Author: Beric Croome Under the provisions of the Tax Administration Act, the Commissioner: South African Revenue Service (‘SARS’) is entitled to request that a taxpayer submits relevant material that SARS requires in terms of section 46 of the Tax Administration Act No. 28 of 2011 (‘TAA’). Section 1 of the TAA in turn defines ‘relevant material’ as meaning:
Category: Court Cases
Legal professional privilege
On 17 March 2014 judgment was handed down in the Western Cape High Court in the case of A Company and two others v Commissioner for the South African Revenue Service (case no 16360/2013 – as yet unreported). The facts were briefly as follows: The applicants were three companies in a group of companies. In the course of conducting an audit of the applicants’ tax affairs, the South African Revenue Service (SARS) directed a request for relevant material at the applicants in terms of section 46 of the Tax Administration Act, No 28 of 2011(the TAA).
Tax Administration Act – Tax clearance certificates
Taxpayers who wish to tender for State contracts do not qualify unless they can produce a valid tax clearance certificate. The refusal, withdrawal or non- renewal of such a certificate would consequently be the death knell of any business whose lifeblood is the securing of state tenders.
Liquidations and arbitrations: the consequences of the definition of "debts" in section 345 of the Companies Act 61 of 1973 for bringing a liquidation application
By Ashton Crommelin of Hogan Lovells Interim costs awards in arbitration proceedings are not often the precursors to winding up applications. However, it may happen that if such an award of costs is not paid, the possibility of winding up the non-paying party may arise. This possibility leads to the following question, “Is a bill of costs drafted pursuant to an arbitration award and taxed by the taxing master of the High Court a “debt” for purposes of section 345 of the Companies Act 61 of 1973?”
Apportionment of audit fees
Apportionment of audit fees – Commissioner for the South African Revenue Service v Mobile Telephone Network Holdings (Pty) Ltd This appeal considered the deductibility of statutory audit fees incurred by a holding company that derived income comprising interest and dividends. The audit fees incurred in relation to exempt income, in the form of dividends, were held to be non-deductible for income tax purposes and the court had to decide the relevant method of apportionment.
Rectification of an agreement in order to secure zero-rated VAT
The issue before the court in Milner Street Properties (Pty) Ltd v Eckstein Properties (Pty) Ltd [2001] ZASCA 95 was whether an agreement that was intended by the parties to be a zero-rated VAT disposal from one VAT vendor to another of an enterprise as a going concern but which failed to satisfy the formal requirements imposed by section 11(1)(e) of the Value-Added Tax Act 89 of 1991 could be rectified, with retrospective effect, so as to satisfy those requirements.
SARS must give proper reasons and have proper grounds
Author: Ben Strauss (DLA Cliffe Dekker Hofmeyr) The Tax Administration Act, No 28 of 2011 (TAA), together with the new rules for dispute resolution promulgated under the TAA on 11 July 2014 (Rules), govern the resolution of disputes between taxpayers and the South African Revenue Service (SARS). Generally, and in terms of s104 of the TAA, a taxpayer who is aggrieved by an assessment may object to that assessment.
Datakor case is still alive for new debt reduction rules
By Barry Visser, Associate Director: Tax, Grant Thornton Johannesburg Old debt reduction rules The matter of CIR v Datakor Engineering (Pty) Ltd 1998 (4) SA 1060 (SCA) related to a company (Datakor) that entered into an arrangement whereby Datakor’s creditors relinquished their claims against it in exchange for preference shares in the company. It was held that the discharge of a contractual obligation, to pay a debt, through the issue of shares, amounted to a compromise. The court concluded that the compromise benefited the company as it was absolved from its obligation to settle the debt.
Can SARS just say “Prove it”?
By Ian Wilson An important element in disputes between taxpayers and SARS is the burden of proof. This deals with identifying which of the parties must prove its case in order to succeed. In section 102(1) of the Tax Administration Act the burden of proof that an amount is exempt or is not otherwise taxable, or that an amount is deductible, rests on the taxpayer.
Supreme Court considers administrative fairness in tax disputes
On June 12 2014 an interesting judgment was handed down in the Supreme Court of Appeal (SCA) in Commissioner for the South African Revenue Service v Pretoria East Motors (Pty) Ltd (291/12) [2014] ZASCA 91. Facts The taxpayer operated a car dealership in Pretoria. The South African Revenue Service (SARS) conducted an audit of the taxpayer in respect of its 2000 to 2004 years of assessments, and raised various additional assessments in respect of income and value added tax (VAT), among other things. SARS also imposed punitive additional tax of 200%. The taxpayer objected to the additional assessments, but SARS disallowed the objection. The taxpayer appealed to the Tax Court.