ENS Tax In Brief - Issue 137

Below, please find issue 137 of ENS' Tax in brief, a snapshot of the latest tax developments in South Africa.

case law

• Constitutional Court | Commissioner for the South African Revenue Service v Medtronic International Trading S.A.R.L (CCT 79/23) [2024] ZACC 26 (20 December 2024)
  • This is an application for leave to appeal to the Constitutional Court ("CC") by the Commissioner for the South African Revenue Service ("SARS") where the taxpayer succeeded in obtaining orders regarding the remission of interest following the conclusion of a Voluntary Disclosure Agreement ("VDA").
  • The CC had to determine:
    • whether the Promotion of Administrative Justice Act, No. 3 of 2000 ("PAJA") requires an organ of state to consider applications purportedly made under an Act regardless of its power to act under that Act; and
    • whether SARS has the power to grant remission of interest to a taxpayer after a VDA has been concluded.
  • The primary question was whether SARS could remit interest after a VDA has been concluded. Absent such power, there would be no obligation under PAJA to the request for remission.
  • The CC noted that the VDA represents a binding agreement where interest is statutorily imposed and allowing the remission of interest following the conclusion of a VDA would undermine the entire voluntary disclosure scheme.
  • The appeal was upheld with costs.
  • Find a copy of the judgment here.
• High Court | JBSA Props (Pty) Ltd and Another v Commissioner for the South African Revenue Services and Others (5009/2023P) [2025] ZAKZPHC 3 (10 January 2025)
  • This is is an application challenging SARS' right to recover post-commencement valueadded tax ("VAT") debts incurred during business rescue.
  • The applicants argued that the business rescue plan extinguished SARS' claim for post-commencement VAT debts by binding all creditors under sections 152(4) and 154 of the Companies Act, No. 71 of 2008. It was contended that SARS' failure to attend the creditors' meeting signified acquiescence to the plan, which allocated only a nominal dividend to SARS for its VAT claims.
  • SARS opposed the application, asserting that its claims for post-commencement VAT were not compromised under the business rescue plan as SARS had neither consented to such a compromise nor acceded to any discharge of its claims. SARS also argued that statutory provisions under the Tax Administration Act, No. 28 of 2011 ("TAA") required a formal written agreement for any compromise of tax debts, which had not occurred.
  • The court held that the business rescue plan could not lawfully bind SARS to a compromise it had not agreed to. SARS' absence from the creditors' meeting did not constitute acquiescence and SARS post-commencement VAT claims could not be compromised without its explicit consent.
  • The application was dismissed with costs.
  • Find a copy of the judgment here.
• Tax Court | IT 45673 (IT) [2024] ZATC PTA (17 July 2024)
  
