Category: SARS (page 1 of 2)

SARS dispute: What are the reasons?

Generally, disputes with the South African Revenue Service (SARS) are the result of an assessment which has been issued by SARS to a taxpayer. An assessment is the determination of an amount of a tax liability or refund, by way of self-assessment by the taxpayer (such as in the case of VAT) or assessment by SARS (such as in the case of income tax). If taxpayers are not satisfied with an assessment, the Tax Administration Act provides for dispute resolution mechanisms, in terms of which taxpayers can object to the assessment, and subsequently appeal, if objections are not maintained.

Although objection to an assessment is the correct procedure to dispute a tax amount, taxpayers often lodge objections against assessments, without knowing exactly what they are objecting to. This could seriously jeopardise a taxpayer’s case, since taxpayers may not appeal on a ground that constitutes a new objection against a disputed assessment. If a valid ground of objection is therefore not addressed in the objection itself, taxpayers may lose the opportunity to object to a specific ground.

For example: when an assessment is raised by SARS because “expenses are not allowed as a deduction” it could be as a result of, among others, the following:

  • SARS considers the taxpayer not to carry on a trade;
  • SARS considers the expense not to have been incurred in the production of income;
  • SARS considers the expense not to have been actually incurred; or
  • SARS considers the expense to be of a capital nature.

Without having reasons for the assessment, the taxpayer cannot properly formulate its grounds of objection and may, therefore, find itself in a position where the real grounds for the assessment, may not be challenged on appeal.

In terms of Rule 6 of the dispute resolution rules, a taxpayer who is aggrieved by an assessment may request that SARS provide reasons for an assessment. The reasons provided by SARS must enable the taxpayer to formulate its grounds of objection. The reasons for any administrative action must include the reasons for the conclusion reached, and it is not enough to merely state the statutory grounds on which the decision is based or repeat the wording of the legislation. The decision-maker should furthermore set out his understanding of the relevant law.

A request for reasons for an assessment must be made within 30 business days from the date of assessment. Taxpayers (and their practitioners) are therefore encouraged to consider assessments as soon as they are issued by SARS. If there is any doubt as to why the assessment has been issued, a formal request for reasons should be issued without delay.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Value-Added remarks on Value-Added Tax (VAT)

VAT is an integral part of our economic society and is something that influences everyone, especially businesses in South Africa.  In this article, we will discuss a few do’s and don’ts regarding VAT.

  1. Valid tax invoices

In South Africa’s current tax system, vendors that are registered for VAT are allowed a deduction for the tax they pay on eligible goods or services (input tax) from the tax you collect on the sales made (output tax). Tax invoices are therefore very important to vendors as failure to provide valid documentation during VAT audits will cause the vendor to lose all the input tax being claimed on the invoice. The following requirements will overcome the challenges that may be encountered because of SARS scrutinising the validity of VAT invoices.

When the tax invoices exceed R5 000, a full tax invoice needs to be provided. For invoices of R5 000 or below they may issue an abridged tax invoice. There will be no tax invoice needed if the consideration is R50 or less. However, documents such as a sales docket or till slip will be necessary to verify the input tax deducted.

As from 8 January 2016, the following information must be reflected on a tax invoice for it to be considered valid:

  1. Contains the words “Tax Invoice”, “VAT Invoice” or “Invoice”
  2. Name, address and VAT registration number of the supplier
  3. Serial number and date of issue of invoice
  4. Accurate description of goods and/or services (indicating where applicable that the goods are second-hand goods)
  5. Value of the supply, the amount of tax charged and the consideration of the supply
  6. Name, address and where the recipient is a vendor, the recipient’s VAT registration number
  7. Quantity or volume of goods or services supplied

Note that an abridged tax invoice will only need to meet criteria 1 to 5, whereas the full tax invoice (tax invoices exceeding R5 000) must meet all criteria.

  1. When to declare output VAT/claim input VAT

The date on which VAT becomes due on a transaction is the earliest of either the payment date or the invoice date. For example, if a payment is received in advance of the invoice issued for the supply, the VAT will be due on the date of receipt of payment. It is important to note that output VAT should be declared in the period in which the invoice has been issued or the payment has been received. With regards to input VAT, here the 5-year rule applies.

