A recent judgment in the Johannesburg High Court confirms that a tax debtor moving money between banks and accounts does not put that funds beyond the reach of the South African Revenue Service (“SARS”).

In Cuba Dumakude v Bidvest Bank Limited and Another, handed down on 8 September 2026, the court considered an attempt by an individual to secure the release of funds frozen in his bank account following SARS’s investigation into an allegedly fraudulent VAT refund.

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

The case illustrates how significant SARS’s extensive debt-recovery powers under the Tax Administration Act, No. 28 of 2011 (“TAA”) can become where it believes that money improperly obtained from the fiscus is at risk of being dissipated.

From VAT Refund to Frozen Bank Account

The dispute originated with Hill Side Trading and Projects CC (“Hill Side Trading”), which submitted VAT returns reflecting a refund claim of approximately R3.28-million.

SARS duly paid the refund to this taxpayer on 13 February 2025. Four days later, Hill Side Trading transferred R900 000.00 from its Capitec Bank account into a Bidvest Bank account belonging to Mr. 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 thereafter investigated the invoices supporting Hill Side Trading’s purported VAT claims. According to the evidence before the Court, 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 subsequently issued a third-party appointment to Bidvest Bank under section 179 of the TAA, to attach the affected refund paid out. 

SARS’ Section 179 Recovery Mechanism

Section 179 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 in question to SARS in satisfaction of the taxpayer’s outstanding tax debt.

Ordinarily, SARS may 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, and that SARS had failed to issue the required final demand before invoking the provision.

The Court rejected both arguments and held that the third-party notice had not been issued against the Applicant. Hill Side Trading was the taxpayer ‘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 established 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 collection of the tax debt.

The third-party notice was consequently held to have been validly issued, leaving Bidvest Bank legally obliged to comply with it.

When Money Has Already Moved

Another interesting aspect of this 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 which is consistent with the dissipation of funds rather than the conduct of a legitimate business,” the judgment reads. 

The Court ultimately 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. Section 179 should not necessarily 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 ‘debtor’.

Rather, the outcome in Dumakude was closely linked to the particular facts: an improperly obtained VAT refund, evidence of fraudulent supporting invoices, rapid movement of the funds and the recipient’s inability to establish a legitimate entitlement to the dubious R900 000.00 transfer.

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

Where SARS considers collection to be at risk, section 179(6) may permit it to act without the ordinary preceding final demand. Equally, recipients of funds implicated as an improperly obtained tax refund may face difficulty securing their release where they cannot demonstrate a legitimate entitlement to those funds.

This is where early intervention by a skilled tax attorney becomes critical. SARS’s collection powers are extensive, but they remain subject to the requirements of the TAA. Specialist advice can determine whether those requirements have been met and what remedies are available before funds are ultimately recovered by SARS.

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.

Written by Richan Schwellnus, Team Lead: Tax Controversy & International Tax at Tax Consulting SA