{"id":850931,"date":"2026-03-03T12:00:00","date_gmt":"2026-03-03T10:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=850931"},"modified":"2026-03-03T12:04:02","modified_gmt":"2026-03-03T10:04:02","slug":"supreme-court-warning-for-anyone-with-money-outside-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/850931\/supreme-court-warning-for-anyone-with-money-outside-south-africa\/","title":{"rendered":"Supreme Court warning for anyone with money outside South Africa"},"content":{"rendered":"\n

The Supreme Court of Appeal has served a warning to South Africans with money or assets outside the country. <\/p>\n\n\n\n

A recent judgment highlighted that if taxpayers cannot clearly explain the source of foreign funds, the South African Revenue Service (SARS) will tax them and impose steep penalties.<\/p>\n\n\n\n

In this case, the court ruled against a taxpayer who failed to properly account for a R1.67 million foreign deposit paid into his account by an entity in the British Virgin Islands.<\/p>\n\n\n\n

The taxpayer attempted to challenge an additional assessment and penalties raised by SARS but was unsuccessful.<\/p>\n\n\n\n

According to Richan Schwellnus, Senior Tax Attorney at Tax Consulting SA, the judgment goes far beyond a single disputed payment. <\/p>\n\n\n\n

\u201cIt sends a broader warning to taxpayers that SARS has far-reaching powers to tax undisclosed foreign income and even impose severe penalties,\u201d he said. The matter arose after SARS conducted a lifestyle audit and identified the offshore deposit.<\/p>\n\n\n\n

Initially, the taxpayer stated that the funds were a loan to cover legal fees and even produced an acknowledgement of debt in support of this version. SARS rejected this explanation.<\/p>\n\n\n\n

However, by the time the dispute reached the Tax Court, the taxpayer\u2019s story had changed entirely. The deposit was no longer described as a loan.<\/p>\n\n\n\n

Instead, the taxpayer claimed it was a repayment of a shareholder loan from a dissolved foreign company of which he was the beneficial owner. <\/p>\n\n\n\n

The previously submitted acknowledgement of debt, he now suggested, was something that \u201cdid not happen\u201d.<\/p>\n\n\n\n

This inconsistency proved fatal. Schwellnus emphasised that the case is fundamentally about the application of core tax principles. <\/p>\n\n\n\n

\u201cThe SCA decision in this case is not simply a case about a taxpayer who changed his version of events.\u201d<\/p>\n\n\n\n

\u201cIt is a case about how core tax principles, the correct disclosure of taxable receipts to the Tax Authority, and the imposition of penalties, are applied by SARS when a taxpayer fails to substantiate their position with reliable evidence.\u201d<\/p>\n\n\n\n

The importance of the Voluntary Disclosure Programme<\/h2>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

The ruling relied on section 102(1) of the Tax Administration Act, which places the burden of proof squarely on the taxpayer.<\/p>\n\n\n\n

\u201cThe taxpayer\u2019s fatal error was not merely inconsistency, but further the failure to appreciate that South African tax law places the full onus on the taxpayer to prove that income is not taxable,\u201d Schwellnus said.<\/p>\n\n\n\n

The court reaffirmed that if a taxpayer claims that a receipt is a loan or a repayment of capital, this must be proven with credible documentary evidence.<\/p>\n\n\n\n

It cannot be reconstructed years later through assumptions or pieced together from incomplete records.<\/p>\n\n\n\n

Notably, although the foreign income had been received as far back as 2006, SARS still exercised its powers to investigate and assess the payment.<\/p>\n\n\n\n

Schwellnus warned that this shows that even the effluxion of time offers little protection to taxpayers in cases of non-compliance.<\/p>\n\n\n\n

The court also upheld a 90% understatement penalty imposed by SARS. The taxpayer argued that this was excessively punitive and that there had been no intention to evade tax.<\/p>\n\n\n\n

The SCA rejected this, holding that the shifting explanations and reliance on documents later disavowed justified SARS\u2019 view of the seriousness of the conduct.<\/p>\n\n\n\n

In fact, the court remarked that SARS could have imposed a 200% penalty and that 90% was lenient.<\/p>\n\n\n\n

Schwellnus warned that timing is critical. Once SARS initiates a lifestyle audit or begins querying suspicious deposits, the Voluntary Disclosure Programme door is effectively closed.<\/p>\n\n\n\n

At that stage, taxpayers can no longer use the process to regularise their defaults and potentially avoid penalties and criminal prosecution.<\/p>\n\n\n\n

\u201cThe VDP process exists precisely to deal with situations where there is a tax default, the transaction history is complex, and the tax treatment may not have been correctly declared to SARS,\u201d Schwellnus said.<\/p>\n\n\n\n

\u201cIt allows taxpayers to regularise their affairs before credibility becomes an issue in litigation.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

A recent judgment by the Supreme Court of Appeal has served as a warning to South Africans with money or assets outside the country.\u00a0<\/p>\n","protected":false},"author":92,"featured_media":826181,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[853,24747,12796,21727],"class_list":["post-850931","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-south-africa","tag-supreme-court-of-appeal-sca","tag-tax-consulting-sa","tag-the-south-african-revenue-service-sars"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/850931","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\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=850931"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/850931\/revisions"}],"predecessor-version":[{"id":852747,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/850931\/revisions\/852747"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/826181"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=850931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=850931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=850931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}