This rule provides that any amount of input tax which was deductible and has not yet been deducted can be claimed in a following period but is limited to a tax period 5 years after which the tax invoice should have been issued.

  1. Overpayments by the customer

When a vendor receives an overpayment from a customer, that vendor will not declare VAT on the overpayment. If a vendor fails to refund the overpayment within 4 months of the date of the invoice, the excess amount is deemed to be a consideration and therefore output VAT should be declared on the last day of the VAT period during which the 4-month period ends at a tax fraction of 15/115.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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EMP501-Rekonsiliasies

Die aanvangsdatum van die 2019-seisoen vir indiening van die jaarlikse EMP501-rekonsiliasies is deur die Suid-Afrikaanse Inkomstediens (SAID) uitgestel vanaf 1 April na 17 April 2019. Die rede vir hierdie verandering word toegeskryf aan opdaterings deur die SAID aan hul bestaande stelsels.

Die sperdatum vir indiening van bostaande rekonsiliasie, sowel as die Opgawe van Verdienste (“Return of Earnings”) (W.As 8) is 31 Mei 2019.  Die boetes vir laat indiening is as volg:

  • die nie-indiening of laat indiening van die EMP501-rekonsiliasie kan lei tot ’n 10% boete van die belastingjaar se werknemersbelastingaanspreeklikheid; en
  • die laat indiening van die W.As 8 2018 Opgawe van Verdienste by die Departement van Arbeid kan 10% van die aanslag bedrag beloop.

Daar word voorgestel om gebruik te maak van elektroniese salarisregisters wat jou in staat stel om onderliggende waardes van doeltreffendheid en betroubaarheid behoorlik te handhaaf en sodoende te verseker dat akkurate inligting aan die SAID en die Departement van Arbeid betyds voorsien word om enige boetes te vermy.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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Changes regarding payroll taxes

The South African Revenue Service (“SARS”) has recently made changes with regards to the management of payroll taxes in order for employers to more effectively manage their own accounts by way of a number of functions and tools.

SARS states that the aim of these changes is to allow employers to ensure that all their necessary payroll filings are correctly reflected, payments have been correctly allocated and that all charges to their accounts such as adjustments, interest and penalties have been correctly calculated and recorded.

The most recent changes include changes to the statement of account (“SOA”) which were introduced on 26 April 2019. These changes followed complaints by employers of errors on these accounts.

The purpose of the SOA is to reflect the balance and detailed transactions for a tax year with regards to Pay-As-You-Earn (“PAYE”), the Skills Development Levy, the Unemployment Insurance Fund and the Employer Tax Incentive (“ETI”) in order to allow for employers to complete their Employer Reconciliation Declaration bi-annually.

In order to make the SOA more clear and comprehensible, SARS made changes to the manner in which financial information is being displayed. In this regard, enhanced descriptions were included for liability and non-liability transactions. Also, all liability transactions are now grouped together and sorted in transaction date order. The exemption to this is any non-financial transactions with a date earlier than the first day of the period under consideration.

In order to identify payments and to better reconcile them with the employer’s bank statements, the SOA now also makes provision for receipt numbers for payments and journals.

Furthermore, ETI transactions (which have no impact on the PAYE account) are now grouped together and reflected at the bottom of the SOA.

In addition to the above, employers previously had to request SARS to make payment reallocations and corrections on their behalf. The monthly employer declaration (“EMP201”) and payment reference number (“PRN”) system was introduced to allow employers to amend their declarations and payments themselves. This tool also allows employers to identify and follow-up on incorrect or missing transactions using the consolidated employer SOA and query function as well as to correct unallocated payments.

Employers also have access to their financial accounts online to view and query transactions processed against their accounts in real-time. SARS also allows for a case management system where employers will be able to log queries, they are unable to resolve themselves and to monitor and track SARS’ progress with regards to the query logged.

