South Africa: Tax In Brief | Issue 65

case law

• Tax Court of South Africa I IEA Taxpayer v Commissioner for the South African Revenue Service ZATC [2021] Cape Town
  • The taxpayer ("Appellant") appealed against the decision by the Commissioner for the South African Revenue Service ("SARS") to disallow the  Appellant from deregistering as a value-added tax ("VAT") vendor, on the  basis that the Appellant earned a fee for administering funeral policies on  behalf of a long-term insurer ("insurer").
  • The Appellant's argument was that its business qualifies as a deemed financial service and thus the legislature intended that the fees earned by the  Appellant fall outside the exclusions under section 2 of the VAT Act, 1991  ("VAT Act").
  • The Tax Court considered, inter alia:
    • the terms of the agreement concluded between the Appellant and the insurer;
    • the definition of "financial service" under section 2 of the VAT Act;
    • the exemptions in section 12 of the VAT Act; and
    • Binding Private Ruling 34 (VAT) | Management of superannuation schemes: Long-term insurers.
  • The Tax Court held that the agreement concluded between the Appellant and the insurer makes it clear that the services performed by the Appellant  are purely administrative ones for which the Appellant is paid a fee. The  Appellant does not provide a long-term insurance policy. Accordingly, the  activities of the Appellant cannot be deemed to be "financial services" for  purposes of section 2 of the VAT Act.
  • The Tax Court dismissed the appeal.
  • Find a copy of the judgment here.

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