ABC (Pty) Ltd v Commissioner for the South African Revenue Service (VAT 1610) [2019] ZATC 18 (19 June 2019)

ABC (Pty) Ltd v Commissioner for the South African Revenue Service (VAT 1610) [2019] ZATC 18 (19 June 2019)

The court found that the services acquired from local service providers were not sufficiently linked to the making of taxable supplies, but rather related to the refinancing of debt, which is an exempt financial service under the VAT Act. The connection between the services and the taxable supplies was too remote to justify input tax deduction. Similarly, services from foreign providers were not acquired for the purpose of making taxable supplies and thus constituted imported services subject to output VAT. The penalty imposed by SARS was remitted as there was no evidence of intent to avoid or postpone payment. No costs order was made as ABC did not act unreasonably in pursuing the appeal.

Citation
[2019] ZATC 18
Parties
Appellant: ABC (Pty) Ltd; Respondent: Commissioner for the South African Revenue Service
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
19 June 2019
Case Number
VAT 1610
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeal dismissed. Additional assessments confirmed. Penalty remitted. No order as to costs.
Judges
Louw
Legal Topics
Input Tax Deduction, Imported Services, Vat Penalties, Financial Services Exemption
Tax Law Input Tax Deduction Imported Services Vat Penalties Financial Services Exemption

Case Brief

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Parties

ABC (Pty) Ltd

Appellant

Commissioner for the South African Revenue Service

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether ABC was entitled to deduct VAT charged by local service providers as input tax when substituting foreign loans with local loans.
  2. 2 Whether ABC was obliged to declare and pay output VAT on fees paid to non-resident suppliers for services related to refinancing foreign loans.
  3. 3 Whether the 10% non-payment penalty imposed by SARS should be remitted.

Ratio Decidendi

The court found that the services acquired from local service providers were not sufficiently linked to the making of taxable supplies, but rather related to the refinancing of debt, which is an exempt financial service under the VAT Act. The connection between the services and the taxable supplies was too remote to justify input tax deduction. Similarly, services from foreign providers were not acquired for the purpose of making taxable supplies and thus constituted imported services subject to output VAT. The penalty imposed by SARS was remitted as there was no evidence of intent to avoid or postpone payment. No costs order was made as ABC did not act unreasonably in pursuing the appeal.

Court Disposition

Appeal dismissed. Additional assessments confirmed. Penalty remitted. No order as to costs.

Orders

  • The appeal is dismissed.
  • The additional assessments raised by the Commissioner for the tax periods 04/2012, 06/2012, 07/2012, 08/2012 and 10/2012 are confirmed.