  • This is an appeal by the taxpayer (a trust) against the decision of SARS arising after an objection raised by the taxpayer was partially allowed resulting in reduced assessments. In particular, the taxpayer disputed the following income tax consequences of certain agreements concluded in respect of a property:
    • Liability for additional income tax on rental income on the basis that it was not earned nor accrued; and
    • Additional income tax on the value capital cost disregarded by SARS in the determination of the base cost of the property on the disposal thereof.
  • Considering the facts, the Tax Court found in favour of SARS and the appeal was dismissed with costs.
  • Find a copy of the judgment here.
• Tax Court | VAT 22425 (VAT) [2024] ZATC JHB (6 August 2024)
  • This judgment deals with two interlocutory applications.
  • SARS delivered documents consisting of 27 000 pages of discoveries and over 300 pages of expert summaries on the eve of the appeal hearing.
  • In response to each of the records filed out of time, the taxpayer issued a Uniform Rule 30 notice claiming that SARS' conduct constituted an irregular step and invited SARS to remove the cause of the irregularity. SARS filed an application for condonation.
  • Taking into account the extent of the delay, the explanation for the delay, the prejudice to the taxpayer, the complex nature of the case and attendant investigations, and the effect of the delay on the administration of justice, the Tax Court granted condonation to SARS. SARS was however ordered to pay the taxpayer's costs on an attorney client scale.
  • Find a copy of the judgment here.
• Tax Court | IT 46204&VAT 22494 [2024] ZATC PTA (6 November 2024)
  • An application for separation of issues by the taxpayer was dismissed with costs.
  • Find a copy of the judgment here.
• High Court | Glencore Merafe Venture and Others v CSARS (38144/22) [2024] ZAGPPHC 1196 (7 November 2024)
  • This is an appeal against the disallowance by SARS of diesel refund claims. The first applicant ("GMV") is a joint venture between the second applicant and third applicant.
  • The applicant contended that SARS' Appeal Committee had no power to make a new determination or finding on the adequacy of logbooks/record keeping, as this was a wholly different determination from the determination which was made in the letter of demand issued by SARS in respect of the diesel refund claims. The High Court found that the Appeal Committee did not act ultra vires and that in the absence of compliance with Notes 6(a) and 6(q), SARS cannot grant any diesel refund claimed.
  • The mining rights in question were not registered in the name of GMV. Simply put, GMV does not carry on the mining activities (which would qualify for a refund of levies), as the holder or cessionary of a mining authorisation granted or ceded to GMV, as required by Note 6(f)(ii)(cc).
  • On the basis that GMV does not carry on the mining activities, the Hight Court found that GMV was not entitled to the refund. SARS' discretion therefore does not arise.
  • The appeal was dismissed with costs.
  • Find a copy of the judgment here.
• High Court | Southern Ambition 1942 CC and Another v CSARS (5808/2021) [2024] ZAFSHC 371 (15 November 2024)
  • This is an application for leave to appeal to the Full Bench of the High Court. In the main application, the court was called upon to adjudicate upon the application for condonation in terms of section 89 (2)(a) and (3) read with section 96(1) of the Customs and Excise Act, No. 91 of 1964 ("Customs Act"), and whether there was a notice in terms of section 96(1)(c)(i) of the Customs Act as well as the special plea raised by SARS.
  • The High Court held that in an application for leave to appeal, the applicant is not precluded from revisiting the issues provided that the court is satisfied that there is a reasonable prospect that the factual matrix would receive a different interpretation by another court. Importantly, it was noted that the bar has indeed been raised for granting leave to appeal against a judgment of a High Court.
  • Accordingly, the appeal was dismissed with costs.
  • Find a copy of the judgment here.
• High Court | Dankie Oupa Delwery CC v CSARS (A216/2023) [2024] ZAGPPHC 1202 (14 November 2024)
  • The appellant, Dankie Oupa Delwery CC, appealed against a ruling by SARS denying diesel refunds claimed under section 75 of the Customs Act.
  • The appellant argued that SARS did not allow the mandatory 30-day period to provide further evidence. The High Court found that SARS had acted fairly, as the appellant was provided multiple opportunities to submit evidence.
  • The appeal was dismissed with costs.
  • Find a copy of the judgment here.
• High Court | Jaymat Enviro Solutions CC v CSARS (7559/2024) [2024] ZAWCHC 423 (13 December 2024)
  • This judgment involved a review of SARS' failure to record so-called ETI credits on the applicant's statement of account.
  • The High Court held that there are no "exceptional circumstances", as contemplated in section 105 of the TAA, justifying a departure from the "default route" and that the subject matter and relief sought is best left for adjudication to the Tax Court.
  • The High Court further held that the applicant was aware of SARS' reasons for the decision and that the delay in instituting the application is unreasonable and exceeds the maximum 180-day period allowed as a maximum under section 7(1) of PAJA.
  • The application was struck from the roll for lack of jurisdiction.
  • Find a copy of the judgment here.

legislation and draft legislation

• Rates and Monetary Amounts Amendment Act 45 of 2024
  • The Rates and Monetary Amounts Amendment Act was promulgated on 24 December 2024.
  • Find a copy here.
• Revenue Laws Second Amendment Act 44 of 2024
  • The Revenue Laws Second Amendment Act was promulgated on 24 December 2024.
  • Find a copy here.
• Tax Administration Laws Amendment Act 43 of 2024
  • The Tax Administration Laws Amendment Act was promulgated on 24 December 2024.
  • Find a copy here.
• Taxation Laws Amendment Act 42 of 2024
  • The Taxation Laws Amendment Act was promulgated on 24 December 2024.
  • Find a copy here.
• Global Minimum Tax Act 46 of 2024
  • The Global Minimum Tax Act was promulgated on 24 December 2024.
  • Find a copy here.
• Global Minimum Tax Administration Act 47 of 2024
  • The Global Minimum Tax Administration Act was promulgated on 9 January 2025.
  • Find a copy here.
• Draft Interpretation Note ("IN") 54 | Deductions not allowed: Corrupt activities fines and penalties and fruitless and wasteful expenditure
  • This Draft IN provides guidance on the meaning and scope of section 23(o) of the Income Tax Act, 58 of 1962 ("ITA"), which prohibits the deduction of expenditure incurred in respect of corrupt activities, fines or penalties imposed due to an unlawful activity, or any expenditure constituting "fruitless and wasteful expenditure" as defined in section 1 of the Public Finance Management Act, 1999.
  • Find a copy of draft IN 54 here.
• IN 53 | Limitation of allowances granted to lessors of affected assets
  • The previous issue of IN 53 was replaced.
  • Find a copy of issue 4 of IN 53 here.
• IN 136 | Public benefit organisations: Non-professional sport and recreation
  • This IN provides guidance on the interpretation and application of Public Benefit Activity 9 that provides for the administration, development, co-ordination or promotion of sport or recreation in which the participants take part on a non-professional basis as a pastime.
  • Find a copy of IN 136 here.

