Reference documents and sites
ITR12 – annual tax return submitted by the taxpayer
ITA 34 – SARS notification to the tax payer via e-Filing and email
Income Tax Act
Tax Administration Act
In this article, we discuss the basics of tax refunds from SARS and the applicable tax-related legislation.
Section 190(1) of the Tax Administration Act, 2011 determines that SARS must pay a refund, together with interest on that amount, to any taxpayer who is entitled to it. This provision extends to refunds of income tax, value-added tax (“VAT”), mineral royalties, or pay-as-you-earn but the rights given to taxpayers is subject to certain further provisions of section 190.
Once you have completed and submitted your annual tax return, SARS will issue a notification to the taxpayer via email, SMS and e-Filing.
Log in to your e-Filing profile and check the ITA34 document; you will see whether you owe SARS money, or if they will issue you with a refund.
If you are owed a refund, this will be electronically processed and usually reflects in your bank account within 2–3 days of the ITA34 being issued but sometimes a delay, with reasons, may occur.
Reasons for the refund payment delay:
Your return might have been selected for an audit or verification. On the ITA34, there is a block which says Audit: Yes or Audit: No.
If it says Yes, SARS will send a follow-up letter requesting supporting documentation to be reviewed by SARS. in e-Filing you will be able to submit the required documents.
Once the audit process is finished, SARS has 21 business days to issue a Letter of Completion and also generate a second, revised/additional ITA34 showing if the refund or amount owing has changed or stayed the same. Once the Letter arrives, expect the refund within 7 business days.
Section 190(2) of the Income Tax Act contains info regarding refunds and audits. SARS is not required to pay a refund until such time as a “verification, inspection or audit” in respect of that refund has been finalised in terms of Chapter 5 of the Tax Administration Act however SARS cannot use the defence that it is busy with a general tax audit and therefore refuse to make the refund as SARS has a 21 day time frame to comply with. There have been court cases against SARS for non-payment and the courts review each refund case based on the applicable merits. Rappa Resources (Pty) Ltd v C:SARS in 2020 is one example in which the courts ruled against SARS for not paying the refund in an acceptable time-frame.
It’s important to keep in mind that section 190(4) of the Income Tax Act contains prescription provisions. This section provides that a refund stemming from an erroneous overpayment of taxes will be forfeited to the State, unless a refund is made:
in the case of an assessment by SARS (such as income tax), within three years of certain dates; and
in the case of a self-assessment (such as VAT and mineral royalties), within five years from certain dates.
Taxpayers who are owed refunds should ensure that they enforce their rights without any delay. A refund that has been prescribed will not be recoverable from SARS unless the above provisions have been met. Do not delay any replies to SARS and query the refund status as often as required.
- Outstanding taxes (and returns) could impact on the payment of refunds
In terms of section 191 of the Tax Administration Act, SARS may allocate a refund against certain other outstanding taxes. For instance, SARS may set-off a VAT refund against outstanding income tax and the result of this provision is that SARS will not pay any amount of a refund if there are outstanding returns recorded on the taxpayer’s account.
Taxpayers must keep in contact with SARS for any refunds due. If no response is forthcoming, a taxpayer may approach the High Court to compel SARS to pay the refunds that are due. In reaching a decision, the court will consider all of the provisions discussed above and the applicable facts.
If you’ve failed to keep your annual tax returns up to date, SARS will insist that all outstanding returns are submitted before a refund will be issued to you. To check for outstanding returns, click on the Returns tab on SARS e-Filing, then click SARS correspondence, Request Historic IT Notices and then view a Statement of Account, also known as an ITSA. Here you will see any outstanding returns. If you complete these old tax returns SARS can release your tax refund (as long as you haven’t been charged penalties for late filing that is).
- Banking Details
SARS may have invalid, outdated, incomplete or no banking details listed for you. SARS should notify you if there’s a problem but it is the taxpayers responsibility in the first place to confirm that the bank account details are correct when submitting the annual return.
Log in to your e-Filing profile and verify your bank account details once again.
- Unpaid Balance
The last reason your refund may be delayed could be that you have an outstanding amount due to SARS. You can check this on e-Filing by requesting a Statement of Account (in historic notices).
If this is the case, and you do owe SARS money, they might deduct your balance from your refund amount.
SARS has a help centre you can contact on 0800 00 7277.
Whatever the course of action, taxpayers should seek professional tax advice on the available remedies to facilitate a tax refund. If your personal tax is of a complex nature then the services of a tax professional is advisable. Companies should, in any event, use the services of professional accountants for annual returns and must ensure that the accountants receive prompt and accurate information from the company at all times.
Author Craig Tonkin