Author: Hylton Cameron (Grant Thornton Johannesburg) In the recent case of Ackermans Ltd v CSARS the issue of prescribed tax returns was re-visited in Pretoria in the High Court. In terms of the Income Tax Act, SARS is entitled to raise additional assessments for three years from the date of final assessment. However if there is a misrepresentation of a material fact in the original return, the three prescription period does not apply. In this case however, SARS only raised additional assessments some seven to thirteen years after the original assessments, sparking concern about SARS’ almost infinite reach to reassess tax returns.
Category: Objections & Appeals
Interpretation of exemption provisions
The Tax Court gave judgment in the matter of ABC (Pty) Ltd vCommissioner for the South African Revenue Service (case number 13512, as yet unreported) on 30 March 2015. Even though the case concerned secondary tax on companies (STC), which has been replaced by dividends tax, it is interesting to see how the court dealt with the interpretation of an exemption provision.
A preservation order is not of itself a ‘tax collection’ measure
A preservation order is not of itself a ‘tax collection’ measure – but it may well be followed by tax collection processes On 1 December 2014 the Pretoria High Court confirmed a provisional preservation order that had been granted in terms of section 163 of the Tax Administration Act 28 of 2011 against Africa Cash and Carry (Pty) Ltd and various members of the Hathurani family in their personal capacities and in their representative capacities as trustees of trusts. (The judgment – thus far published only on the SARS website – is reported as Commissioner for the South African Revenue Services, as applicant, and 19 respondents, including trustees of the Edrees Hathurani Family Trust; case 49274/2014.)
High Court overrules tax court on input VAT claim on sponsorships
Author: Prof Peter Surtees (Norton Rose Fulbright South Africa) If a taxpayer receives money, goods and services from sponsors in return for providing branding and marketing services to the sponsors, output VAT is payable on the value of these receipts. And if the sponsors decline to furnish tax invoices for the money, goods and services they receive from the taxpayer in return, may the taxpayer infer an input claim from available evidence? The tax court ruled that, when output VAT was due on the value of the receipts; the taxpayer could claim no input credits in the absence of tax invoices. On 6 February 2015 in ABC (Pty) Ltd v CSARS Case No A 129/2014 the High Court of the Western Cape overruled the tax court’s decision.
Understatement penalties: where is the prejudice to SARS?
Authors: Seelan Moonsamy and Nada Kakaza of ENSafrica The understatement penalty (“USP”) regime introduced by the South African Revenue Service (“SARS”) in terms of the Tax Administration Act, No 28 of 2011 (the “TAA”), which is still in its infancy stages, has led to some uncertainty as to when an USP should, veritably, be levied by SARS. An “understatement” is defined in section 221 of the TAA to mean “any prejudice to SARS or the fiscus as a result of – a default in rendering a return; an omission from a return; an incorrect statement in a return; or if no return is required, the failure to pay the correct amount of ‘tax’.”
VAT – Confusion regarding interpretation
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).
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.
Keeping the lid on Pandora's box
Author: Lisa Brunton (Cliffe Dekker Hofmeyr) Analysis of the recent Kluh Investments (Pty) Ltd v Commissioner for the South African Revenue Service case. If only all judgments were formulated with the elegant reasoning and perspicacity of the judgment delivered by Rogers J in the Western Cape Division of the High Court in Kluh Investments (Pty) Ltd v Commissioner for the South African Revenue Service (case number A48/2014, as yet unreported) on 9 September 2014.
SARS guide on the new dispute resolution rules
The rules, promulgated on 11 July 2014 (new Rules), replaced the rules promulgated under s107A of the Income Tax Act, No 58 of 1962 (old Rules). The new Rules prescribe the procedures to be followed in respect of objections and appeals in respect of assessments or certain administrative decisions by SARS. The new Rules also deal with procedures to be followed in respect of alternative dispute resolution and various other issues relating to the Tax Court. In our Tax Alert dated 18 July 2014, it was noted that some of the most noteworthy departures from the old Rules were the following: