The Gauteng High Court in Johannesburg has made a ruling in a case involving a taxpayer who applied for the release of R448,838.35 from his frozen Bidvest Bank account. The court found that the funds were linked to a fraudulent VAT refund paid by the South African Revenue Service (SARS). The case began with a company, Hill Side Trading, submitting VAT returns to SARS and claiming a refund of R3.27 million, which was paid in February 2025.
Days after the refund was paid, R900,000 was transferred from Hill Side Trading's Capitec Bank account into the taxpayer's Bidvest Bank account. Capitec Bank then sent an electronic mail to several banks, including FNB, Standard Bank, and Old Mutual, advising that Hill Side Trading had been implicated in fraud involving SARS and that the proceeds had been sent to various accounts. Bidvest Bank subsequently froze the taxpayer's account.
SARS conducted an investigation into the VAT claim and found that the invoices submitted in support of the refund were fraudulent. The alleged suppliers confirmed in affidavits that the invoices purported to have been issued by them were not authentic and that they had never conducted business with Hill Side Trading. Furthermore, the investigation found that the company's registered business address was not a business premises, but rather a daycare centre.
The taxpayer argued that the freezing of his account was unlawful and that SARS could not issue a third-party notice because he was not the taxpayer who owed the money. He also claimed that SARS had failed to issue a final demand before issuing the notice. However, the court rejected these arguments, finding that Bidvest Bank was entitled to freeze the account under its terms and conditions and that SARS was entitled to use section 179 of the Tax Administration Act to recover the funds.
The court also found that the taxpayer had failed to provide supporting documents, including invoices, delivery notes, or a contract, to explain why he had received the R900,000. The judge noted that the account had been dormant and that significant cash withdrawals and purchases followed the payment. The court ultimately found that the funds were proceeds of unlawful activity and that the taxpayer had failed to establish a clear right to them.
The ruling highlights the efforts of SARS to recover funds obtained through fraudulent means. The revenue service has been actively pursuing cases of VAT fraud and other forms of tax evasion. In this case, the court's decision demonstrates that SARS has the authority to use third-party notices to recover funds from taxpayers who have received proceeds of unlawful activity.
The case serves as a warning to taxpayers who may be involved in or facilitating fraudulent activities. SARS has made it clear that it will take action to recover funds obtained through such means, and taxpayers who are found to be involved may face serious consequences. The ruling also highlights the importance of verifying the authenticity of invoices and other documents submitted in support of VAT refunds.
Key points
- The Gauteng High Court has dismissed an application by a taxpayer to release R448,838.35 from his frozen Bidvest Bank account, citing links to a fraudulent VAT refund paid by SARS.
- SARS conducted an investigation into the VAT claim and found that the invoices submitted in support of the refund were fraudulent.
- The court found that the funds were proceeds of unlawful activity and that the taxpayer had failed to establish a clear right to them.
