Court mandates suspension of R531m tax payment, challenging SARS ‘pay now, argue later’ rule.

The “pay now, argue later” rule is one of SARS’ most powerful weapons.

If SARS issues an assessment and says you owe tax, they expect you to pay it — even if you believe the assessment is wrong and are challenging it in the Tax Court.

For businesspeople, that can mean crippling cash flow pressure long before a dispute is resolved.

In a recent Gauteng High Court judgment, Ferreira v Commissioner for SARS (Case no 2024/067035; Gauteng Division of the High Court; on 2 February 2026), is a reminder that SARS’ powers are not unlimited.

A R531m dispute

The taxpayer, Mario Ferreira, faced additional income tax assessments of more than R531-million for the period 2009–2021. The tax liability is disputed and is heading to the Tax Court. While the dispute was pending, he requested that SARS suspend payment in terms of section 164 of the Tax Administration Act.

That section allows SARS to suspend payment if certain factors justify it — including whether recovery is at risk, whether fraud is involved, whether the taxpayer will suffer irreparable hardship, and whether adequate security has been offered.

Ferreira initially offered security that SARS rejected. He then tendered something far more substantial: his 80% shareholding in TMM Holdings, valued at more than R1-billion.

SARS still refused to suspend payment.

The problem for SARS

In court, SARS ultimately admitted that the shareholding exceeded R1-billion in value — almost double the disputed debt!

The high court found this critical. If security worth more than the tax debt is pledged, it becomes difficult to argue that recovery is “in jeopardy” or that there is a serious risk of asset dissipation.

More troubling for SARS was the court’s acceptance that its independent debt c
ommittee may not have been properly informed of the full security tender when it made its decision. In other words, the most important fact in the taxpayer’s favour was not properly considered by the committee.

That, the court held, rendered the decision irrational and procedurally unfair.

Hardship is not theoretical

The court also engaged with commercial reality. Forcing immediate payment of R531-million would probably have required asset liquidations at “fire sale” prices, potentially destroying ongoing business operations.

Even if the taxpayer later won in the Tax Court, the victory could be hollow.

While the Constitutional Court has long upheld the constitutionality of “pay now, argue later”, this case confirms that SARS must still exercise its discretion rationally and fairly.

A rare step: substitution

In an unusual move, the high court did not simply send the matter back to SARS. It substituted its own decision, ordering that payment be suspended pending the resolution of the tax dispute — subject to the shareholding being pledged within five days.

Courts are generally reluctant to replace administrative decisions. That it happened here underscores how strongly the court viewed the flaws in SARS’s reasoning in refusing the suspension of payment.

Why this matters

The case does not weaken SARS’ collection powers. The “pay now, argue later” principle remains firmly entrenched, but it sends a clear message: SARS must properly consider credible security and cannot rely on formulaic references to “risk” or “prejudice” where the facts do not support them.

For businesspeople facing large disputed assessments, the case is significant. If meaningful security is available and properly tendered, and SARS refuses suspension without rational justification, judicial review remains a powerful — and sometimes decisive — remedy.

In tax disputes, process matters, even for SARS. DM

Johan Kotze is a tax executive and Freek van Rooyen a partner at Shepstone Wiley Attorneys, Johannesburg.