ISBN: 978 148515 163 0
Affiliations: LLB LLD (Stel); Professor, Department of Private Law, Stellenbosch University; LLB LLM (UCT) LLD (Stel); Postdoctoral fellow, Department of Public Law, Stellenbosch University
Source: Yearbook of South African Law, Volume 6, p. 1176 – 1205
ISBN: 978 148515 163 0
Affiliations: BA (Law) LLB (Stell) LLM (Virginia) MA (Free State) MPA (Birmingham) LLD (Stell); Professor, Department of Public Law, Stellenbosch University and Director, African Procurement Law Unit
Source: Yearbook of South African Law, Volume 6, p. 1206 – 1243
ISBN: 978 148515 163 0
Affiliations: BA LLB (UCT) LLM (London) H Dip Tax (Wits) PhD (Macquarie); Professor Emeritus
in the School of Law, University of KwaZulu-Natal, Pietermaritzburg
Source: Yearbook of South African Law, Volume 6, p. 1244 – 1267
ISSN: 2219-1585
Affiliations: Honorary Member, Cape Bar; Michael Rudnicki, Executive, Bowmans; and Mohammed Makda, Candidate Attorney, Bowmans
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 2, 2025, p. 1 – 13
The ground-breaking judgment of the Constitutional Court in Absa Bank Ltd and Another v Commissioner for the South African Revenue Service [2026] ZACC 15 is the first substantive Constitutional Court interpretation of South Africa’s current General Anti-Avoidance Rules in sections 80A to 80L of the Income Tax Act 58 of 1962 following their introduction in 2006. The case concerned a preference share funding structure under which Absa and its subsidiary, United Towers, received tax-exempt dividends. SARS invoked the GAAR and recharacterised those dividends as taxable interest, which resulted in litigation and this landmark decision. This article summarises the judgment, which is nothing short of iconoclastic in rejecting long-held, established views in tax circles concerning the GAAR. The article further identifies the principal practical implications of the decision. The majority adopted a broad and objective approach to the modern GAAR. It held, contrary to the conventional wisdom, that a taxpayer may be a ‘party’ to an impermissible avoidance arrangement even without knowledge of every downstream step, and that the relevant tax benefit may be determined by examining the arrangement stripped of its avoidance features. The article also considers three issues arguably left unresolved by the judgment: the threshold for ‘participation’ under section 80L; the distinction between a tax benefit and an economic benefit; and the correct construction of the GAAR counterfactual scenario. Rogers J dissented, taking a narrower view of both participation in an arrangement and the location of the relevant tax benefit. The dissenting judgment reflects the traditional view of the GAAR amongst tax practitioners. The decision of the Constitutional Court is likely to affect many financing transactions which previously had been considered tax-efficient and immune from attack under the GAAR, and in particular those involving preference share funding.
ISSN: 2219-1585
Affiliations: Professor: Department of Mercantile & Labour Law, Faculty of Law, Univ ersity of
the Western Cape
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 2, 2025, p. 14 – 24
The GAAR provisions in the Income Tax Act 58 of 1962 (the ITA) empower the Commissioner of SARS to deal effectively with schemes of arrangement which have the undesirable effect of avoiding, through artificial means, an income tax liability that would otherwise accrue. Section 80B(1) of the ITA authorises the Commissioner to raise an additional or compensatory assessment which is geared to counteract the consequences of an offending scheme. Before issuing any such assessment, the Commissioner must be satisfied that facts exist which indicate the existence of a transaction, operation, scheme, agreement, or understanding whose sole or main purpose is to obtain a tax benefit and that the ‘arrangement’ was entered into or carried out in a manner which would not normally be employed for bona fi de business purposes, other than obtaining a tax benefit. In its recent decision in CSARS v Erasmus, the SCA authoritatively held that in matters where the Commissioner seeks to justify a GAAR assessment on a different factual basis from that relied on when the power in section 80B(1) was exercised, then the Commissioner is, by law, obliged to withdraw the disputed assessment and issue another in its stead based on the different facts which he aims to use for that purpose. In any such instance, the Commissioner must follow the procedure laid down in section 80J(4). This article argues that the approach adopted in CSARS v Erasmus supra upholds the sanctity of a GAAR assessment and that the Commissioner cannot willy-nilly change the basis of any such assessment, and certainly not without following due process of law. The author motivates the view that the decision of the SCA gives meaningful expression and effect to fairness and justice, both of which are basic tenets engrained in the rule of law and in the resolution of tax disputes in accordance with section 34 of the Constitution. The article concludes that the SCA was correct in holding that the Commissioner cannot be permitted to raise a GAAR assessment on one set of facts, but then be allowed to justify that assessment, in the course of appeal proceedings to the Tax Court, on a materially different set of facts.