With the annual employer reconciliations submission deadline now at 31 May 2019, employers are encouraged to use all these amended functions and tools to submit accurate information and to manage their payroll taxes more effectively in the future.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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BTW-regulasies in verband met die verskaffing van elektroniese dienste

Sedert 2015 word buitelandse verskaffers van elektroniese dienste (soos oudiovisuele inhoud, e-boeke, ens.) in Suid-Afrika, geag ’n onderneming vir BTW plaaslik te bedryf. Alhoewel die regime al vir ’n aantal jare in plek is, word nuwe regulasies in hierdie verband voortdurend gepubliseer, die laaste op 18 Maart 2019, met ’n effektiewe datum van 1 April 2019. Saam met die nuwe regulasies het die SAID ’n “FAQ”-dokument gepubliseer wat sommige van die vrae wat handelaars en die publiek in die algemeen waarskynlik sal hê oor die implikasies van die opgedateerde regulasies en onlangse wetgewende wysigings, aanspreek. Hieronder ondersoek ons sommige van die meer relevante sake wat die SAID in die “FAQ”-dokument aanspreek.

 

Wat is elektroniese dienste? Elektroniese dienste beteken enige dienste wat deur ’n nie-inwoner vir oorweging verskaf word deur gebruik te maak van –

  • ’n elektroniese agent;
  • ’n elektroniese kommunikasie; of
  • die internet.

 

Elektroniese dienste is dus dienste, waarvan die verskaffing –

  • afhanklik is van inligtingstegnologie;
  • geoutomatiseerd is; en
  • minimale menslike ingryping behels.

 

Eenvoudig gestel, beteken dit dat vanaf 1 April 2019, u BTW moet betaal op ’n wyer reeks elektroniese dienste. Die regulasies omvat nou enige dienste wat kwalifiseer as “elektroniese dienste” (behalwe vir ’n paar uitsonderings) hetsy dit direk deur die nie-inwonerbesigheid of via ’n “tussenganger” verskaf word.

 

Enkele voorbeelde sluit in:

  • Veilingdienste;
  • Aanlynadvertensies of voorsiening van advertensieruimte;
  • Aanlynkoopportale;
  • Toegang tot “blogs”, joernale, tydskrifte, koerante, speletjies, publikasies, sosiale netwerke, “webcasts”, webinare, webwerwe, webtoepassings, webreekse; en
  • Sagteware-toepassings afgelaai deur gebruikers op mobiele toestelle.
Wat is spesifiek uitgesluit van die omvang van elektroniese dienste in die opgedateerde regulasies? Uitgesluit uit die opgedateerde regulasies is –

  • Telekommunikasiedienste;
  • Opvoedkundige dienste wat vanaf ’n uitvoerland (’n ander land as Suid-Afrika) voorsien word, welke dienste deur ’n onderwysowerheid kragtens die wette van die uitvoerland gereguleer word; en
  • Sekere lewerings van dienste waar die verskaffer en ontvanger aan dieselfde groep maatskappye behoort.
Wat is die rede vir die opgedateerde regulasies? Die oorspronklike regulasies het die omvang van dienste wat as elektroniese dienste kwalifiseer beperk en belasting moet teen die standaardkoers gehef word. Die voorneme van die opgedateerde regulasies is om die omvang van dienste wat as elektroniese dienste kwalifiseer, wesenlik uit te brei sodat alle dienste wat vir ’n oorweging (onderworpe aan ’n paar uitsonderings) verskaf word, wat deur middel van ’n elektroniese agent, elektroniese kommunikasie of die internet, elektroniese dienste is en BTW teen die standaardtarief gehef moet word.
Tref die opgedateerde regulasies ’n onderskeid tussen Besigheid-tot-Besigheid (B2B) en Besigheid-tot-Verbruiker (B2C) voorrade? Nee, daar is geen onderskeid tussen B2B en B2C-voorrade nie, daarom sal B2B-voorrade met BTW teen die standaardkoers gehef word. Hierdie uitkoms was opsetlik omdat die Suid-Afrikaanse BTW-stelsel nie ten volle die B2B- en B2C-konsepte onderskryf nie.
Wat is voorbeelde van voorrade wat nie elektroniese dienste is nie?
  • Sekere opvoedkundige dienste
  • Sekere finansiële dienste waarvoor ’n fooi gehef word
  • Telekommunikasiedienste
  • Sekere voorrade gelewer in ’n groep maatskappye
  • Die aanlynverskaffing van tasbare goedere soos boeke of klere
  • Sekere voorrade of dienste wat nie elektroniese dienste volgens hulle aard is nie, maar waar die uitset en oordrag van die dienste slegs elektronies gekommunikeer word, byvoorbeeld:
    • ’n regsmening wat in ’n uitvoerland voorberei is, per e-pos gestuur; en
    • ’n argitek se plan opgestel in ’n uitvoerland en per e-pos aan die kliënt gestuur.

