On 2 February 2026, the Gauteng Division of the High Court delivered its judgment in Ferreria v Commissioner for the South African Revenue Service. The case concerned the South African Revenue Service’s (SARS’) refusal to suspend payment of a disputed tax under section 164 of the Tax Administration Act 28 of 2011 (TAA), read together with a reconsideration request under TAA section 9. In its ruling, the court curtailed the reach of the “pay now, argue later” principle and held that SARS acted irrationally in refusing to suspend payment despite the taxpayer having tendered substantial security.
The Ferreria decision is significant as it reaffirms that SARS’ discretion under section 164 is not unfettered and must be exercised rationally, fairly and with proper regard to all relevant facts.
Section 164(1) of the TAA codifies the “pay now, argue later” principle: the filing of an objection or appeal does not suspend a taxpayer’s obligation to pay tax or SARS’ right to recover it. Taxpayers must therefore pay assessed tax under when an assessment is disputed. However, this principle is tempered by the discretion conferred on SARS under section 164:
SARS’ exercise of these powers constitutes administrative action and must therefore comply with the constitutional requirements of lawfulness, reasonableness and procedural fairness under section 33 of South Africa’s Constitution, as given effect in the Promotion of Administrative Justice Act 3 of 2000 (PAJA). Within this framework and in line with the common law legality principle, taxpayers are entitled to challenge SARS decisions, including those made under the “pay now, argue later” principle. While SARS is entrusted with weighing the relevant factors, its discretion must rest on a proper factual foundation and be exercised rationally and fairly.
The dispute arose from additional income tax assessments against the taxpayer for the 2009-2021 years of assessment, totalling approximately ZAR 531 million. The taxpayer disputed the assessments and requested a suspension of payment under section 164 of the TAA, pending the outcome of the dispute. The taxpayer initially tendered various forms of security, which SARS rejected as inadequate. SARS maintained that recovery of the disputed tax would be jeopardised if the dispute was ultimately resolved in its favour.
The taxpayer then tendered additional security in the form of an 80% shareholding valued at over ZAR 1 billion and requested reconsideration under section 9(1) of the TAA. As noted above, section 9(1) allows certain decisions made by SARS officials or notices issued by SARS to be withdrawn or amended at the discretion of a senior SARS official. SARS denied the request, again asserting that collection of the tax would be jeopardised and that the additional security remained insufficient.
The taxpayer sought review under PAJA, arguing that SARS’ refusal was unlawful because:
The taxpayer also alleged that SARS failed to place the additional security before its Independent Debt Committee (IDC) before reaching its decision.
SARS opposed the application, arguing, inter alia, that:
SARS denied that the additional security had not been disclosed to the IDC but did not offer any evidence supporting this assertion.
The central question before the court was whether SARS had properly exercised its discretion under section 164 in circumstances where substantial security had been tendered. More specifically, the court was required to determine whether SARS’ decision was rational based on relevant considerations and whether the process was procedurally fair as required under PAJA.
The High Court reaffirmed that the “pay now, argue later” principle is constitutionally valid but emphasised that SARS’ discretion under TAA section 164 constitutes administrative action subject to review under PAJA section 6. The principle’s constitutional legitimacy depends in part on the proper exercise of this discretion.
The court accepted that the additional security exceeded ZAR 1 billion and was adequate to secure the disputed tax. It further found that SARS had failed to place the additional security before the IDC. A bare denial, the court held, was insufficient; SARS was required to place evidence before the court substantiating its position, which it failed to do. The court held that SARS’ decision was unlawful because:
SARS’ decision therefore fell to be reviewed and set aside under PAJA section 6.
The court then considered whether it should substitute its own decision for that of SARS, noting that such relief is reserved for exceptional circumstances. Citing a 2015 decision, the court noted that substitution is appropriate where:
The court found these requirements were met and ordered that payment of the tax be suspended pending finalisation of the underlying tax dispute.
The Ferreria decision is a clear reminder that, although the “pay now, argue later” principle remains a powerful revenue collection tool, its application is constrained by administrative law standards. For SARS, the decision underscores the need for disciplined, evidence-based decision-making that properly considers all relevant factors and follows a fair process. For taxpayers, it confirms that section 164 is not merely a procedural formality, but a meaningful safeguard that can be invoked—and where necessary—enforced through judicial review.
Ultimately, the “pay now, argue later” principle’s legitimacy depends on SARS exercising its discretion under section 164(3) lawfully, rationally and fairly when taxpayers seek a suspension of payment.
David Warneke
Shirlynn Smith
BDO in South Africa
The Ferreria decision is significant as it reaffirms that SARS’ discretion under section 164 is not unfettered and must be exercised rationally, fairly and with proper regard to all relevant facts.
