This 2026 article is an update of the original article published in July 2019.
The original article can be accessed here: https://fincor.co.za/sars-and-tax-assessment-prescriptions/
A second article can be found here: https://fincor.co.za/tax-returns-and-the-3-year-limitation-period-of-the-tax-administration-act/
Before the Tax Administration Act, 28 of 2011 came into effect on 1 October 2012, section 11(a)(iii) of the Prescription Act applied to tax debts. These debts are prescribed after 30 years. The period of limitation for the collection of tax debts is now set out in section
171 of the TAA.
Section 11 of the Prescription Act as it applied until 2011 and before the Tax Administration Act 28 of 2011 came into effect is as follows:
“11 Periods of prescription of debts.
The periods of prescription of debts shall be the following:
(a) thirty years in respect of:
(i) any debt secured by a mortgage bond;
(ii) any judgement debt;
(iii) any debt in respect of any taxation imposed or levied by or under any law;
(iv) any debt owed to the State in respect of any share of the profits, royalties or any similar consideration payable in respect of the right to mine minerals or other substances;(b) fifteen years in respect of any debt owed to the State and arising out of an advance or loan of money or a sale or lease of land by the State to the debtor, unless a longer period applies in respect of the debt in question in terms of paragraph (a);
(c) six years in respect of a debt arising from a bill of exchange or other negotiable instrument or from a notarial contract, unless a longer period applies in respect of the debt in question in terms of paragraph (a) or (b);
(d) save where an Act of Parliament provides otherwise, three years in respect of any other debt.”
Section 99 of the TAA Act is given below with CAPITAL LETTER emphasis added by the author of the article.
Section 99(1)(a) of the TAA provides:
“An assessment may not be made … (a) three years after the date of assessment of an original assessment by SARS…”
Section 99(2)(a) then states:
“Subsection (1) DOES NOT apply to the extent that (a) in the case of assessment by SARS, the fact that the full amount of tax chargeable was not assessed was due to the following:
(I) FRAUD;
(II) MISREPRESENTATION; OR
(III) NON-DISCLOSURE OF MATERIAL FACTS…”
According to section 171 of the TAA Act, SARS may not initiate proceedings for the recovery of a tax debt after the expiration of 15 years from the date the assessment of tax becomes final or a decision referred to in section 104(2), that is, a decision amenable to objection and appeal, giving rise to a tax liability, becomes final.
Section 79 of the Income Tax Act, 58 of 1962 (“Income Tax Act”), contained the prescription provisions before the enactment of the TAA. Section 99 of the Tax Administration Act regulates the prescription of tax periods. The most important circumstances in which SARS is barred from raising further assessments in relation to a tax period are those relating to the passing of time.
As a general rule, SARS is time-barred from raising an assessment in relation to a tax period as follows:
- three years after the date of assessment of an original assessment by SARS (e.g., for income tax);
- five years after the date of assessment of an original assessment, either by way of self-assessment or by way of a return (e.g., value-added tax); and
- five years from the date of payment of tax or the effective date (in the case of no payment being made) for a tax period where no return is required.
Taxpayers would therefore generally be able to assume that they would not be at risk of SARS raising additional assessments after the expiry of these time periods, but certain exceptions apply to this general rule.
The most important of these exceptions is where there has been fraud, misrepresentation or non-disclosure of material facts which resulted in the proper amount of tax not being assessed.
In the recent October 2021 Supreme Court of Appeal judgement of The Commissioner for The South African Revenue Service versus Spur Group (Pty) Ltd (Case no. 320/20) [2021] ZASCA 145 (15 October 2021), the SCA was called upon to, amongst others, decide on whether SARS was precluded from raising additional assessments in respect of the taxpayer’s 2005 to 2009 years of assessment on the grounds that those years of assessment had been prescribed in terms of section 99 of the Tax Administration Act, No. 28 of 2011.
In this court case, Spur had answered “No” to pertinent questions which should have been answered as “Yes” in the income tax return. Spur also failed to separately disclose certain items in the relevant fields provided for in the income tax return, limiting SARS’ ability to flag potential tax risks in relation to the returns through its risk identification processes upon submission of the returns. These disclosure errors resulted in the Commissioner not being able to correctly assess Spur for tax within the three-year period after the original assessments had been issued in respect of the 2005 to 2009 years of assessment, respectively. The court found these errors to constitute a deliberate misrepresentation and a non-disclosure of material facts, sufficient enough to displace the protection given by prescription.