 

Gegewe die veel groter toepassingsgebied vir elektroniese dienste, moet beide plaaslike en buitelandse handelaars toesien dat BTW teen die toepaslike tarief gehef word vir die verskaffing van elektroniese dienste – en plaaslike verkopers moet, waar toepaslik, die nodige stawende dokumente behou ten einde enige insetbelastingeise te staaf.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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EMP501-rekonsiliasies

Die aanvangsdatum van die 2019-seisoen vir indiening van die jaarlikse EMP501-rekonsiliasies is deur die Suid-Afrikaanse Inkomstediens (SAID) uitgestel vanaf 1 April na 17 April 2019. Die rede vir hierdie verandering word toegeskryf aan opdaterings deur die SAID aan hul bestaande stelsels.

Die sperdatum vir indiening van bostaande rekonsiliasie, sowel as die Opgawe van Verdienste (“Return of Earnings”) (W.As 8) is 31 Mei 2019.  Die boetes vir laat indiening is as volg:

  • die nie-indiening of laat indiening van die EMP501-rekonsiliasie kan lei tot ’n 10% boete van die belastingjaar se werknemersbelastingaanspreeklikheid; en
  • die laat indiening van die W.As 8 2018 Opgawe van Verdienste by die Departement van Arbeid kan 10% van die aanslag bedrag beloop.

Daar word voorgestel om gebruik te maak van elektroniese salarisregisters wat jou in staat stel om onderliggende waardes van doeltreffendheid en betroubaarheid behoorlik te handhaaf en sodoende te verseker dat akkurate inligting aan die SAID en die Departement van Arbeid betyds voorsien word om enige boetes te vermy.

Hierdie artikel is ʼn algemene inligtingsblad en moet nie as professionele advies beskou word nie. Geen verantwoordelikheid word aanvaar vir enige foute, verlies of skade wat ondervind word as gevolg  van die gebruik van enige inligting vervat in hierdie artikel nie. Kontak altyd ʼn finansiële raadgewer vir spesifieke en gedetailleerde advies. (E&OE)

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REQUESTS FOR SUSPENSION OF PAYMENT FROM SARS

Since its introduction, the “pay now, argue later” rule relating to disputed amounts of tax has been and remains to be the subject of much controversy, and rightfully so. The basic premise is that even though you disagree with an amount of tax, once you have been assessed by SARS, the amount becomes due and your obligation to pay the tax, and SARS’ right to recover the tax, is not suspended by any objections or appeals against the assessment or pending court proceedings (i.e. pay the tax, and then dispute it).

Taxpayers do however have some remedy, in that they may request a senior SARS official to suspend the payment of the tax (or a portion), pending the outcome of a dispute against an assessment. Importantly, a taxpayer needs to dispute, or at least intend to dispute, the amount of tax allegedly due before a request to suspend the payment can be made.

In considering the request, the SARS official should consider relevant factors, including:

  • whether the recovery of the disputed tax will be in jeopardy or if there will be a risk of dissipation of assets;
  • the compliance history of the taxpayer with SARS;
  • whether fraud is prima facie involved in the origin of the dispute;
  • whether the taxpayer has tendered adequate security for the payment of the disputed tax and if accepting it is in the interest of SARS or the fiscus; and
  • whether payment will result in irreparable hardship to the taxpayer not justified by the prejudice to SARS or the fiscus if the disputed tax is not paid or recovered.

