Tax court upholds 150% penalty against taxpayer over R1.38m fraudulent refund

The South African Revenue Service has won a Tax Court case against a salaried taxpayer who disputed responsibility for fraudulent returns that produced a R1.38 million refund, with the court upholding a 150% understatement penalty after finding the conduct amounted to intentional tax evasion.

As CapeTown ETC reported on 20 September 2026, the case concerned revised income tax returns for the 2020 and 2021 tax years. Those returns, according to the report, included fabricated farming assets and expenses, along with inflated IRP5 and PAYE credits.

The taxpayer had no genuine farming business. She later told the court that an unidentified SARS official had used her eFiling credentials to submit the fraudulent returns.

The court rejected that explanation. According to the report, the taxpayer’s version of events changed during the proceedings and she provided no supporting evidence that another person had accessed her account. SARS, the court found, had met its burden of proving the case on a balance of probabilities.

SARS initially paid out about R1.38 million before reversing the refund after an investigation. The resulting assessments totalled about R3.6 million, made up of the reversed refund, more than R141,000 in interest and an understatement penalty of about R2.08 million.

Legal experts Anton Lockem and Daniel Robb told Daily Investor that the ruling should not be read as meaning that possession of eFiling credentials automatically proves a taxpayer personally submitted disputed returns. They described the case as valuable as an evidence case, saying the court was right on liability and on the 150% penalty. The evidence went beyond the eFiling records, they said, and included the taxpayer receiving and retaining the refund and failing to show that anyone else had submitted the returns.

eFiling is SARS’s online platform for submitting returns, making payments and conducting other tax transactions. SARS has repeatedly urged taxpayers to protect their login credentials, a warning that sits at the centre of this case.

For ordinary taxpayers, the practical point is narrow but important. The judgment does not establish that anyone whose credentials were used is automatically liable. It establishes that where SARS produces evidence beyond the login records, including the retention of a refund and the absence of proof of third-party access, a court may find the taxpayer liable and impose a substantial penalty on top of the tax.

The case also illustrates the scale of what is at stake when a refund is reversed. The original payout was about R1.38 million. With interest and the penalty added, the assessments reached about R3.6 million.