AB LLC and BD Holdings LLC v Commissioner of the South African Revenue Services (13276) [2015] ZATC 2; 77 SATC 349 (15 May 2015)

AB LLC and BD Holdings LLC v Commissioner of the South African Revenue Services (13276) [2015] ZATC 2; 77 SATC 349 (15 May 2015)

The court held that Article 5(2)(k) of the DTA between South Africa and the USA is an integral part of the definition of 'permanent establishment' and, once its requirements are met, there is no need for a separate enquiry under Article 5(1). The appellant provided consultancy services in South Africa through its employees for a period exceeding 183 days, satisfying Article 5(2)(k). Even if Article 5(1) were to be considered separately, the appellant had a fixed place of business at X's boardroom, meeting the requirements for a permanent establishment. The court further found that the computation of the 183-day period may involve double counting across fiscal years, as contemplated by the...

Citation
[2015] ZATC 2
Parties
Appellant: AB LLC and BD Holdings LLC; Respondent: Commissioner of the South African Revenue Services
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
15 May 2015
Case Number
13276
Procedural Posture
Tax Appeal / Final Judgment
Outcome
The appeal is dismissed in respect of the 2007, 2008, and 2009 tax assessments, the additional tax penalty, and the interest levied.
Judges
Vally, Peter Vundla, Gavin Beckwith
Legal Topics
Double Taxation Agreement, Permanent Establishment, Income Tax Act, Interpretation of International Treaties, Additional Tax Penalty, Interest on Tax Default
Tax Law Commercial and Corporate Double Taxation Agreement Permanent Establishment Income Tax Act Interpretation of International Treaties Additional Tax Penalty Interest on Tax Default

Case Brief

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Parties

AB LLC and BD Holdings LLC

Appellant

Commissioner of the South African Revenue Services

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether the appellant established a 'permanent establishment' in South Africa under the Double Taxation Agreement (DTA) with the USA.
  2. 2 Whether the requirements of Article 5(2)(k) of the DTA are sufficient to trigger tax liability, or if Article 5(1) must also be satisfied.
  3. 3 Whether the appellant is liable for tax for the 2007, 2008, and 2009 years of assessment.

Ratio Decidendi

The court held that Article 5(2)(k) of the DTA between South Africa and the USA is an integral part of the definition of 'permanent establishment' and, once its requirements are met, there is no need for a separate enquiry under Article 5(1). The appellant provided consultancy services in South Africa through its employees for a period exceeding 183 days, satisfying Article 5(2)(k). Even if Article 5(1) were to be considered separately, the appellant had a fixed place of business at X's boardroom, meeting the requirements for a permanent establishment. The court further found that the computation of the 183-day period may involve double counting across fiscal years, as contemplated by the...

Court Disposition

The appeal is dismissed in respect of the 2007, 2008, and 2009 tax assessments, the additional tax penalty, and the interest levied.

Orders

  • The appeals against the 2007, 2008 and 2009 assessments are dismissed.
  • The appeals against the additional tax imposed for non-payment during the 2007, 2008 and 2009 years are dismissed.