Below, please find issue 76 of ENSafrica's tax in brief, a snapshot of the latest tax developments in South Africa.

case law

  • High Court of South Africa (Western Cape Division, Cape Town) | Commissioner for the South African Revenue Services v Esibonga Investment (Pty) Ltd and Others (16177/21) [2021] ZAWCHC 250 (2 December 2021)
    • This was an application by Mr and Mrs Watson (the "Watsons") in anticipation of the return date of a provisional preservation order granted in favour of the Commissioner for the South African Revenue Service ("SARS") as envisaged in section 163(4)(c) of the Tax Administration Act, 28 of 2011 (as amended) (the "TAA").
    • The application was for the Court to discharge the provisional preservation order which related to a certain immovable property registered in the name of the Watsons.
    • The relevant factual background to the provisional preservation order was as follows:
      • SARS conducted an in-depth information gathering process and subsequently an audit in respect of the tax affairs of one Esibonga Investments (Pty) Ltd ("Esibonga") for the 2019 and 2020 years of assessment. It had a tax debt of circa R988 million. Subsequent thereto, SARS obtained a compulsory winding-up order.
      • Esibonga's bank statements showed that an amount of R2.1 million was paid by Esibonga to Smith Tabata Buchanan Boyes ("STBB"), the transferring attorneys of the property in the name of the Watsons.
      • SARS sought the preservation order to prevent the property from being disposed of. SARS harboured the fear of risk that Esibonga may dissipate assets, which dissipation would hinder the collection of the tax amount due - hence the preservation order.
      • According to the Watsons there was no intention to sell the property as it was held as their primary residence. Also, they alleged that they paid funds required to acquire the property to a Zimbabwean foreign exchange agent in Harare. They were advised that the funds would be paid to the South African conveyancers for the payment towards the purchase price through routine and ordinary commercial channels. The Watsons did not have any dealings or any knowledge of Esibonga.
      • The provisional preservation order was granted in favour of SARS to authorise the Registrar of Deeds to register a caveat notice on the property to ensure that the property was not transferred without notice to SARS and the curator bonis, appointing a curator bonis and authorising him to take control of the property.
    • In dismissing the application, the court held the following:
      • The purpose of preservation orders is to ensure that the property concerned is not disposed of or concealed in anticipation of proceedings.
      • Section 163(1) of the TAA extends to protection of property to include persons in the possession of the property itself.
      • In order to be discharged from the preservation order, the court must be satisfied that a reasonable person in the position of the Watsons could not have known that Esibonga paid (on their behalf) or if they knew about the payment, that such payment was not in furtherance of the dissipation of Esibonga's assets.
      • The Watsons did not take any reasonable steps to investigate whether, in the circumstances, the payment of the purchase price by Esibonga was required and was reasonably made.
      • It was incumbent upon the Watsons to consider whether it could be said that they took reasonable steps to investigate whether, in the circumstances, the payment of the purchase price for their home by Esibonga was required and the payment was reasonably made.
    • As such, the application was dismissed.
    • Find a copy of the judgment here.

legislation and draft legislation

  • no new legislation or draft legislation noted

tax rulings

  • no new tax ruling noted

SARS publications

  • Media release | Continued collaboration towards tax transparency through exchange of information
    • Tax Transparency and Exchange of Information occupied center stage on the international tax agenda this past week with the back-to-back hosting of the Africa Initiative and OECD Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) Plenary meetings.
    • See the full media release here.
  • Media Release | SARS extends filing season deadline
    • To afford taxpayers the opportunity to comply with their legal requirements, SARS will extend the filing season deadline for non-provisional individual taxpayers from 23 November 2021 to 2 December 2021.
    • SARS is acutely aware of systemic issues the organisation has experienced, as well as the impact of load-shedding on taxpayers which made it difficult for taxpayers to file their returns.
    • As a result, the date for levying of penalties on taxpayers that have not filed their return, will be extended and implemented in January 2022.
    • See the full media release here.

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