The power to demand payment upfront remains one of SARS’ most formidable tools. Often described as the “Pay Now, Argue Later” principle. Once an assessment is raised, payment is due and enforcement may follow. For taxpayers confronted with substantial additional assessments, the financial impact can be immediate and destabilising.
Section 164 of the Tax Administration Act introduces a structured exception to that position. It does not dilute the principle, but it creates a procedural safety valve where fairness requires temporary relief.
What Is a Suspension of Payment?
A suspension of payment is a statutory mechanism that allows a taxpayer to request a pause on SARS’ collection efforts while a tax dispute is being resolved under Chapter 9 of the Act.
It is important to be clear about what it is not. It is not a cancellation of tax. It is not an admission that the assessment is flawed. Nor does it erase the debt. It simply delays enforcement until the dispute process has run its course.
Where granted, SARS is precluded from taking recovery steps until 10 business days after the outcome of the objection or appeal has been communicated. If the request is refused, however, collection may proceed uninterrupted.
Critically, suspension must be actively sought. It does not arise automatically when an objection is lodged.
When Can You Apply?
A taxpayer may request suspension where they intend to dispute, or are already disputing, their liability under Chapter 9 of the Act. In other words, the mechanism becomes available once an assessment is being challenged through objection or appeal.
The request is typically submitted via SARS eFiling or at a SARS branch and should generally be lodged within 40 business days of the assessment.
However, lodging an objection alone does not stop collection. Without an approved section 164 request, the “Pay Now, Argue Later” principle continues to operate in full.
What Are the Requirements?
Section 164(3) makes clear that the decision to suspend payment is discretionary. A senior SARS official must consider relevant factors, including:
- Whether recovery of the disputed tax will be in jeopardy or whether there is a risk of dissipation of assets;
- The taxpayer’s compliance history;
- Whether fraud is prima facie involved in the origin of the dispute;
- Whether payment would result in irreparable hardship not justified by the prejudice to SARS or the fiscus; and
- Whether the taxpayer has tendered adequate security and whether accepting it would be in the interest of the fiscus.
The provision requires a balancing exercise. SARS must protect revenue collection, but it must also act rationally and fairly when exercising its discretion.
Overlaying this is section 102(1) of the Tax Administration Act, which places the burden of proof on the taxpayer in tax disputes. The taxpayer must prove, among other things, that an amount is not taxable, that a deduction applies, that a valuation is correct, or that a decision subject to objection and appeal is incorrect. A suspension application should therefore be supported by credible legal and factual grounds.
The Ferreria Judgment: A R531 Million Dispute
The boundaries of SARS’ discretion were recently examined in Ferreria v Commissioner for SARS (Case no 2024-067035; 2 February 2026) before the Gauteng High Court.
Mario Ferreria was assessed for additional income tax exceeding R531 million for the 2009–2021 years of assessment. He disputes the liability, and the matter is proceeding to the Tax Court. Pending that outcome, he sought relief under section 164.
After earlier security proposals were declined, Ferreria offered his 80% shareholding in TMM Holdings (Pty) Ltd as security. The value of that interest exceeded R1 billion (nearly double the disputed amount).
SARS nevertheless refused to suspend payment, relying on concerns about jeopardy to recovery and potential asset dissipation.
During litigation, SARS conceded that the pledged shareholding was indeed worth more than R1 billion. The High Court considered this highly significant. Where security materially exceeds the tax debt, it becomes difficult to justify a conclusion that recovery is at risk.
The Court was also troubled by evidence suggesting that SARS’ Independent Debt Committee may not have been fully apprised of the extent of the security tendered. A decision taken without proper regard to central facts, the Court held, cannot stand. The refusal was found to be irrational and procedurally unfair.
An Uncommon Outcome: Judicial Substitution
Rather than remitting the matter to SARS for reconsideration, the High Court took the unusual step of substituting its own decision. It ordered that payment be suspended pending the finalisation of the tax dispute, subject to the shareholding being pledged within five days.
Judicial substitution is exceptional. Courts are ordinarily cautious about stepping into the shoes of administrators. The fact that the Court did so here underscores the extent to which it viewed SARS’ reasoning as fundamentally flawed.
A practical reminder: section 164 suspension of payment applications
Another practical takeaway arising from recent tax litigation is the importance of section 164 of the Tax Administration Act, which deals with the suspension of payment of disputed tax.
As a general principle, lodging an objection does not automatically suspend a taxpayer’s obligation to pay the assessed tax. Taxpayers should therefore carefully consider submitting a formal suspension of payment application where an assessment is disputed, particularly where immediate payment would create commercial or cash flow pressure.
Importantly, these applications should not be treated as routine administrative filings. SARS must consider various factors in deciding whether to grant or reject the application, including the taxpayer’s compliance history, the risk of dissipation of assets, prospects of recovery, potential prejudice to SARS or the taxpayer, and whether the dispute appears to be genuinely arguable.
In practice, a well-prepared and persuasively motivated application can materially improve the prospects of success and may provide important interim protection while the underlying dispute is resolved.
The Broader Implications
The Ferreria judgment does not dismantle SARS’ enforcement authority. The “Pay Now, Argue Later” rule remains embedded in South African tax administration.
What the decision does clarify is that section 164 discretion must be exercised with proper regard to evidence and context. Assertions of risk cannot override objective facts, particularly where substantial and credible security is available.
For taxpayers engaged in significant disputes, the case reinforces two key points. First, suspension applications must be carefully prepared and supported by cogent evidence. Second, where discretion is exercised unreasonably, judicial review is not merely symbolic, but it can produce tangible relief.
Even in a system designed to prioritise revenue collection, lawful process is not optional. It is foundational.
If you are facing a tax dispute with SARS, require assistance with a suspension of payment application, or would like to assess your dispute resolution strategy, contact us, our team would be pleased to assist.
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