Navigating the VAT Maze: Input Tax Deductibility for Holding Companies and Private Equity Structures in the Post-Woolworths Era

by | Oct 18, 2025 | BTCLQ, BTCLQ V16 I3

Navigating the VAT Maze: Input Tax Deductibility for Holding Companies and Private Equity Structures in the Post-Woolworths Era

Authors: Joon Chong and Des Kruger

ISSN: 2219-1585
Affiliations: Partner, Webber Wentzel; Consultant, Webber Wentzel
Source: Business Tax & Company Law Quarterly, Volume 16 Issue 3, 2025, p. 1 – 14

Abstract

This article provides a comprehensive analysis of the evolving legal landscape governing value-added tax (VAT) input tax deductibility for holding companies in South Africa, as well as for private equity structures. It examines the seminal judgments in Commissioner for the South African Revenue Service (CSARS) v De Beers Consolidated Mines Ltd, the recent landmark case of CSARS v Woolworths Holdings Limited, and the corroborating Tax Court decision in IT 76795. The analysis reveals a fundamental jurisprudential shift away from the restrictive, transaction-focused approach established in De Beers towards the holistic, purpose-driven framework solidified in Woolworths. This evolution presents both significant opportunities and new compliance imperatives for corporate structures, particularly within the private equity (PE) sector.
The central principle emerging from this body of case law is the critical importance for a holding company to defi ne, structure, and evidence its status as an ‘active investment holding company’. To successfully claim input VAT on acquisition, capital-raising, and other strategic expenses, a holding company must demonstrate that its core enterprise involves the continuous and regular provision of taxable supplies – such as management, financial, or administrative services – to its underlying portfolio companies for a fee. The mere passive holding of shares and receipt of dividends or interest is insufficient to constitute a VAT enterprise for the purposes of deducting input tax on associated costs.
The core thesis of this article is that the test for deductibility has evolved. The question is no longer whether an expense has a ‘direct and immediate link’ to a specific operational transaction, but rather whether it has a clear ‘functional link’ to the company’s overall, continuous enterprise. The Woolworths judgment has affirmed that costs incurred in furtherance of strategic expansion, such as capital-raising fees, are deductible if they serve to enhance and grow an active investment management enterprise.
For the PE industry specifically, this represents a pivotal moment. The strategic imperative is clear: PE holding companies must proactively structure their operations to align with the principles of the Woolworths judgment. This involves establishing formal management service agreements, charging market-related fees, and maintaining meticulous records that evidence active strategic involvement in portfolio companies. By doing so, they can create a defensible basis for claiming input VAT on a wide range of transaction costs, thereby mitigating tax leakage and enhancing overall fund returns.

The Conflict Between Director Reliance in the Companies Act and Director Liability in the JSE Listings Requirements

by | Oct 18, 2025 | BTCLQ, BTCLQ V16 I3

The Conflict Between Director Reliance in the Companies Act and Director Liability in the JSE Listings Requirements

Author: Siyabonga Nyezi

ISSN: 2219-1585
Affiliations: BCom (UCT), LLB (Unisa), Attorney of the High Court of South Africa
Source: Business Tax & Company Law Quarterly, Volume 16 Issue 3, 2025, p. 15 – 22

Abstract

In the film The Pursuit of Happyness, the protagonist, Chris Gardner, juggles the challenges of fatherhood on the one hand, with his failing attempts at an entrepreneurial breakthrough on the other. Throughout the film, each keeps getting in the way of the other, almost as if they cannot coexist. A missive on a film about a struggling entrepreneur and father is perhaps not the most conventional way to start an article on delegation and reliance in company law; but the purpose of the anecdote is to emphasise the concept of two attempts at doing the right thing getting in the way of each other – a central theme in this article’s analysis of the Financial Service Tribunal ruling in Munro v Johannesburg Stock Exchange (JSE2/2023) [2024] ZAFST 36. More specifically, this article examines the incongruence between the reliance provisions in section 76(5) of the Companies Act 71 of 2008, and the provisions relating to director liability in the JSE Listings Requirements (‘Listings Requirements’).
In Munro, the Financial Services Tribunal (‘Tribunal’) had to determine, inter alia, whether a (financial) director was liable to be sanctioned for a contravention of the Listings Requirements, resulting from misstatements in the company’s financial statements, where the director relied on information provided to him by other employees of the company. This article asserts that the provisions of the Companies Act and the Listings Requirements result in parallel and conflicting treatment of reliant director conduct. The article further argues that there are instances where the JSE Listings Requirements may unduly impose liability on directors who have, in line with section 76(5), relied on information provided to them by other employees.