SARS publications

• Tax Exempt Institutions | Process to apply for Public Benefit Status Improved
  • SARS has improved the EI1 application form for entities that qualify to apply for income-tax-exempt status. The form has been enhanced as follows:
    • Easier completion: the online form can be saved, submitted as a PDF, or printed.
    • Clearer guidance to help different taxpayers fill in the form correctly.
    • Space for signatures and declaration by those accepting Fiduciary Responsibility. This improvement means that submitting an EI2 form is unnecessary if the Founding Document is legally valid.
  • SARS has developed a guide with annexures that indicates how to complete the application form in respect of each of the different categories of Tax Exempt Institutions.
  • Find a copy of the updated form here and a copy of the guide here.
  • SARS will only accept applications based on the old forms until 28 February 2025.
• Trade statistics for November 2024
  • South Africa recorded a preliminary trade balance surplus of R34.7 billion in November 2024 attributable to exports of R180.9 billion and imports of R146.2 billion.
  • Find more information here.
• Taxation of alcoholic beverages | Discussion document released for comment
  • The National Treasury has published a policy review on the taxation of alcoholic beverages, which builds on the previous excise tax policy review in 2014 and proposes adjustments to the current policy framework.
  • National Treasury requests stakeholders to submit detailed written comments and proposals to assist government to further develop an appropriate excise policy framework to reduce the harmful use of alcohol. After the public consultation process is concluded, the draft proposals will be revised to consider public comments and announcements will be made in the 2025 Budget.
  • Find a copy of the discussion document here.
  • The deadline for public comments is 14 February 2025.
• Monthly Tax Digest for January 2025 now available
  • Find a copy of the latest Monthly Tax Digest newsletter here.

exchange control

• no new exchange control circulars noted.

advance tax rulings

• no new tax rulings note.

customs and excise

• Facility codes used in the Box 30 of Goods Declaration
  • The facility codes used in Box 30 of Goods Declaration have been updated to remove the details of the cancelled Transit Shed, namely:
    • Kuehne and Nagel (Pty) Ltd with code R3 based at OR Tambo International Airport; and
    • De-grouping Facility named Berry and Donaldson (Pty) Ltd with code M9 based at O R Tambo International Airport.
  • Find the facility code list here.
• 13th deferment payment at the end of the 2024/2025 financial year
  • This message serves as a reminder to all customs clients who are deferment account holders to kindly adhere to the 13th deferment payment requirements, which becomes due by end of the financial year, 31 March 2025.
  • Find a copy of the letter to stakeholders here.

International

• Organisation for Economic Co-Operation and Development ("OECD") | International tax reform: Release of new tools for the implementation of Amount B relating to the simplification of transfer pricing rules
  • The OECD released a pricing tool and fact sheets to facilitate the understanding and operation of the simplified and streamlined approach to transfer pricing.
  • Amount B under the Two-Pillar Solution to Address the Tax Challenges of the Digitalising Economy provides for a simplified and streamlined approach to the application of the arm's length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries.
  • The OECD will hold a technical webinar on 11 February 2025 on the latest developments relating to Amount B, including a demonstration of the Pricing Automation Tool.
  • Find more information here.
• OECD | Kenya deposits its instrument of ratification of the Multilateral BEPS Convention
  • Kenya deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("BEPS Convention").
  • The BEPS Convention will enter into force on 1 May 2025 for Kenya.
  • As of today, 88 jurisdictions have either ratified, accepted, or approved the BEPS Convention resulting in the modification of over 1 600 treaties. Around 350 additional treaties will be modified once the BEPS Convention will have been ratified by all Signatories.
  • Find more information here.
• OECD | Pillar One Update from the Co-Chairs of the Inclusive Framework on BEPS
  • The Co-Chairs of the Inclusive Framework on BEPS (Inclusive Framework) provide an update on the progress made by the Inclusive Framework in developing a final package for Pillar One of the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy.
  • Find a copy of the statement here.
• OECD | Global minimum tax: Release of compilation of qualified legislation and information filing and exchange tools
  • The Inclusive Framework on BEPS is releasing a compilation of qualified domestic rules together with other tools to streamline the co-ordinated administration of the global minimum tax.
  • Find more information here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.