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File Image: IOL

Ferrari Logistics vs Sars highlights the need for a tax law partner

By Opinion Time of article published Dec 22, 2020

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In early December, the Pretoria High Court ordered that Sars refund Ferrari Logistics more than R1 million, including interest, it collected without cause from the company’s bank account in October and November 2020.

Jean-Louis Nel of Tax Consulting SA, says the case illustrates the importance of engaging an expert in tax law, court proceedings and Sars legal processes.

“While tax advisors are typically competent to service their clients’ general tax needs, both the taxpayer and the advisor should ensure their tax compliance regime includes a strong tax legal partner,” he says.

This guarantees similar unwarranted actions are met with the immediate legal response required and expected by the court when considering if the matter should be heard on an urgent basis.

The matter

Tax Consulting SA was approached by Legal Professional Accounting Consultants, the tax advisor to Ferrari Logistics (Pty) Ltd, to provide legal assistance to the large multinational organisation.

In October 2020, Sars appointed Ferrari Logistics’ bank, FNB, as a third-party agent to collect a substantial sum Sars deemed to be due from the company’s account. Sars has the right to make such appointments in terms of Section 179 of the Tax Administration Act. However, when applied improperly, it is imperative that the affected taxpayer understands their legal rights and responds proactively.

Ferrari Logistics had not received a letter of demand from Sars as prescribed by the Act and was in fact tax compliant with no outstanding tax debt due to Sars.

Tax Consulting SA promptly gave notice to Sars that if it did not refund the amount, the taxpayer would approach the High Court for relief.

Despite this, Sars collected further funds, nearly draining Ferrari Logistics’ bank account. This had a significant impact on the business’s cash flow and its ability to pay employee salaries.

The taxpayer had no alternative but to launch an urgent application against Sars in the Pretoria High Court to set aside the third-party appointment and to claim a refund of the full amount together with interest and costs. Ultimately, the court granted an order in favour of the taxpayer.

“Without specialised legal guidance, Ferrari Logistics could have waited over eight months for the case to be heard, and even longer under Covid-19 constraints,” says Nel. He commends Legal Professional Accounting Consultants for promptly seeking professional council for their client.

According to Nel, this was the fourth matter of its nature being heard by the Pretoria High Court alone this year.

Rapid response team

Taxpayers who delay taking decisive action risk undermining the merits of their own urgent application before the High Court.

Tax Consulting SA advises organisations and their tax advisors to work in a cooperative manner with Sars when dealing with regular tax affairs. However, when matters arise that infringe on the taxpayer’s rights, they should engage legal professionals without delay.

Nel says the best approach is to have a rapid response team on call that comprises the taxpayer’s internal tax function, the tax advisor and a solid legal partner.

“Don’t overlook the legal component,” he advises. “Immediate direction on the best and fastest route through complex tax laws, court proceedings and SARS legal processes is critical in ensuring a taxpayer recovers quickly from any similar tax crisis.”

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