Tax In Brief | Issue 83

• Published date: 14 June 2022
• Law Firm: ENSafrica
• Author: &nbsp ENSafrica

Below, please find issue 83 of ENSafrica's tax in brief, a snapshot of the latest tax developments in South Africa.

CASE LAW

• The High Court of South Africa, Gauteng, Pretoria | Sasima Investment Holdings (Pty) Ltd v Commissioner, South African Revenue Service [2022] (59288/2021) (6 May 2022)
• • On 16 September 2021 at Skilpadhek, on the border to Botswana the respondent (Commissioner) detained a truck and trailer that the applicant uses to transport fuel to Botswana.
  • Pursuant to an export entry made on behalf of the applicant the respondent issued a letter of demand demanding payment of duties on the fuel, on the basis that the fuel has been irregularly dealt with in terms of the Custom and Excise Act, 1964.
  • The applicant responded to the letter of demand by requesting the truck, trailer and fuel detained. In addition, the applicant requested suspension of payment pending the action of review proceedings.
  • The applicant issued a section 96 notice on 16 November 2021 and launched an urgent application a week later.
  • Issues
  • • whether it is in the interest of justice that the period of one month in a section 96 notice ought to be reduced; and
    • whether the relief sought by the applicant in Part A is final or justified.
  • Held
  • • The relief sought by the applicant is not interim in that once the vehicle is released, there is no guarantee the vehicle will return to South Africa with the fuel sale should Part B not proceed or succeed.
    • The application is dismissed with costs.
  • Find a copy of the judgment here.
• The Tax Court of South Africa, KwaZulu Natal Local Division, Durban | Taxpayer Z v The Commissioner for the South African Revenue Service Case No. 35448
• • This is a tax appeal concerning an additional income tax assessment issued by the South African Revenue Service ("SARS") in respect of the 2014 tax period, in terms of which SARS disallowed expenses of the Taxpayer of some ZAR90- million. More representations were made and the disallowed expenses were reduced to ZAR30 677 104.74.
  • There are four aspects of the 2014 assessment that are in dispute:
  • • management fees claimed by Taxpayer Z in the sum of circa ZAR16- million. This is made up of management fees claimed to have been provided to Taxpayer Z by two associated entities, RR in the sum of circa ZAR12-million and II in the sum of circa ZAR4-million Both these figures exclude Value Added Tax ("VAT"), and are expressed in the financial accounts of Taxpayer Z as "Management Fees";
    • whether SARS was entitled to impose interest in terms of section 89quat of the Income Tax Act, 1962 (the "Act"), and whether SARS should have remitted that interest;
    • whether SARS was entitled to impose an understatement penalty of 125% under the Tax Administration Act, 2011 (the "TAA"); and
    • whether Taxpayer Z or SARS should pay the costs of the appeal.
  • In the initial tax return submitted by Taxpayer Z, the ZAR16-million had been claimed under the heading "Income Statement" under both "Admin., secretarial, rentals guarantee fees and other services - Non-connected". On the next page, the same amount was claimed under the heading "Management fees - Non-connected". SARS queried this and was told the amount was for "Other expenses" - SARS did not suggest that this was a double deduction. ZAR11.9-million was claimed for donations. Ms E, the only witness for Taxpayer Z and the person who managed and controlled Taxpayer Z, RR and II contended that both of these expenses were part of...