Section 40 of the Tax Administration Act, No. 28 of 2011 (“the TAA”), states that SARS may select a taxpayer for audit on the basis of “any consideration relevant for the proper administration of a Tax Act, including on a random or risk assessment basis”. This provision
does not prescribe a specific time limit for the number of past tax years in respect of which SARS must/may conduct an audit. The basis on which SARS may select a particular taxpayer for audit (i.e., for the proper administration of a tax act) may still accommodate the argument that SARS’ audit powers are not completely unrestricted.
The term “administration of tax acts” is defined in section 3 of the TAA. In essence, section 3 determines that SARS must make sure that a taxpayer has complied with a relevant tax act. The amount of time that has lapsed between the time when SARS wants to conduct the audit and when the year of assessment ended is irrelevant to whether the taxpayer has complied with a tax act.
This has recently come to the fore again with SARS deciding to review the tax compliance status for trusts going back 10 years and more, to the 2015/2016 tax period.
Section 171 of the TAA states that recovery steps to COLLECT a tax debt may not be initiated any later than fifteen years from the date of assessment. Section 171 only places a time limit on the collection of tax debts, not audits.
With the renewed focus on trusts and tax compliance, this goes hand-in-hand with penalties for current non-compliance. SARS issues administrative penalties where trusts failed to submit the required ITR12T returns for the 2024 and 2025 tax years following the final demand process implemented earlier this year. It seems quite normal, then, to conduct audits as and when appropriate, even if it goes back 10 or more years, to properly verify compliance status. Penalties range from a meagre R250 per month to a hefty R16 000 per month per outstanding return up to a maximum of 35 months.
In April 2026, SARS published a reminder on their website to all trusts registered in South Africa that, in terms of tax legislation, are required to submit income tax returns for every year of assessment. This obligation applies even where a trust had no economic activity during the relevant year. Where a trust is no longer being used for its intended purpose, trustees are encouraged to formally terminate the trust through the Office of the Master of the High Court (Master). Once the Master has issued a written confirmation of termination, trustees should request SARS to deregister the trust for income tax purposes. This process assists in preventing the unnecessary imposition of administrative penalties arising from ongoing non-compliance.
Although the Trust Property Control Act does not expressly prescribe a deregistration process, the Chief Master issued a directive in 2017 to provide clarity on the procedure to be followed. Importantly, trustees must first establish and regularise the trust’s tax compliance status with SARS before approaching the Master for termination.
Trustees act as representative taxpayers of a trust in terms of the Income Tax Act and are required to ensure that all outstanding tax returns, payments, and related tax obligations are fully resolved prior to requesting termination at the Master and deregistration at SARS. In some instances, SARS may owe a trust a tax refund. Once a trust has been terminated by the Master, it legally ceases to exist, as does the Office of Trusteeship. In such circumstances, SARS is unable to lawfully process or pay any refunds due to the trust.
Trustees are urged to follow the correct sequence: first confirm and regularise the trust’s tax affairs with SARS, and only thereafter proceed with termination at the Master. This approach safeguards compliance and protects trustees from potential personal liability. This also ensures that any refunds due to the trust can be processed timeously.
All trusts must:
· File a tax return (ITR12T) annually, whether economically active or not.
· Update and maintain trust information reflected on the SARS system.
· Maintain a detailed organogram and records of the founder, trustees, donors, and beneficiaries.
· Maintain strict records of financial statements, trust deeds, and minutes of trustee meetings.
· Submit IT3(t) returns reporting detailed information on distributions and amounts vested in beneficiaries, enabling SARS to cross-reference data with beneficiaries’ personal tax returns.
· Some trusts may also be subject to provisional tax requirements.
The biggest change is the strengthened enforcement of the IT3(t) reporting system. Trustees must submit IT3(t) information that details all income, capital gains and vested distributions made to beneficiaries. SARS then automatically cross-checks this information with the beneficiary’s own tax returns.
This matters for compliance because IT3(t) data gives SARS visibility on the following:
Trust distributions to beneficiaries in South Africa
Capital gains tax on trust distributions
Trust distributions to non-residents
Whether beneficiaries have correctly declared tax on trust distributions
Extensive and precise attention must be given to annual tax returns by all taxpayers and their professional tax representatives; failure to do so will have SARS knocking on your door even after the prescription limitation period.