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Section 102 of Tax Administration Act 28 of 2011 - Burden on the Taxpayer - Layman Version

This section of the law, Section 102 of the Direct Tax Administration Act, explains who is responsible for proving information when dealing with tax matters in South Africa. This is often referred to as the “burden of proof.” It’s split into two main parts: what you (the taxpayer) need to prove, and what the South African Revenue Service (SARS) needs to prove.

 

What YOU (the Taxpayer) Must Prove

    • Generally, you, as the taxpayer, are responsible for providing proof for most claims related to your taxes. This means if you claim something, you need to show SARS the evidence.
    • Specifically, you need to prove:
      • Why something isn’t taxable: You must show evidence if an amount, transaction, or item should not be taxed at all, or if it’s legally exempt from tax.
      • Example: If you receive an inheritance, you’d need to show it’s an inheritance, which is generally not subject to income tax.
      • Why you can deduct something or set it off: You must prove that an amount or item you’ve claimed can legally be deducted from your income, or that it reduces your taxable amount in some way. This includes expenses that lower your tax bill.
      • Example: If you claim business expenses, you’d need receipts and records to prove these expenses were legitimate and related to your income-generating activities.
      • The correct tax rate: You must prove which tax rate should apply to a specific transaction, event, item, or to your particular type of taxpayer.
      • Example: If you believe a specific income stream should be taxed at a lower rate due to its nature, you’d need to show why that lower rate applies.
      • Why an amount reduces your tax: You must prove that a certain amount qualifies to reduce the actual tax you owe to SARS. This is different from a deduction, as it directly lowers the final tax amount.
      • Example: If there’s a specific tax rebate you’re claiming, you’d need to show you meet the conditions for that rebate.
      • Your valuation is correct: If you’ve put a value on an asset or item for tax purposes, you must prove that your valuation is accurate.
      • Example: When selling property, if you report its value, you might need an appraisal to back up that figure.
      • A SARS decision is wrong: If you believe a decision made by SARS is incorrect, especially one you can formally dispute or appeal, you must prove that their decision is wrong.
      • Example: If SARS issues an assessment that you believe is too high, you would need to provide evidence explaining why their assessment is flawed.

What SARS (the Tax Authority) Must Prove

    • While you carry most of the burden, there are specific situations where SARS (the South African Revenue Service) must provide the proof. This helps to balance the power between the taxpayer and the tax authority.
    • Specifically, SARS must prove:
      • Reasonableness of an estimate: If SARS has estimated your income or tax (under Section 95 of the Act), they must prove that their estimate is reasonable.
      • Example: If you haven’t submitted a return and SARS estimates your income, they need to show how they arrived at that reasonable estimate.
      • Facts for an understatement penalty: If SARS decides to impose a penalty because you’ve understated your income or tax (this is called an “understatement penalty”), SARS must prove the facts that led them to apply that penalty.
      • Example: If SARS believes you deliberately omitted income, they must provide the evidence to support their claim that an understatement occurred and warrants a penalty.
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