If you're under investigation, and a judge believes you haven't complied with your tax obligations, SARS can get a warrant to search your premises. A judge will probably grant the warrant quite freely and won't need much convincing from SARS.
To get this warrant, SARS must apply to a magistrate or a judge to issue it and it can pitch up at your office unannounced, conduct a search of your premises and seize relevant material.
Luckily, they can't just apply as and when they feel like it. SARS has to prove to a judge why thet need this warrant.
This is exactly what happened in a recent case.
Let's have a look at the case Huang and Others v The Commissioner for the South African Revenue Service.
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The facts of the case
SARS applied for a search and seizure warrant against the current applicants, being Mr Huang, Mrs Huang, and Mpisi Trading 74 (Pty) Ltd (Applicants).
Their application was successful, which allowed them to search the applicant's premises and to seize documentation and relevant material.
SARS conducted the search on 26 April 2013.
The reason the warrant was granted, was because Huang and Others didn't comply with their duties in terms of the Income Tax Act, No 58 of 1962, the Value-Added Tax Act, No 89 of 1991 and/or the TAA (relevant Acts). There were reasonable grounds to believe they had committed offences in terms of the relevant Acts.
After SARS was granted the search and seizure warrant, Huang and Others approached the High Court asking it to reconsider. Their application was based on the following submissions:
· The warrant application didn't satisfy the requirements of an ex parte application. I.e. SARS went to court without Huang;
· The main application didn't satisfy the requirements of the TAA; and
· The ex parte application was an abuse of the court process.
Huang and Others also said SARS didn't disclose all the material facts to the judge and some of the facts provided were irrelevant. SARS frustrated the court and aimed to influence the judge to issue the warrant.
The Applicants said if SARS had given the judge all
the material facts and the correct information, he wouldn't have issued the warrant.
The court sided with SARS and said the facts it disclosed were enough and met the requirements of Section 59 of the Tax Administration Act.
SARS' said the warrant application had enough substantial information on it, which led them to believe Huang and Others didn't comply with the Acts. Let's see what this all means for you.
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So what does this all mean?
A judge can issue a warrant if he's satisfied there are reasonable grounds to believe you didn't comply with your obligations set out in the tax Acts. Or if you committed a tax offence and SARS will find relevant material on your premises.
SARS has to set out reasonable grounds to support any argument it puts forward against you if it believes you aren't complying. It also needs to show a court that it will find relevant material on your premises and must specify this in the application.
If the court is happy with this, it will issue the warrant.
So, basically, a court must first see if objective jurisdictional facts are present. Secondly, it will look and see if the warrant was exercised judicially. If SARS achieves both of these the warrant will stand. If not, the court will set it aside.
What you can do if a SARS official rocks up with a search and seizure warrant
If a SARS official arrives at your premises to perform a search and seizure ALWAYS ask to see their SARS official identity card first. No card means no entry – regardless of a warrant issued or not. The Tax Admin Act specifically states under section 61(1)
that 'A SARS official
...' must conduct the search, and therefore section 8(3)
should take precedence over any warrant shown to you. If they can't prove they're a SARS official, then they aren't allowed to carry out the search in terms of section 61
Once they positively identify themselves as SARS officials, ask to see the search and seizure warrant.
Until next time
Managing Editor: The Practical Tax Loose Leaf Service