Statutory Framework
Section 164(1) of the TAA codifies the “pay now, argue later” principle: the filing of an objection or appeal does not suspend a taxpayer’s obligation to pay tax or SARS’ right to recover it. Taxpayers must therefore pay assessed tax under when an assessment is disputed. However, this principle is tempered by the discretion conferred on SARS under section 164:
- Section 164(2) allows taxpayers to request a suspension of payment; and
- Section 164(3) empowers a senior SARS official to grant a suspension, taking into account factors, including:
- Whether recovery of the disputed tax would be jeopardised or assets dissipated;
- The taxpayer’s compliance history;
- Whether fraud is prima facie involved;
- Whether payment would cause irreparable hardship to the taxpayer that cannot be justified by prejudice to SARS or the fisc; and
- Whether adequate security has been provided and whether accepting the security serves the interest of SARS or the fisc.
SARS’ exercise of these powers constitutes administrative action and must therefore comply with the constitutional requirements of lawfulness, reasonableness and procedural fairness under section 33 of South Africa’s Constitution, as given effect in the Promotion of Administrative Justice Act 3 of 2000 (PAJA). Within this framework and in line with the common law legality principle, taxpayers are entitled to challenge SARS decisions, including those made under the “pay now, argue later” principle. While SARS is entrusted with weighing the relevant factors, its discretion must rest on a proper factual foundation and be exercised rationally and fairly.
Facts of the Case
The dispute arose from additional income tax assessments against the taxpayer for the 2009-2021 years of assessment, totalling approximately ZAR 531 million. The taxpayer disputed the assessments and requested a suspension of payment under section 164 of the TAA, pending the outcome of the dispute. The taxpayer initially tendered various forms of security, which SARS rejected as inadequate. SARS maintained that recovery of the disputed tax would be jeopardised if the dispute was ultimately resolved in its favour.The taxpayer then tendered additional security in the form of an 80% shareholding valued at over ZAR 1 billion and requested reconsideration under section 9(1) of the TAA. As noted above, section 9(1) allows certain decisions made by SARS officials or notices issued by SARS to be withdrawn or amended at the discretion of a senior SARS official. SARS denied the request, again asserting that collection of the tax would be jeopardised and that the additional security remained insufficient.
The taxpayer sought review under PAJA, arguing that SARS’ refusal was unlawful because:
- SARS failed to consider relevant factors, including the value of the additional security tendered, which far exceeded the disputed tax;
- The decision lacked a rational connection to the purpose of section 164;
- The decision was so unreasonable that no reasonable decision-maker could have reached it; and
- The process was procedurally unfair.
The taxpayer also alleged that SARS failed to place the additional security before its Independent Debt Committee (IDC) before reaching its decision.
SARS opposed the application, arguing, inter alia, that:
- The taxpayer did not challenge the validity of the “pay now, argue later” principle, but only the application of the principle;
- The taxpayer had not adequately demonstrated financial prejudice;
- The taxpayer was not tax compliant in respect of other affairs;
- There were concerns regarding alleged fraudulent conduct giving rise to the additional assessments; and
- The additional security tendered was insufficient and recovery of the tax remained at risk.
SARS denied that the additional security had not been disclosed to the IDC but did not offer any evidence supporting this assertion.
The central question before the court was whether SARS had properly exercised its discretion under section 164 in circumstances where substantial security had been tendered. More specifically, the court was required to determine whether SARS’ decision was rational based on relevant considerations and whether the process was procedurally fair as required under PAJA.
Decision of the Court
The High Court reaffirmed that the “pay now, argue later” principle is constitutionally valid but emphasised that SARS’ discretion under TAA section 164 constitutes administrative action subject to review under PAJA section 6. The principle’s constitutional legitimacy depends in part on the proper exercise of this discretion.The court accepted that the additional security exceeded ZAR 1 billion and was adequate to secure the disputed tax. It further found that SARS had failed to place the additional security before the IDC. A bare denial, the court held, was insufficient; SARS was required to place evidence before the court substantiating its position, which it failed to do. The court held that SARS’ decision was unlawful because:
- SARS disregarded the value of the additional security and failed to consider relevant factors;
- The decision lacked a rational connection to the purpose of section 164;
- The IDC did not properly consider the additional security, rendering the process procedurally unfair; and
- The taxpayer would suffer significant prejudice if forced to liquidate assets to satisfy the disputed tax.
SARS’ decision therefore fell to be reviewed and set aside under PAJA section 6.
The court then considered whether it should substitute its own decision for that of SARS, noting that such relief is reserved for exceptional circumstances. Citing a 2015 decision, the court noted that substitution is appropriate where:
- The court is in as good a position as the administrator to make a decision;
- The outcome is a foregone conclusion; and
- Substitution is just and equitable in the circumstances.
The court found these requirements were met and ordered that payment of the tax be suspended pending finalisation of the underlying tax dispute.
BDO Perspective
The Ferreria decision is a clear reminder that, although the “pay now, argue later” principle remains a powerful revenue collection tool, its application is constrained by administrative law standards. For SARS, the decision underscores the need for disciplined, evidence-based decision-making that properly considers all relevant factors and follows a fair process. For taxpayers, it confirms that section 164 is not merely a procedural formality, but a meaningful safeguard that can be invoked—and where necessary—enforced through judicial review.Ultimately, the “pay now, argue later” principle’s legitimacy depends on SARS exercising its discretion under section 164(3) lawfully, rationally and fairly when taxpayers seek a suspension of payment.
David Warneke
Shirlynn Smith
BDO in South Africa