High Court (Gauteng Division, Pretoria) decision on whether SARS is no longer bound by a compromise agreement in the circumstances under consideration

This case dealt with whether the South African Revenue Service (“SARS”) was no longer bound to a compromise agreement entered into between the taxpayer and SARS in terms of the Tax Administration Act (the “Admin Act”) as a result of alleged non-disclosures and misstatements made by the taxpayer, who expressly warranted the truth of the facts furnished by him. The taxpayer had been assessed to pay income tax, with interest, in the aggregate amount of R18 192 295.36 by May 2014 in respect of the 2005 to 2011 tax years. The taxpayer objected to the assessments and alleged that the amounts in question constituted donations or dividends in respect of which he declared he could not be assessed to tax. The taxpayer addressed four requests for a compromise to SARS. The taxpayer and SARS finally concluded a compromise agreement on 21 May 2014. By 1 December 2014, the taxpayer had … Continue reading

Supreme Court of Appeal decision on whether grapes delivered to a co-operative winery, pressed and pooled, constitute produce held and not disposed of for purposes of the First Schedule to the Income Tax Act

https://www.ensafrica.com/news/Tax-in-Brief?Id=2302&STitle=Tax%20in%20BriefThe taxpayer derived a portion of his taxable income from wine farming. In particular, he received payments from a co-operative winery (the “co-op”) in respect of grapes which he delivered to the co-op for the purpose of being made into wine. The South African Revenue Service (“SARS”) assessed the taxpayer on the basis that the grapes that he had already delivered to the co-op constituted “produce held and not disposed of at the end of the year of assessment” in terms of paragraph 3 of the First Schedule (“First Schedule”) to the Income Tax Act. The Tax Court’s decision was in favour of SARS, whereafter the taxpayer took the matter on appeal to the Supreme Court of Appeal (“SCA”). The issues on appeal to the SCA were as follows: whether the income received by the taxpayer, which is generated by the sale of wine, constitutes income “derived from agricultural or … Continue reading

Cape Town Tax Court judgment on whether a fast food delivery service is liable to account for output VAT on driver’s petrol money

  The taxpayer carried on a fast food delivery business, in terms of which customers wishing to order food from a number of fast food restaurants could place their orders with the taxpayer. The taxpayer would then relay the orders to the relevant restaurants and would arrange for the collection of the food and for its delivery to the customers in exchange for a commission. The actual collection and delivery services were purportedly not performed by the taxpayer or its employees, but by drivers who acted as independent contractors to the taxpayer. The drivers were remunerated by way of a delivery fee, which appeared on the tax invoice presented to the customer as “driver’s petrol money”. In terms of the tax invoices, value-added tax (“VAT”) was charged in respect of the food order, but not in respect of the driver’s petrol money.

High Court (Eastern Cape Division, Port Elizabeth) decision on SARS’ information gathering powers in terms of section 46 of the Tax Administration Act

  In this case, the taxpayer refused to submit a so-called lifestyle questionnaire (“questionnaire”) to the South African Revenue Service (“SARS”), which was served to him in terms of section 46(1) of the Tax Administration Act (the “Admin Act”). The information sought in terms of the questionnaire related to the taxpayer and his spouse’s personal particulars and circumstances, personal and private investments and assets, properties owned by them, income received during the period under review and expenses. After receiving the questionnaire, the taxpayer sought to make his compliance with the information request conditional upon SARS furnishing him with certain information, including the following: in terms of which sections of which law the taxpayer was obliged to submit the relevant material; if this is for the administration of any tax law, the relevant subsection of that definition in section 3(2) of the Admin Act must be quoted, and supported by the … Continue reading

In vino veritas: an important case for the wine farming industry

The South African wine industry is internationally renowned for the quality of wine it produces. From a tax perspective, a specific tax dispensation applies to income derived by a person from “pastoral, agricultural or other farming operations” as contemplated in s26(1) of the Income Tax Act, No 58 of 1962 (Act). To the extent that a person’s taxable income is derived from such operations, the First Schedule to the Act will apply. We previously discussed s26(1) and the First Schedule in our Alert of 8 April 2016: The Kluh-ed up taxpayer wins – a decision on s26 of the Income Tax Act.

Value Added Tax on private equity transactions

Author: Seelan Moonsamy (Tax Manager at ENSafrica). The judgment of the Supreme Court of Appeal (“SCA”), which established certain guidelines and principles regarding the claiming of input tax for value added tax (“VAT”) purposes in the Commissioner for South African Revenue Services v De Beers Consolidated Mines Ltd (503/11) (1 June 2012) case may have far-reaching consequences for the private equity and venture capital industry.

Criticism on SARS’s approach to the interpretation of legislation

Author: Mareli Treurnicht (Senior Associate at Cliffe Dekker Hofmeyr). On 29 April 2016 the High Court of South Africa (Gauteng Division, Pretoria) handed down judgment in an application brought by Julius Malema (Applicant) against the Commissioner for the South African Revenue Service (SARS). The matter concerned a compromise agreement concluded between them in terms of s205 of the Tax Administration Act, No 28 of 2011 (TAA).

An uncompromising stance – the dispute between SARS and Julius Malema continues

The High Court (Gauteng Division, Pretoria) recently handed down judgment in the case of Malema v Commissioner for the South African Revenue Service (76306/2015) [2016] ZAGPPHC 263 (29 April 2016).  The issue before the court was whether the South African Revenue Service (SARS) was bound to a compromise agreement entered into between the Malema (Applicant) and SARS as a result of alleged non-disclosures and misstatements made by the Applicant, who expressly warranted the truth of the facts furnished by him. The compromise agreement was concluded in accordance with the provisions of s205 of the Tax Administration Act, No 28 of 2011 (TAA).

Section 104 of the Tax Administration Act and the meaning of ‘exceptional circumstances’ – a cautionary tale

Author: Heinrich Louw (Senior Associate). In terms of s104 of the Tax Administration Act, No 28 of 2011 (Act), a taxpayer who is aggrieved by an assessment or decision of the South African Revenue Service (SARS), may object to the assessment or decision. The Act states that the objection must be lodged within 30 business days from the date of the assessment. A senior SARS official may extend this period by no more than 21 business days, unless the official “…is satisfied that exceptional circumstances exist which gave rise to the delay in lodging the objection”.

The Kluh-ed up taxpayer wins – a decision on section 26 of the Income Tax Act

In its efforts to increase its income from tax revenue, the South African Revenue Service (SARS) sometimes applies legislative provisions in tax legislation in a manner that can best be described as tenuous. An example of this is apparent from the recent decision of the Supreme Court of Appeal (SCA) in CSARS v Kluh Investments (Pty) Ltd (115/2015) [2016] ZASCA 5 (1 March 2016).