SARS is coming after bank accounts in South Africa

A Johannesburg High Court judgment confirmed that SARS can freeze and recover funds moved between bank accounts.

This emerged in the case of Cuba Dumakude v Bidvest Bank Limited and Another, handed down on 8 September 2026.

The court considered an individual’s attempt to secure the release of funds frozen in his bank account following the South African Revenue Service (SARS) investigation into an allegedly fraudulent VAT refund.

However, the individual whose bank account contained the funds was not the taxpayer owing the alleged tax debt to SARS.

Tax Consulting SA’s Team Lead of Tax Controversy & International Tax, Richan Schwellnus, said this case shows how extensive the taxman’s debt recovery powers are under the Tax Administration Act (TAA).

This is particularly where SARS believes that money improperly obtained from the fiscus is at risk of being dissipated.

The dispute originated with Hill Side Trading and Projects, which submitted VAT returns reflecting a refund claim of R3.28 million. SARS paid the refund to this taxpayer on 13 February 2025.

Four days later, Hill Side Trading transferred R900,000 from its Capitec Bank account into a Bidvest Bank account belonging to Cuba Dumakude (the applicant).

Shortly thereafter, Capitec Bank alerted various financial institutions that Hill Side Trading had been implicated in fraud involving SARS and identified funds transferred from its account.

The applicant’s Bidvest account was subsequently frozen. SARS investigated the invoices supporting Hill Side Trading’s purported VAT claims.

The suppliers involved confirmed that the invoices were not authentic and that they had not conducted business with Hill Side Trading.

The investigation also established that the company’s registered business address was a daycare centre. SARS issued a third-party appointment to Bidvest Bank under section 179 of the TAA to attach the affected refund paid out.

SARS has a powerful recovery mechanism

Section 179 of the TAA permits a senior SARS official to issue a notice to a person who holds, or will hold, money for, or on behalf of a taxpayer, requiring that person to pay the money to SARS to settle an outstanding tax debt.

According to Schwellnus, SARS can usually only issue such a notice after delivering a final demand to the tax debtor at least 10 business days beforehand.

However, section 179(6) provides an important exception. SARS need not issue the final demand where a senior SARS official is satisfied that doing so would prejudice the collection of the tax debt.

That exception proved important in Dumakude. The applicant challenged SARS’s third-party notice on the basis that he was not the taxpayer ‘debtor’ contemplated by section 179.

He also argued that SARS had failed to issue the required final demand before invoking the provision. The court rejected both arguments.

It held that the third-party notice had not been issued against the Applicant. Hill Side Trading was the taxpayer’s debtor, while Bidvest Bank was the appointed third party holding the relevant funds.

The court also accepted SARS’s reliance on section 179(6). The evidence showed that the VAT refund had been obtained through fraudulent invoices and that the funds were at risk of dissipation if not secured.

In the circumstances, issuing a final demand would have prejudiced the collection of the tax debt. The third-party notice was consequently held to have been validly issued, leaving Bidvest Bank legally obliged to comply.

When money has already moved

Schwellnus said another notable aspect of the judgment concerns what happened after the VAT refund left Hill Side Trading’s account.

Although the applicant received R900,000.00, he failed to demonstrate legitimate business dealings with Hill Side Trading that could explain and justify this payment.

The court noted that the affected funds had been deposited into a personal account that had apparently been dormant for some time, rather than a business account.

The court described this as “telling about the case”. The applicant could also not produce invoices, delivery notes or a contract supporting the payment.

“Worse for the applicant, it attempted to withdraw significant sums in cash and make purchases at various retailers shortly after the deposit was made,” the judgment reads.

This practice is “consistent with the dissipation of funds rather than the conduct of a legitimate business.”

The court concluded that the funds were proceeds of unlawful activity arising from fraud against SARS and were not the applicant’s property merely because they had been deposited into his account.

He therefore failed to establish a clear right to the affected funds. This distinction is important, Schwellnus pointed out.

Section 179 should not be understood as granting SARS an unrestricted power to recover money from any person only because funds can historically be traced back to a taxpayer’s debtor.

Rather, the outcome in Dumakude was closely linked to the particular facts. An improperly obtained VAT refund, and evidence of fraudulent supporting invoices.

There was also rapid movement of the funds and the recipient’s inability to establish a legitimate entitlement to the dubious R900,000 transfer.

Dumakude shows that moving funds out of a taxpayer’s bank account does not necessarily place them beyond SARS’s reach, Schwellnus added.

“Dumakude is a reminder that when SARS follows the money, acting quickly and obtaining the right tax dispute advice can be the difference between resolving a tax debt and having your funds frozen as SARS moves to recover what is due.”