ABC Trading CC v Commissioner of the South African Revenue Services (1712) [2020] ZATC 7; 83 SATC 157 (29 April 2020)

ABC Trading CC v Commissioner of the South African Revenue Services (1712) [2020] ZATC 7; 83 SATC 157 (29 April 2020)

The court found that SARS was entitled to raise additional assessments for the second VAT period under section 92 of the Tax Administration Act, as the audit had not been finalized when the High Court order was granted. However, the failure by ABC to declare output tax on the fringe benefit, amounting to R601.09, was not material in the context of the total refund of over R71 million. The ratio of the fringe benefit output VAT to the total refund was 0.0006%, which did not meet the materiality threshold set by section 45(1)(i) of the VAT Act. The court held that section 45 is concerned with materiality, not principle, and that SARS's attempt to rely on the fringe benefit error to recall...

Citation
[2020] ZATC 7
Parties
Appellant: ABC Trading CC; Respondent: Commissioner of the South African Revenue Services
Court
Tax Court
Jurisdiction
South Africa
Judgment Date
29 April 2020
Case Number
VAT 1712
Procedural Posture
Tax Appeal / Final Judgment
Outcome
Appeal upheld. Additional assessments for the relevant VAT periods are altered by reinstating the interest paid. SARS is ordered to pay costs, including costs of two counsel.
Judges
Windell
Legal Topics
Vat Refunds, Materiality in Tax Returns, Fringe Benefit Taxation, Interest on Tax Refunds
Tax Law Vat Refunds Materiality in Tax Returns Fringe Benefit Taxation Interest on Tax Refunds

Case Brief

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Parties

ABC Trading CC

Appellant

Commissioner of the South African Revenue Services

Respondent

Procedural Posture

Tax Appeal / Final Judgment

Legal Issues

  1. 1 Whether SARS was entitled to raise additional assessments for the second VAT period after a court order compelled payment of the refund with interest.
  2. 2 Whether ABC's failure to declare output tax on a fringe benefit rendered its VAT returns incomplete or defective in any material respect under section 45(1)(i) of the VAT Act.
  3. 3 Whether SARS was justified in recalling interest paid to ABC based on the fringe benefit output tax issue.

Ratio Decidendi

The court found that SARS was entitled to raise additional assessments for the second VAT period under section 92 of the Tax Administration Act, as the audit had not been finalized when the High Court order was granted. However, the failure by ABC to declare output tax on the fringe benefit, amounting to R601.09, was not material in the context of the total refund of over R71 million. The ratio of the fringe benefit output VAT to the total refund was 0.0006%, which did not meet the materiality threshold set by section 45(1)(i) of the VAT Act. The court held that section 45 is concerned with materiality, not principle, and that SARS's attempt to rely on the fringe benefit error to recall...

Court Disposition

Appeal upheld. Additional assessments for the relevant VAT periods are altered by reinstating the interest paid. SARS is ordered to pay costs, including costs of two counsel.

Orders

  • The VAT returns rendered by the appellant for VAT periods 2015/12, 2016/01, 2016/02, and 2016/03 were not incomplete or defective in any material respect as contemplated in section 45 of the Value-Added Tax Act 89 of 1991.
  • The appeal in respect of VAT periods 2015/12, 2016/01, 2016/02, and 2016/03 is upheld and the additional assessments for these periods are altered by reinstating the interest paid by the respondent in accordance with the order of Mokose AJ.