{"id":840856,"date":"2025-10-24T09:30:00","date_gmt":"2025-10-24T07:30:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=840856"},"modified":"2025-10-24T09:19:23","modified_gmt":"2025-10-24T07:19:23","slug":"sars-nails-one-taxpayer-for-r46-million","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/840856\/sars-nails-one-taxpayer-for-r46-million\/","title":{"rendered":"SARS nails one taxpayer for R46 million"},"content":{"rendered":"\n

The South African Revenue Service (SARS) has scored another victory in court, emboldening its aggressive push to go after taxpayers who are trying to skirt or evade their tax obligations.<\/p>\n\n\n\n

In the latest case, the Revenue Service applied General Anti-Avoidance Rules (GAAR) to a taxpayer who had been channelling their remuneration through foreign entities to avoid paying tax.<\/p>\n\n\n\n

The taxpayer in question had for several years been doing so to generate Secondary Tax on Companies (STC) credits, re-characterising their compensation as tax-exempt dividends rather than taxable income.<\/p>\n\n\n\n

However, when SARS sniffed this out, it disagreed with the process and applied GAAR to re-characterise the receipts as ordinary income. <\/p>\n\n\n\n

The Tax Court agreed with SARS, finding that the sole or main purpose of the structure set up by taxpayer was to obtain a tax benefit and that, “but for” the arrangement, substantial income tax would have been payable.<\/p>\n\n\n\n

SARS ultimately succeeded in levying R46 million.<\/p>\n\n\n\n

According to tax experts at Tax Consulting SA, the court ruling is just the latest in a string of cases where SARS is flexing its legislative muscled and ironing out lumps in South Africa’s tax laws.<\/p>\n\n\n\n

Earlier in the year, SARS secured a judgment from the Supreme Court of Appeal clawing back R40 million<\/strong><\/a> from impermissible tax rebates, as well as R30 million<\/strong><\/a> from a taxpayer using creative accounting to lend money to their own businesses.<\/p>\n\n\n\n

Tax Consulting said the latest court decision shows SARS is clearly clamping down on avoidance-related issues where taxpayers have attempted to find loopholes, often resulting in disputes. <\/p>\n\n\n\n

“It reflects a clear trend of SARS becoming increasingly assertive in challenging perceived tax-driven arrangements,” it said.<\/p>\n\n\n\n

Under sections 80A to 80L of the Income Tax Act, SARS is empowered to disregard, combine or re-characterise any arrangement that results in a tax benefit and lacks genuine commercial substance.<\/p>\n\n\n\n

“In this case, SARS demonstrated that the taxpayer\u2019s structure, ostensibly designed to utilise STC credits and disguise income, lacked commercial substance.”<\/p>\n\n\n\n

“The court agreed, holding that the steps were executed in a manner not ordinarily employed for bona fide business purposes,” the group saod.<\/p>\n\n\n\n

Notably, the court also confirmed that substance prevails over form: the fact that payments were styled as dividends did not prevent SARS from re-characterising them as income where the underlying reality supported that view.<\/p>\n\n\n\n

What’s more notable about the latest case is that SARS’ application of GAAR is still being ironed out.<\/p>\n\n\n\n

Earlier this year, the Constitutional Court heard argument in a long-running case between SARS and Absa over its application.<\/p>\n\n\n\n

While judgment is still awaited in that matter, this latest Tax Court decision underscores the courts\u2019 willingness to uphold SARS\u2019 use of GAAR and reject tax-driven schemes lacking commercial rationale, Tax Consulting said.<\/p>\n\n\n\n

The scales are not in your favour<\/h2>\n\n\n\n
\"\"<\/a>
SARS commissioner, Edward Kieswetter<\/figcaption><\/figure>\n\n\n\n

The Tax Court\u2019s application of the \u201cbut for\u201d test proved decisive, the experts said.<\/p>\n\n\n\n

The taxpayer\u2019s contention that the transactions had legitimate business purpose collapsed against the economic reality that, withour (“but for”) the structure, ordinary income tax would have applied. <\/p>\n\n\n\n

The balance therefore turned squarely in SARS\u2019 favour.<\/p>\n\n\n\n

“In practice, SARS is becoming increasingly proactive, using legislative tools to dismantle what it regards as artificial arrangements. This marks a clear shift from reactive enforcement to strategic, pre-emptive intervention,” Tax Consulting said.<\/p>\n\n\n\n

This should serve as a clear warning for corporates and any other taxpayers who are using creative accounting and loopholes in legitimate structures to avoid paying tax.<\/p>\n\n\n\n

“Arrangements undertaken primarily for tax reasons, even when technically compliant, are now firmly in SARS\u2019 sights,” the experts warned.<\/p>\n\n\n\n

This includes executive remuneration models, cross-border structuring, corporate reorganisations, and financing arrangements that prioritise tax outcomes over economic substance.<\/p>\n\n\n\n

“Put simply, where tax drives the transaction rather than follows it, the arrangement is at risk. SARS has made it clear that complexity and multiple layers of entities will no longer provide protection.”<\/p>\n","protected":false},"excerpt":{"rendered":"

SARS has scored another court victory against a taxpayer using loopholes in legitimate structures to skirt their tax obligations.<\/p>\n","protected":false},"author":10,"featured_media":782514,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[3246,15027],"class_list":["post-840856","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-sars","tag-tax-consulting"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/840856","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=840856"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/840856\/revisions"}],"predecessor-version":[{"id":840857,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/840856\/revisions\/840857"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/782514"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=840856"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=840856"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=840856"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}