Tax update

August 1st, 2012
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By Barry Ger

Commissioner for the South African Revenue Service v Tradehold Ltd (SCA) (unreported case no 132/11, 8-5-2012) (Boruchowitz AJA)

A tax case that was discussed in the 2011 (July) DR 50 was taken on appeal by the Commissioner for the South African Revenue Service (SARS) to the Supreme Court of Appeal (SCA). The taxpayer in the lower court had successfully claimed relief under the double taxation agreement (DTA) between South Africa and Luxembourg. The relief related to capital gains tax that SARS sought to impose on the capital gain that arose in the taxpayer’s hands on the disposal of its assets that was deemed to have taken place when it ceased to be a tax resident in South Africa.

On 8 May 2012 judgment in the case of Commissioner for the South African Revenue Service v Tradehold Ltd (SCA) (unreported case no 132/11, 8-5-2012) (Boruchowitz AJA) was handed down. The SCA upheld the taxpayer’s objection to its assessment.

Following the judgment, SARS issued a media statement in which it claimed that the ruling ‘that a double taxation agreement applied to a deemed disposal and thus did not allow for an exit charge’ appeared to ‘disturb the balance that has been achieved’.

It warned that, after the judgment was studied by the treasury and SARS, amendments with an effective date running from the day the judgment was delivered may apply to clarify that a tax treaty does not apply to a deemed or actual disposal while a taxpayer is resident in South Africa.

Barry Ger BBusSc LLB BCom (Hons) (Taxation) (UCT) is a tax consultant in Cape Town.

This article was first published in De Rebus in 2012 (Aug) DR 43.