SARS Preying on Personal Liability – Constitutionality Confirmed!

The Constitutional Court judgement in Greyvensteyn v Commissioner for SARS and Others has been welcomed by SARS!

Serving to reaffirm the constitutionality of SARS holding individuals personally liable for company debts, and pursuing recovery from those persons, the Greyvensteyn judgement emphasizes the importance of tax revenue collection.

Where there is uncertainty as to who can be held personally liable, a distinct legislative guideline is that individuals involved in the financial management of a company, even informally, could find themselves personally liable for its unpaid tax debts. SARS’ broad powers extend beyond just the taxpayer, potentially implicating directors, shareholders, and other key individuals in a company’s financial affairs.

Personal Liability Under Section 180 of the Tax Administration Act (“the TAA”)

Section 180 of the TAA empowers SARS to hold third parties personally responsible for a company’s tax debt if:

1. The person “controls or is regularly involved in the management of the overall financial affairs of a taxpayer”; and
2. SARS determines that the person acted negligently or fraudulently concerning the taxpayer’s tax debt.

Where a tax debt exists, this would include liability for capital sums due, as well as related penalties and interest.

Holding an official financial title within the company is not necessary—merely being involved in financial decisions can make an individual a target. Directors, shareholders, financial officers, and even informal advisors can be held liable if their actions (or inaction) contribute to tax non-compliance.

The Courts Back SARS’ Powers

Read more in our latest article, "SARS Preying on Personal Liability – Constitutionality Confirmed!"