Taxpayers should not look to abuse the suspension system, as SARS are well within their rights to revoke a decision to suspend payment with immediate effect, if it is satisfied that a taxpayer merely entered into the dispute process on a frivolous or vexatious basis, is employing dilatory tactics, or if there is a material change in the circumstances from when the request was granted. Furthermore, if a request has been successfully granted, but the taxpayer does not object to the assessment, does not appeal after a disallowed objection or proceeds to court, the suspension is revoked with immediate effect.

SARS will not suspend payment of an amount of tax out of own accord once the dispute process has commenced. Taxpayers will need to actively take steps to initiate the suspension, through either e-filing or a branch office visit. A request for suspension of payment is a vital part of the dispute resolution process and should be submitted as soon as possible for an assessment which a taxpayer intends to dispute. If not already along with a request for reasons, it would be good practice to submit the request at the same time as the objection.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Additional changes to income tax returns for trusts

The South African Revenue Service (“SARS”) implemented several changes to the income tax returns for trusts (the ITR12T) on 17 September 2018. These changes are in addition to the changes already made on 26 February 2018. The September 2018 changes apply in respect of the year of assessment ending on 28 February 2018. Taxpayers that already saved or submitted the relevant 2018 ITR12T prior to the implementation of the latest changes, will not be presented with any of the new fields for completion.

Similar to the February 2018 changes, these additional changes form part of SARS’ ongoing efforts to promote efficiency and compliance.

Three new fields will be pre-populated on the ITR12T. The first is the “Trust Type”. Validation questions will be presented for a response if the Trust Type is Special Trust Type A or B. The Trust Type may change based on the answers provided.

The second and third fields relate to income from local farming operations (IT48) and income from local partnership farming operations (IT48V). These fields will now include auto-calculations and cater for negative currency to be captured.

Where applicable, trustees will now also be able to select one or both of the following options: “vested” and “discretionary”.

The ITR12T wizard has also been updated to include a question pertaining to imputed income from controlled foreign companies (“CFC”). If this question is answered yes, the ITR12T will display a new container to be completed. Please note that trusts, together with any connected person in relation to the trust, that holds at least 10% of the participation rights in a CFC, will also be required to submit a completed IT10B form (or IT10A form for years prior to 2012).

More fields have been added to the ITR12T with regards to the reduction of debts (section 19 of the Income Tax Act[1]), cash contributions to a rehabilitation trust fund (section 37A of the Income Tax Act) and amounts in respect of certain (tainted) intellectual property (section 23I of the Income Tax Act).

Furthermore, SARS indicated that the following documents should be submitted with the ITR12T (as a minimum) and include financial statements and/or administration accounts, all certificates and documents relating to income and deductions, proof of any tax credits claimed, particulars of assets and liabilities, as well as details of persons or beneficiaries to whom income, capital and/or assets were distributed or vested.

The take away is that trusts should carefully consider these new requirements in order to ensure that the relevant ITR12T is completed correctly. For more information on these new fields, an example of the new ITR12T form is available on SARS’ website for consideration.

[1] No. 58 of 1962

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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Deduction for photovoltaic solar energy plants

Section 12B(1) and (2) of the Income Tax Act[1] provides for a 50/30/20 income tax deduction in respect of certain machinery or plant owned by the taxpayer and which was or is brought into use for the first time by that taxpayer, for the purpose of his or her trade to be used by that taxpayer in the generation of electricity from, amongst others, photovoltaic solar energy (both for energy of more than 1 megawatt and energy not exceeding 1 megawatt) or concentrated solar energy. The tax deduction also applies to any improvements to the qualifying plant or machinery which is not repairs.

In cases of plant and machinery used in the generation of electricity from photovoltaic solar energy in respect of energy less than 1 megawatt, the taxpayer may write off 100% of the costs of such plant or machinery in the year brought into use.[2]

The cost of any asset for purposes of section 12B also includes the direct cost of installation or the erection thereof.[3]

In a recent binding private ruling (BPR 311) the applicant proposed to install solar power systems at each of the sites it rented to reduce electricity costs. As each system will only be supplemented and not replace the electricity provided by the main grid, it was proposed to generate less than 1 megawatt of electricity.

