long, so it was shortened to 30 days.

This amendment was hardly snuck through. Have a look at 14.2 on page 71 of Bowmans is even on the list of commentators on page 81.

Like SARS ever completes anything in 30 days…

These are the same people that did not see Tax payer money do to Dubai and Pakistani banks. They refuse to investigate.

These are the same people that refuse to investigate ex-politicians with mansions in Dubai. They refuse to investigate.

These are the same people that refuse to investigate or run lifestyle audits on politicians which receive multimillion sports/luxury cars as gifts.

They have a list of likely tax dodgers available on a plate. Free. No effort required. It’s all there on the Zondo Commission transcripts. All they need to undertake are the lifestyle audits and review if previous tax returns. But I guess it’s easier to bully ordinary hardworking and honest taxpayers.

SARS keeps a portion of my refund for 12 months and the entire amount for a further 4 months. Where is my interest?

End of comments.



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