Obtaining tax and legal certainty from the South African Revenue Service (SARS), is often the prudent approach, and which may be received as a ruling. In the normal course, the benefit derived from using a specialist tax attorney to obtain this certainty outweighs the costs involved but imagine your advisor’s request costing you more than R39 million.
Jashwin Baijoo
Associate Director and Head of Strategic Engagement & Compliance
This is what happened to Assmang (Pty) Ltd, carrying on a mining business in the Northern Cape, when their astute advisors, KPMG approached SARS for a ruling, which resulted in a robust compliance audit.
Flowing from this, Assmang sought legal recourse, only to land with 2 adverse judgements, the last of which was handed down in the Supreme Court of Appeal (SCA) on 29 August 2025. The final outcome: Assmang’s appeal was not only being dismissed with costs but compounded with a finding that failure to keep logbooks disentitles their diesel refund claim.
Assmang’s Failed Appeal
The recent SCA judgement in Assmang (Pty) Ltd v The Commissioner for the South African Revenue Service and Others (311/2024) [2025] ZASCA 121, serves as a clear warning to taxpayer’s to always ensure full compliance with tax acts.
This judgement’s core focus is Assmang’s claim for diesel refunds, with primary dispute on appeal, revolving around whether Assmang’s contracts with its mining service providers were on a “wet” or “dry” basis. This basis determines eligibility for the refunds under the Customs and Excise Act 91 of 1964.
The snowball which triggered the avalanche, even before the refunds were claimed, was that KPMG, on behalf of Assmang, approached SARS for a ruling on whether a diesel refund in respect of contactors could be claimed.
Being a prudent revenue authority, SARS detected a risky tax treatment strategy and proceeded to conduct a broader diesel refund audit. Upon completion of the audit, and imposing both interest and penalties, Assmang was stuck with the most expensive ruling request it could imagine, to the tune of R39 566 010.40.
Aside from the findings of the contracts being on a “wet” basis, meaning Assmang did not qualify for a rebate, another key shortcoming was their record keeping, especially logbooks, which requirements are clear in law – “substantial compliance is not sufficient”.
Having due regard for the grounds set forth in the judgement, the appeal was bound to fail, but so then too, would the legal muster to pass an intense SARS audit not be met, which worst case, can result in penalties being imposed of up to 200% of the corresponding tax liability!
Audit Adjustments Effected by Additional Assessments
SARS’ Audit Team appear to be strongly enforcing the zero-tolerance policy on any non-compliance. Aiding their cause, and easing the pressure of the job, are the data-driven insights derived from AI use, including processing of taxpayer historic returns, and logbooks, with absolute precision.
In practice we have seen a significant spike in SARS audits, which in most cases result in the audit being Finalised with Adjustments, due to taxpayers missing the Request for Relevant Material, or their supporting documents not meeting SARS’ standard.
SARS’ strategy to instil a sense of urgency and responsibility among taxpayers’ hinges on making non-compliance both hard and costly. By detecting and addressing non-compliance rigorously, SARS aims to deter tax evasion and ensure that all taxpayers fulfil their obligations.
This approach emphasizes that no taxpayer, regardless of their economic standing, is beyond the reach of SARS’ compliance efforts. Recent trends have also shown SARS considering not just current compliance, but also deep diving into historic risks of non-compliance, and in some instances, even requesting taxpayers to look into their crystal balls and provide SARS with income and expenditure estimates for future tax periods.
Avoid Penalties, and Prosecution
Where you find yourself, or your clients in the case of finance professionals, facing a historic audit from SARS, it is imperative to ensure a timeous response, with all correct supporting documentation. We have seen in the market a number of ill-advised taxpayers seeking the correct counsel only after the fact and paying the price for it, such as when those additional assessments are issued post-Audit Finalisation. The nail in the coffin is always the understatement penalties, capping at a bank-breaking 200% of the capital taxes due.
As a rule of thumb, any and all correspondence received from SARS should be holistically addressed by a strong multi-faceted tax, legal, and financial team – the “A-Team”. In instances of non-compliance with tax laws, legal professional privilege is a must, especially where SARS have suspicion of, or have already detected “risk(s)”.
This will not only serve in safeguarding you or your clients against potential jail-time but also allow for the correct legal stopper to be put in place preventing SARS from implementing aggressive collection measures. As compliance specialists in their own right, enlisting your correct A-Team ensures taxpayers and their astute practitioners will be correctly advised on the most appropriate solution to ensure the burden of proof is fully discharged in any audit.
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