South Africa: Tax Provisions should be interpreted independent of SARS Interpretation Notes

Rédigé le 13/06/2018

In its judgment delivered on 25 April 2018 in CCT 208/17 the Constitutional Court held that tax provisions should be objectively interpreted independent of the South African Revenue Service (SARS) Interpretation Notes.

At issue in this case, was an appeal by the South African Red Cross Air Mercy Service Trust (Trust) concerning the interpretation of S8(5) and 11(2)(n) of the Value Added Tax Act by the Supreme Court of Appeal. The court had granted judgment to the effect that the Trust was not exempt from paying Value Added Tax (VAT) on payments it receives for services that it renders to the Provincial Health Department.

The Trust’s main argument was that courts should independently determine the meaning/interpretation of legislation without resort to SARS Interpretation Notes. The Commissioner of the South African Revenue Service (CSARS) contended that the Supreme Court of Appeal had interpreted the relevant VAT provisions independent of Interpretation Notes and the notes were only confirmatory in its judgment.

The Constitutional Court held that the Supreme Court of Appeal interpreted the legislative provisions in question independent of SARS Interpretation Notes. The Court also stated that government subsidies are taxable in terms of S8(5) of the VAT Act and are zero rated when payment of such subsidies is made to welfare organizations, on the part of welfare organizations in terms of S11(2)(n) of the VAT Act.

Subsequently, the Court held that the Trust was liable to pay VAT on services rendered to Provincial Departments and payment of subsidies to the Trust by a Public Authority were zero rated in terms of S11(2)(n) of the VAT Act because the Trust is a welfare organization.

Therefore, the appeal by the Trust was rejected by the Constitutional Court.

To view the judgment, please click here

Constitutional Court Of South Africa: Judgment CCT 208/17 of 25 April 2018

By Vimbai Tanyanyiwa