Vacation Exchanges International (Pty) Ltd v Commissioner for the South African Revenue Services (A253/2008) [2009] ZAWCHC 139; 71 SATC 249 (7 August 2009)

Vacation Exchanges International (Pty) Ltd v Commissioner for the South African Revenue Services (A253/2008) [2009] ZAWCHC 139; 71 SATC 249 (7 August 2009)

The court held that the Seventh Schedule provides a clear and exclusive mechanism for quantifying the cash equivalent of fringe benefits, which must precede any assessment for employees' tax. The Commissioner is required to follow the process set out in paragraph 3(2) of the Seventh Schedule if dissatisfied with the employer's determination, and cannot bypass this by directly assessing the employer under the Fourth Schedule. The structure and purpose of the Act demand that the quantification of fringe benefits is a prerequisite to any further tax collection steps. The Commissioner’s remedy, if dissatisfied, lies against the employee via assessment for normal tax, not against the employer...

Citation
[2009] ZAWCHC 139
Parties
Appellant: Vacation Exchanges International (Pty) Ltd; Respondent: Commissioner for the South African Revenue Services
Court
Western Cape High Court, Cape Town
Jurisdiction
South Africa
Judgment Date
7 August 2009
Case Number
A253/2008
Procedural Posture
Civil Appeal / Appeal From Special Tax Court
Outcome
Appeal upheld; assessments against the appellant set aside.
Judges
Davis, Bozalek, Alllie
Legal Topics
Fringe Benefits Taxation, Seventh Schedule Interpretation, Employees Tax, Remuneration Definition
Tax Law Civil Procedure Fringe Benefits Taxation Seventh Schedule Interpretation Employees Tax Remuneration Definition

Case Brief

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Parties

Vacation Exchanges International (Pty) Ltd

Appellant

Commissioner for the South African Revenue Services

Respondent

Procedural Posture

Civil Appeal / Appeal From Special Tax Court

Legal Issues

  1. 1 Whether the Commissioner may assess the employer for employees' tax on fringe benefits without first determining the cash equivalent under the Seventh Schedule.
  2. 2 Whether paragraph 3(2) of the Seventh Schedule provides an exclusive remedy for the Commissioner to re-determine the cash equivalent of fringe benefits.
  3. 3 Whether the assessment against the employer was procedurally correct under the Income Tax Act.

Ratio Decidendi

The court held that the Seventh Schedule provides a clear and exclusive mechanism for quantifying the cash equivalent of fringe benefits, which must precede any assessment for employees' tax. The Commissioner is required to follow the process set out in paragraph 3(2) of the Seventh Schedule if dissatisfied with the employer's determination, and cannot bypass this by directly assessing the employer under the Fourth Schedule. The structure and purpose of the Act demand that the quantification of fringe benefits is a prerequisite to any further tax collection steps. The Commissioner’s remedy, if dissatisfied, lies against the employee via assessment for normal tax, not against the employer...

Court Disposition

Appeal upheld; assessments against the appellant set aside.

Orders

  • The appeal succeeds with costs.
  • The order of the Special Tax Court is altered to read: 'the appeal is allowed and the assessments are set aside.'