Equity Equivalent Programmes: A Tax Analysis

by | Oct 18, 2025 | BTCLQ, BTCLQ V16 I3

Equity Equivalent Programmes: A Tax Analysis

Author: Michael Rudnicki

ISSN: 2219-1585
Affiliations: Tax Executive, Bowman’s Attorneys
Source: Business Tax & Company Law Quarterly, Volume 16 Issue 3, 2025, p. 23 – 29

Abstract

The concept of ‘Equity Equivalents’ in the context of BEE ownership rules and regulations is rearing its head once more. Foreign organisations seeking investable presence in South Africa are cautious about giving up true equity. Ownership points play a key role in the ‘BEE score card’ table. The Department of Trade, Industry and Competition has historically accepted an alternative basis to transfer equity to black owned small and medium organisations. The alternative is referred to as an ‘Equity Equivalent’ programme.
The programme typically envisages a percentage of turnover over a period of time (typically seven to ten years) to be deployed in qualifying beneficiaries or participants in categories of investment such as supplier development, training and research.
This article considers the tax deductibility of the EE expenditure in terms of section 11(a) of the Income Tax Act (’the Act’).
It is submitted that expenditure is ‘actually incurred’ not at the time of signing the framework agreement with the DTIC, but when the contractual obligation to pay beneficiaries arises.
The ‘in the production of income’ test focuses primarily on the act giving rise to expenditure. In the Warner Lambert case (see below for detail), the court concluded that expenditure incurred in respect of social responsibility obligations meets the ‘in the production of income’ test. It is submitted that BEE related expenditure incurred to retain and grow market share meets this test. So too, it is submitted, does expenditure incurred in respect of the EE programme meet this test. The purpose of concluding this programme is to maximise earnings covering existing and new markets.
The more sensitive issue in respect of EE related expenditure is the capital versus revenue nature of the expense. Generally, expenditure incurred in performing the income-earning operations of a business is revenue in nature. Expenditure incurred as part of the cost of establishing or enhancing or adding to the income-earning structure is capital in nature. Supplementary tests are the ‘once and for all test’ and the ‘enduring benefit’ test.
Warner Lambert, supra, considered the social responsibility expenditure in the context of capital and revenue. It concluded that the taxpayer’s income-earning structure had been erected long ago. The expenditure it incurred was to protect its earnings. Accordingly, the judgment concluded that the expenditure was revenue in nature. In the case of companies having erected their income-earning structure long ago, the EE related expenditure does not create an additional structure. Ownerships points are but one of the elements of the BEE scorecard. But the key feature of the expenditure is to maintain and improve market share, thereby protecting the entity’s earnings. As a result, it is submitted, such expenditure is not of a capital nature. The same conclusion should prevail, it is submitted, where a foreign organisation establishes presence in South Africa for the first time and seeks to maximise its market share. Using this income-earning structure to seek profitable business and as a result incur EE related expenditure, does not, it is submitted, label such expenditure capital in nature.

Reflections on Proposed Law Reforms for Unfair Dismissal

by | Oct 4, 2025 | ILJ, ILJ V46 I4

Reflections on Proposed Law Reforms for Unfair Dismissal

Authors Stefan van Eck, Kamalesh Newaj & Zwivhuya Mashele

ISSN: 2413-9874
Affiliations: Professor of Labour Law, University of Pretoria; Associate Professor of Labour and Social Security Law, University of Pretoria; Lecturer, University of Pretoria
Source: Industrial Law Journal, Volume 46 Issue 4, 2025, p. 2257 – 2286

Abstract

The NEDLAC social partners have been engaged in a process of formulating amendments to a number of key pieces of labour legislation and their accompanying codes. In an attempt to foster job creation, policymakers have, among others, published proposals with the view to relaxing the seemingly onerous requirements in respect of unfair dismissal law. Although the negotiating parties have not reached consensus on key aspects of the amendments, significant suggestions have been placed on the table regarding amendments to the Code of Good Practice: Dismissal, as well as important provisions of the Labour Relations Act. The proposed amendments seek to relax unfair dismissal provisions in respect of small employers; they exclude unfair dismissal protection during probation; they recognise incompatibility as a separate ground of dismissal; and they place a cap on the maximum compensation which higher earning employees might be eligible to claim. This contribution analyses these proposed amendments, focusing on their projected effects on the regulatory landscape of unfair dismissal in South Africa.

