ENS Tax In Brief

Below, please find issue 123 of ENS' tax in brief, a snapshot of the latest tax developments in South Africa.

case law

• Constitutional Court (“CC”) | Coronation Investment Management SA (Pty) Ltd v CSARS 2024 ZACC11
  • The CC considered whether the net income of Coronation Global Fund Managers (Ireland) Limited (“CGFM”), a foreign subsidiary of Coronation Investment Management SA (Pty) Ltd (“CIMSA”), was exempted from tax for the 2012 year of assessment in accordance with the provisions of section 9D of the Income Tax Act, No. 58 of 1962 (“ITA”).
  • The exemption hinged on whether, at the time, CGFM met the requirements for constituting a “foreign business establishment” (“FBE”) as defined in section 9D(9)(b) of the ITA based on its primary operations and economic substance. Central to this determination was distinguishing between fund management and investment management activities.
  • The CC confirmed that the Supreme Court of Appeal (“SCA”) erred by mischaracterising CGFM's business as predominantly investment management and misreading the evidence. This led to an illogical conclusion that undermined the objectives of section 9D which aims to ensure offshore companies remain competitive with its foreign rivals.
  • The appeal was therefore upheld and the order of the SCA set aside.
  • Find a copy of the judgment here.
  • Find the ENS tax department's newsflash here.
• High Court (Western Cape division) | Baseline Civil Contractors (Pty) Ltd v CSARS (A83/2023)
  • This case is an appeal against a decision of the Tax Court.
  • The High Court held that the inclusion of a new ground in the taxpayer's statement in terms of rule 32 of the Tax Court Rules constituted a fundamentally different ground of objection to that which was filed in the taxpayer's rule 7(2)(b) notice of objection and is prohibited by rules 10(3) and 32(3) of the Tax Court Rules.
  • The appeal was dismissed.
  • Find the judgment here.
• High Court (Gauteng, Pretoria division) | CSARS v Buthelezi and Others (B5917/2023)
  • The High Court was tasked with considering the taxpayers' objection to a preservation order granted to SARS in terms of section 163 of the Tax Administration Act, No. 28 of 2011.
  • The taxpayers argued that the SARS preservation order application was flawed on the basis that (i) the relevant SARS official did not state he was satisfied that an amount was “due and payable” by the taxpayers, and (ii) it was premised on the taxpayers' alleged involvement in an illegal scheme which was not proven.
  • It was held by the court that (i) the statement regarding the amount owed could be inferred from the evidence, and (ii) the inclusion of the alleged illegal scheme in SARS' affidavit was not decisive of the application for the preservation order.
  • The High Court held that the preservation order was and remains a justified measure but limited the duration thereof in light of its impact.
  • Find the judgment here.
• High Court (Gauteng, Pretoria division) | Fair-Trade Independent Tobacco Association NPC and Others v CSARS and Another (115176/2023; 115375/2023)
  • The High Court was tasked with determining whether the applicants were entitled to interim interdictory relief against SARS in respect of the discharge and/or implementation of the impugned rule 19.09 (“impugned rule”) related to monitoring of customs and excise warehouses through CCTV equipment, published under sections 19, 60 and 120 of the Customs and Excise Act, No. 91 of 1964 (“Customs and Excise Act”), to the extent that it infringed on their right to privacy, dignity and property.
  • The purpose of the impugned rule was found in SARS' difficulty in verifying the integrity of the values presented in documentation and the information provided by licensees of custom excise warehouses.
  • The High Court held that no evidence was provided to support that any of the applicants were connected with acts of illicit trade or that they were not tax compliant.
  • Resultantly, SARS was interdicted and restrained from implementing rule 19.09.
  • Find the judgment here.

SARS publications

• Tax Directives | Two Pot retirement system
  • SARS will be making enhancements to the Tax Directives process to facilitate the upcoming two-pot retirement system changes.
  • Find more information here.
• SARS | Monthly Tax Digest
  • See the June 2024 issue of the Monthly Tax Digest.
• SARS | 2024 Filing Season changes
  • Pro-rata Deductions for Retirement Funds: If a taxpayer's tax year is less than 12 months, the allowable retirement contribution deduction (currently R350,000) will be adjusted on a pro rata basis.
  • Exemption of Tax-Free Investments: If a taxpayer's tax year is less than 12 months, the contribution limitation for tax-free investments (currently R36,000) will be adjusted on a pro rata basis.

To view the full article, click 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.