The taxpayer will purchase the photovoltaic solar panels, appoint and pay independent contracts to perform the installation planning, procure and purchase all other relevant equipment and install the systems at the relevant sites. These systems at each site comprised of the panels, AC inverters, DC combiner boxes, racking, cables and wiring.

In terms of the ruling, the taxpayer was entitled to claim the costs in respect of all the components of each system in terms of sections 12B(1) and (2). As each system will generate less than 1 megawatt of electricity, 100% of these costs were deductible in the year brought into use. No deduction was, however, claimed in respect of the costs of distribution boxes as it did not form part of the photovoltaic solar energy system.

It was furthermore proposed that the taxpayer would incur certain related expenditure as part of the cost of the installation, including the installation planning costs, panel delivery costs and installation safety officer costs. SARS, in this regard, ruled that these costs all formed part of the direct costs of installation and erection of the systems and were therefore deductible in terms of section 12B(3).

Taxpayers installing solar energy systems should therefore carefully consider the tax deductions in terms of section 12B to ensure that all relevant costs are claimed for income tax purposes.

[1] No. 58 of 1962

[2] See section 12B(2)(b)

[3] Section 12B(3)

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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THE INTERPRETATIVE VALUE OF SARS INTERPRETATION NOTES

In terms of section 4 of the South African Revenue Service (SARS) Act,[1] one of the objectives of SARS is to secure the efficient, effective and widest possible enforcement of tax and related acts. One of the methods employed by SARS in this mandate is through the publication of official documents on the application, or SARS’s interpretation, of the acts which they administer – namely Interpretation Notes, which are generally available to taxpayers.

In a unanimous judgment on 25 April 2018, in the matter of Marshall and Others v Commissioner, South African Revenue Service,[2] the role of Interpretation Notes in the interpretation of statutes was considered. The judgment is of particular importance, since it has been generally accepted that Interpretation Notes provide context to legislation and “constitute persuasive explanations in relation to the interpretation and application of the statutory provision in question”,[3] but the weight that should be attached to Interpretation Notes during statutory interpretation, was unclear.

The case involved the interpretation of two sections of the Value-Added Tax Act,[4] dealing with the VAT treatment of payments received by the South African Red Cross Air Mercy Service Trust for services rendered to provincial health departments. The applicant was of the view that the SCA placed undue reliance on SARS’ Interpretation Note 39 in formulating its interpretation of the relevant sections, since it gives “rise to unequal treatment of the litigating parties and fly in the face of the right to a fair hearing.”

The Constitutional Court found that, in the context of statutory interpretation, an approach whereby reliance is placed on an interpretation which accords with a consistent application by those responsible for the administration of the legislation requires re-examination, especially in a constitutional democracy.

In arriving at a conclusion, Justice Froneman indicated the following:

Why should a unilateral practice of one part of the executive arm of government play a role in the determination of the reasonable meaning to be given to a statutory provision? It might conceivably be justified where the practice is evidence of an impartial application of a custom recognised by all concerned, but not where the practice is unilaterally established by one of the litigating parties. In those circumstances it is difficult to see what advantage evidence of the unilateral practice will have for the objective and independent interpretation by the courts of the meaning of legislation, in accordance with constitutionally compliant precepts. It is best avoided.

This makes it clear that courts should make an objective and independent interpretation of legislation and that Interpretation Notes (and arguably other interpretative materials), should be irrelevant to such an interpretation. Since SARS is often a party to tax litigation, Interpretation Notes containing their interpretation of legislation, cannot be considered independent. Despite the appeal being dismissed based on the finding that the SCA indeed interpreted the legislation independently and objectively, the judgment provides clear indication of the role of Interpretation Notes in fiscal interpretation. In short, it carries no value.

[1] 34 of 1997.

[2] [2018] ZACC 11.

[3] Dambuza JA in Commissioner, South African Revenue Service v Marshall NO [2016] ZASCA 158; 2017 (1) SA 114 (SCA) (SCA judgment).

[4] 89 of 1991 (the VAT Act).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)

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