{"id":825702,"date":"2025-05-29T10:06:09","date_gmt":"2025-05-29T08:06:09","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=825702"},"modified":"2025-05-29T10:07:35","modified_gmt":"2025-05-29T08:07:35","slug":"tax-warning-for-loyalty-programmes-in-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business-opinion\/825702\/tax-warning-for-loyalty-programmes-in-south-africa\/","title":{"rendered":"Tax warning for loyalty programmes in South Africa"},"content":{"rendered":"\n

Loyalty programmes in South Africa have exploded in popularity, with companies and customers transacting in billions of rands worth of points and discounts.<\/p>\n\n\n\n

However, with some members gaming the system and some programmes giving them a way to ‘cash out’, legal experts have warned that this might soon draw the attention of the taxman.<\/p>\n\n\n\n

The latest Truth Loyalty and BrandMapps Loyalty Landscape Whitepaper for 2025 showed that 82% of South Africans use loyalty programmes, shooting up from 67% a decade ago.<\/p>\n\n\n\n

The whitepaper flagged the growing cost of living and deep financial shortfalls as one of the main reasons consumers are turning to these programmes, helping them to make ends meet.<\/p>\n\n\n\n

On average, South Africans are actively using 10 loyalty programmes, mainly to buy groceries, fuel and clothing.<\/p>\n\n\n\n

According to Doelie Lessing, Head of Tax and Robyn Schonegevel, associate at Werksmans Attorneys, the use of loyalty programmes and things like rewards points is now commonplace, and draws a very pertinent tax question.<\/p>\n\n\n\n

Customers are drawn to these programmes because they get rewards for everyday transactions, like swiping cards, making purchases or even behavioural actions like going to the gym.<\/p>\n\n\n\n

While these rewards may appear to be a perk, or incidental bonus for things customers would do anyway, the South African Revenue Service (SARS) could look closer to determine whether they are income-generating in any way.<\/p>\n\n\n\n

The legal experts said the key question is whether rewards and programmes are capital in nature, or could be considered revenue.<\/p>\n\n\n\n

“If loyalty points are revenue\u2014earned through deliberate effort or a profit-making scheme, they\u2019re likely taxable as income,” they said.<\/p>\n\n\n\n

“Revenue is what you hustle for, the fruit of your work or strategic capital use. Contrast this with capital, which arises fortuitously, like a birthday gift, and escapes the tax net.”<\/p>\n\n\n\n

While most loyalty points fall into the capital camp, if customers game the system to somehow turn a profit, it could very easily become a taxable item should SARS pursue it as such.<\/p>\n\n\n\n

The tax experts said this could be where customers chase multiple loyalty programmes and tailor their spending to maximise points, or orchestrate purchases to churn points for cash.<\/p>\n\n\n\n

Another tax angle on rewards<\/h2>\n\n\n\n
\"\"<\/a>
Checkers’ Xtra Savings rewards programme is one of the biggest in South Africa, used by mass market and middle market consumers alike.<\/figcaption><\/figure>\n\n\n\n

Another question would be where exchanging points would trigger capital gains tax.<\/p>\n\n\n\n

“A reward point is a personal right, a claim against the issuing company for a benefit. Disposing of such rights can, in some cases, spark tax\u2014like selling a share, a bundle of rights against a company,” the experts said.<\/p>\n\n\n\n

But this is not always the case. For example, when selling a house, the seller trades the property for a right to payment, then swaps that right for cash when the buyer pays. <\/p>\n\n\n\n

SARS\u2019 own Comprehensive Guide to Capital Gains Tax confirms this final swap isn\u2019t a taxable disposal.<\/p>\n\n\n\n

Fortunately for rewards points chasers, redeeming loyalty points isn\u2019t a separate tax event\u2014it\u2019s the natural culmination of their existence. <\/p>\n\n\n\n

“Points are valuable only because they can be redeemed; it\u2019s baked into their DNA. Taxing their redemption as a distinct disposal risks absurd outcomes, like taxing every ‘buy one, get one free’ deal,” the experts said.<\/p>\n\n\n\n

In addition, it is unlikely that SARS would be able to argue that cashing in rewards is the spoils of a revenue-generating hustle; at least for now.<\/p>\n\n\n\n

The tax experts noted that, even though this is not a focus area of SARS at the moment, the sector is still shrouded in grey areas and uncertainty regarding tax. This could cange in the future.<\/p>\n\n\n\n

The Revenue Service is under pressure to find between R20 billion and R50 billion in extra revenue this year. <\/p>\n\n\n\n

However, it said its main target for meeting this challenge will be illicit trade and taxpayers who have been trying to mask their wealth.<\/p>\n\n\n\n

The group has been bolstering its workforce and equipping specialised teams to go after big-ticket categories like high net-worth individuals and crypto traders.<\/p>\n\n\n\n

There is no indication that murkier areas like the loyalty and rewards ecosystems are a target. Despite this, the legal experts warned that it should not be seen as untouchable.<\/p>\n\n\n\n

“SARS may not yet be knocking, but with billions in rewards flowing through these programmes, it\u2019s only a matter of time before they sharpen their knives,” they said.<\/p>\n","protected":false},"excerpt":{"rendered":"

Billions of rands’ worth of goods and services traded through loyalty programmes could draw the taxman’s attention, legal experts warn.<\/p>\n","protected":false},"author":10,"featured_media":824239,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[2000,3246,5114],"class_list":["post-825702","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-opinion","tag-loyalty-programme","tag-sars","tag-werksmans"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/825702","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=825702"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/825702\/revisions"}],"predecessor-version":[{"id":825959,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/825702\/revisions\/825959"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/824239"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=825702"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=825702"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=825702"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}