In this matter, a registered vendor for purposes of Value-added Tax (VAT), made certain supplies to an entity, C, entailing the rectification and rehabilitation, as well as the construction of new, low-cost housing. The vendor levied VAT at the standard rate of 14% in respect of the supplies, received payment from C, and paid the VAT to the South African Revenue Service (SARS).
Category: Court Cases
Interpretation of fiscal legislation
Introduction In Commissioner SARS v Bosch (394/2013) [2014] ZASCA 171 (November 19 2014), the Supreme Court of Appeal dealt with the fiscal consequences of a deferred delivery transaction. The judgment is important not only in the context of the meaning of simulation, but also with reference to the way in which legislation should be interpreted. In Bosch, the question arose as to the meaning of Section 8A of the Income Tax Act (58/1962), which read that a taxpayer’s income should include any gain made by the exercise, cession or release of any right to acquire a marketable security during the year of assessment.
Tax u-turns on cards after probe into SARS rogue unit
Authors: Mzilikazi Wa Afrika, Stephan Hofstatter, Piet Rampedi and Malcolm Rees (Times Live) Tax settlements worth billions of rands risk being reversed as an independent investigation into a rogue spy unit rocked the South African Revenue Service this week. Billionaire businessman Dave King is the most prominent among high-profile South Africans who could be slapped with far higher tax bills if their deals with the taxman are reviewed. The findings of the investigation, carried out by a panel headed by Johannesburg advocate Muzi Sikhakhane, largely confirm reports by the Sunday Times over the past few months – and vociferously denied by SARS at the time – that the rogue unit engaged in a wide array of illegal tactics.
SARS boss Ivan Pillay faces chop again
Author: Piet Rampedi, Stephan Hofstatter and Mzilikazi wa Afrika (Times Live) Tax official Ivan Pillay has been handed a suspension notice, a day after he won a court bid on Thursday to be reinstated. Pillay was handed the notice on Friday, giving him until January 12 to show why he should not be suspended pending the outcome of an investigation. The notice, seen by Sunday Times reporters, said Pillay had to be suspended because of the danger that he could tamper with evidence during the investigation, as he had allegedly done before. Pillay faces a string of allegations, including that he: Established, recommended or was instrumental in setting up a covert intelligence unit within SARS;
Labour Court slams Sars for way Pillay was suspended
SARS deputy commissioner Ivan Pillay Author: Aarti J Narsee and Penelope Mashego (Times Live) The deputy commissioner of the South African Revenue Services (Sars) who was suspended earlier this month can return to work on Friday. The Johannesburg Labour Court on Thursday ruled that Ivan Pillay’s suspension was unlawful and ordered Sars to reverse it with immediate effect. Pillay was suspended for 30 days by new Sars commissioner Tom Moyane on December 5. The suspension came after an investigation into claims of a rogue spy unit within Sars that was set up in 2007.
Professional tax advice vital in mitigation of penalties and interest
Author: Andrew Lewis – Tax Director (Cliffe Dekker Hofmeyr) Judgment was handed down in the Tax Court on 18 November 2014 in the case of Z v The Commissioner for for the South African Revenue Service (case number 13472), as yet unreported. The dispute concerned the calculation by the taxpayer of his capital gains tax liability arising pursuant to the disposal of shares. In 2007 the taxpayer disposed of his shares in a company for R841 million. In and around the time of the disposal of the shares, a company (A) instituted a damages claim against the taxpayer for an amount of R925 million which related to a transaction that took place in 2003. Shortly after the damages action was instituted, the taxpayer agreed to pay A an amount of almost R700 million in full and final settlement of its claim.
No evidence justifying tax penalty
Author: Heinrich Louw – Senior Tax Associate (Cliffe Dekker Hofmeyr) Judgment was handed down in the Tax Court on 18 November 2014 in the case of AB (Pty) Ltd v The Commissioner for the South African Revenue Service (case number 1132, as yet unreported). In this matter the South African Revenue Service (SARS) audited and assessed a vendor in respect of Value-added Tax (VAT). It appeared that the vendor could not adequately explain, nor provide supporting documentation, in respect of discrepancies between its VAT declarations for the relevant periods, and the VAT control account in its books.
Interpretation of fiscal legislation
Author: Emil Brincker – Tax Director at DLA Cliffe Dekker Hofmeyr The judgment of the Supreme Court of Appeal in Commissioner SARS v Bosch (394/2013) [2014] ZASCA 171 (19 November 2014) (Bosch case) dealing with the fiscal consequences of a deferred delivery transaction is not only important in the context of the meaning of simulation, but also with reference to the way in which legislation should be interpreted. In the Bosch case the question arose as to the meaning of s8A of the Income Tax Act, No 58 of 1962, which read that there was to be included in a taxpayer’s income an amount of any gain made by him by the exercise, cession or release during a year of assessment of any right to acquire a marketable security.
Western Cape High Court rules on purpose of preservation orders
Author: Dr Beric Croome – ENSafrica Section 163 of the Tax Administration Act 28 of 2011 (“TAA”) provides that a senior SARS official may authorise an ex parte application to the High Court for an order for the preservation of any assets of a taxpayer, or other person prohibiting any person, subject to the conditions and exceptions as specified in the preservation order, from dealing in any manner with the assets to which the order relates.
What is simulation really
Author: Emil Brincker – DLA Cliffe Dekker Hofmeyr Since the judgment of the Supreme Court of Appeal (SCA) in CSARS v NWK 73 SATC 55 there has been a bone of contention as to the real meaning of a simulated arrangement. In the NWK case it was indicated that “[i]f the purpose of the transaction is only to achieve an object that allows the evasion of tax, or of a peremptory law, then it will be regarded as simulated. And the mere fact that the parties do perform in terms of the contract does not show that it is not simulated: the charade of performance is generally meant to give credence to their simulation.”