Government grants play an important role in supporting South African businesses, particularly in sectors targeted for development or transformation. However, the assumption that such grants are automatically tax free is incorrect. In terms of the Income Tax Act 58 of 1962 (Act), government grants could be included in gross income unless a specific exemption applies or they are of a capital nature.
Category: Tax Administration
Rule 56, default cures and fairness: SCA confirms substance over procedure in tax disputes
In Commissioner for the South African Revenue Service v Virgin Mobile South Africa (Pty) Ltd [2025] ZASCA 77 (4 June 2025), the Supreme Court of Appeal (SCA) delivered important guidance on the procedural interplay between Rule 56 of the Tax Court Rules (Rules) and the requirement for condonation under Rule 52. This ruling provides important clarity on how late filings should be approached, particularly where the defaulting party acts within the grace period afforded under Rule 56. Background Under Rule 31 of the Tax Court Rules, the South African Revenue Service (SARS) must file its statement of grounds of assessment and opposing appeal within 45 business days after receiving the taxpayers Rule 10 notice of appeal. If SARS fails to meet this deadline, the taxpayer may invoke Rule 56(1)(a), placing SARS on terms to remedy the default within 15 business days or face default judgment in terms of section 129(2) Read More …
New tax requirements for foreign employers in South Africa: PAYE withholding obligations
Effective 22 December 2023, new South African tax legislation requires non-resident employers with a permanent establishment (PE) in the country to register as employers for employees tax (PAYE) purposes and to withhold PAYE from remuneration paid to their employees. This change could have a significant impact on employers with employees that opt to work in South Africa remotely, a situation that has become common recently. This new legislation means that foreign employers need to take greater care to ensure compliance with regard to their remote working population.
Navigating tax assessments and objections in South Africa: A legal roadmap
Receiving a tax assessment from SARS is often the starting point for a complex journey for taxpayers. In South Africa, taxpayers have the right to contest an assessment if they believe it to be incorrect, but this process comes with its own set of rules and challenges. Understanding the grounds of assessment and the burden of proof Upon receiving a tax assessment, it is crucial for taxpayers to carefully review the details. If they disagree with the assessment, they have the right to lodge an objection. However, understanding the grounds on which the assessment was made is key. Unfortunately, there are instances where SARS fails to provide adequate reasons for its assessments, leaving taxpayers in the dark. In such cases, taxpayers can request the grounds for assessment within 30 business days from the date the assessment was issued. Once it has received the requested grounds for the assessment, the taxpayer Read More …
The VAT refund process
A VAT refund is an amount of VAT that is payable by SARS to a vendor. In terms of section 1 of the VAT Act No. 89 of 1991 (the VAT Act), a vendor means any person who is or is required to be registered under the VAT Act, provided that where the Commissioner has under section 23 or 50A determined the date from which a person is a vendor, that person shall be deemed to be a vendor from that date.
The VAT treatment of supplies made are you an agent and can you prove it?
In the recent case of KEN CC v CSARS, VAT2218 (VAT) [2023] ZATC CPT, the Tax Court (Cape Town) was tasked with deciding the dispute that had arisen between KEN CC (the vendor) and SARS concerning the vendors supply of services to foreign tour operators (FTOs) incorporated outside of South Africa. The vendor argued that it provided a single supply of tourism package assembly services to its non-resident FTO customers and that such services were zero-rated under section 11(2)(l) of the Value Added Tax Act, 1991 (VAT Act). This was on the basis that the FTO customers were not residents of South Africa and were not located in South Africa when the package assembly services were rendered. As part of its package assembly services, the vendor was appointed on behalf of the FTOs to contract with local third-party service providers for inter alia accommodation, guides, and greeting services. These local Read More …
PAYE obligations for Foreign Employers
Following the 2023 National Budget on 21 February 2023, draft legislation was published on 28 July 2023 where it was proposed by National Treasury (NT) that all foreign employers would be required to register for Employees Tax (PAYE) and make the necessary payments to the South African Revenue Service (SARS) in respect of remuneration paid to any employees located in South Africa (SA). Many commentators made submissions and engaged in the stakeholder meetings with NT advising that this would significantly increase the administrative burden on foreign employers and potentially increase unemployment levels in SA as foreign employers would look to employ personnel in other countries.
A game changer for taxpayer confidentiality: The Constitutional Court decides in a narrow 5-4 split decision
While public interest litigation is a common occurrence in South Africa, it seldom involves the area of tax law. However, pursuant to the Constitutional Courts judgment in Arena Holdings (Pty) Ltd t/a Financial Mail and Others v South African Revenue Service and Others [2023] ZACC 13, handed down on 30 May 2023, this might become a more regular occurrence and something the taxpayer and tax advisory community may see more of in future.
Tempers continue to cool: Are uniform allowances (for nurses) taxable?
The inclusion of any part of an allowance paid or payable in an employees taxable income is governed by section 8(1)(a) of the Income Tax Act 58 of 1962 (Act). At a glance It has recently been reported in the news that the Department of Health has agreed to pay a temporary allowance of R3,153 to nurses in the public sector to enable them to buy uniforms. From a tax perspective, this amount will potentially not be subject to tax. In terms of section 10(1)(nA) of the Income Tax Act 58 of 1962, where an employee is, as a condition of their employment, required while on duty to wear a special uniform which is clearly distinguishable from ordinary clothing, the value of such uniform, or any allowance provided in lieu of any such uniform, given to the employee by his employer, will be exempt from normal tax and therefore not Read More …
Court Case – VAT agency and principals
The terms agent and agency are not defined in the Value Added Tax Act 89 of 1991 (VAT Act). The South African Revenue Service (SARS) has indicated in Interpretation Note 42 (IN 42) that it accepts that the common law relationship between the principal and the agent prescribes the value-added tax (VAT) consequences of this legal relationship. The general VAT rule is that where a person, acting as agent, supplies goods or services on behalf of a principal to a third party, the supply is deemed to be made by the principal and not the agent (section 54(1) of the VAT Act). Conversely, where a third-party supplier makes a supply to an agent acting on behalf of a principal, that supply is deemed to be made to the principal (section 54(2) of the VAT Act). In these instances, the principal and not the agent must account for VAT on the Read More …