Advancing Substantive Equality in the Workplace: Recognising Appearance Autonomy through an Intersectional Lens

by | Oct 4, 2025 | ILJ, ILJ V46 I4

Advancing Substantive Equality in the Workplace: Recognising Appearance Autonomy through an Intersectional Lens

Author Aisha Adam

ISSN: 2413-9874
Affiliations: Postdoctoral fellow, Mercantile Law, Stellenbosch University
Source: Industrial Law Journal, Volume 46 Issue 4, 2025, p. 2287 – 2309

Abstract

Appearance discrimination in the workplace, though pervasive, remains an under explored issue in South Africa’s legal landscape. While certain aspects of physical appearance such as race, colour and sex are explicitly protected under the Constitution, other traits including weight, dress, hairstyle and body modifications receive no express protection. This article focuses on these unprotected dimensions of appearance and argues for their inclusion as a listed ground in the Employment Equity Act 55 of 1998 thus complementing the existing physical appearance protections relating, for instance, to race, sex and colour. It highlights the intersectional nature of appearance-based prejudice and the compounded harm experienced by individuals when appearance-based prejudice intersects with other listed grounds. Using an intersectional lens, the article examines how systemic biases rooted in appearance perpetuate exclusion and inequality. It also seeks to balance employee autonomy with employer interests, through more inclusive workplace policies.

The Cat and Mouse Game in the Enforcement of Arbitration Awards: The Interface between the Labour Relations Act Amendments and Stalingrad Litigation

by | Oct 4, 2025 | ILJ, ILJ V46 I4

The Cat and Mouse Game in the Enforcement of Arbitration Awards: The Interface between the Labour Relations Act Amendments and Stalingrad Litigation

Author Carlos J Tchawouo Mbiada

ISSN: 2413-9874
Affiliations: Senior Lecturer, Department of Mercantile and Private Law, University of Venda
Source: Industrial Law Journal, Volume 46 Issue 4, 2025, p. 2310 – 2332

Abstract

The effective resolution of disputes is a key feature of the South African labour relations framework: it is of critical importance that disputes be resolved speedily and expeditiously. The objective of this article is to analyse the reasons for the delay in resolving disputes notwithstanding legislative provisions designed to achieve this. In particular it focuses on the delay in the enforcement of arbitration awards as far as review applications in the Labour Court are concerned. It is revealed that, notwithstanding the legislative intention to resolve labour disputes in a speedy manner, there is a substantial lapse of time from the moment an award is issued to the time that the award is finally executed, if ever. The delaying tactics, commonly known as Stalingrad litigation, is a phenomenon which hinders the speedy resolution of labour disputes. It is argued that frivolous review applications are the visible face of such tactics. The legislature has, over the years, amended the Labour Relations Act 66 of 1995 to address these delaying tactics. However, despite the legislative effort, the practice is yet to stop. This is partly because labour tribunals operate as courts of law, equity and fairness in the determination of disputes, and thus are prone to extreme leniency which dishonest litigants exploit. This contribution suggests a stricter application of clauses 7(2) and 69(2) of the Labour Court’s new rules to obviate such a delay.

The Relevancy of Expunged Criminal Records in Employment Matters in South Africa: O’Connor v LexisNexis (Pty) Ltd (2024) 45 ILJ 1287 (LC)

by | Oct 4, 2025 | ILJ, ILJ V46 I4

The Relevancy of Expunged Criminal Records in Employment Matters in South Africa: O’Connor v LexisNexis (Pty) Ltd (2024) 45 ILJ 1287 (LC):

Author Jamil Ddamulira Mujuzi

ISSN: 2413-9874
Affiliations: Professor of Law, Faculty of Law, University of the Western Cape
Source: Industrial Law Journal, Volume 46 Issue 4, 2025, p. 2333 – 2344

Abstract

Sections 271B-271E of the Criminal Procedure Act provide for the expungement of some criminal records but are silent on the effect of such expungement. The drafting history shows that the effect of an expungement is that the person shall be regarded as never having been convicted of the offence for all intents and purposes. However, in O’Connor v LexisNexis (Pty) Ltd, the Labour Court failed to give effect to the intention of the legislature when it held that when a conviction is expunged, it becomes irrelevant for the purpose of sentencing but still relevant for the purpose of employment. The court also held that the refusal by an employer to employ a person simply because of his or her criminal record may amount to unfair discrimination under s 6 of the Employment Equity Act 55 of 1998 if there is no evidence that the record will prevent him or her from doing the job in question. The court’s reasoning in this regard should be applauded and should extend to instances where criminal records have not yet been expunged.

Die stand van Afrikaans in ons regswese in historiese perspektief en ’n vooruitskouing

by | Sep 27, 2025 | TSAR, TSAR 2025 I4

ARTIKEL

Die stand van Afrikaans in ons regswese in historiese perspektief en ’n vooruitskouing

Author: TJ Scott

ISSN: 1996-2207
Affiliations: Professor extraordinarius in Privaatreg, Universiteit van Suid-Afrika
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 4, 2025, p. 649-669
https://doi.org/10.47348/TSAR/2025/i4a1

Abstract

8 May 2025 marks the centenary of the recognition of Afrikaans as an official language. Notwithstanding all the celebrations commemorating this event, the present position of Afrikaans can be regarded as precarious. This tendency is incidental to the political development of our subcontinent and the historical handicap experienced by the majority of the population in South Africa before 1994.
In this historical review an account is provided of the legal language in sway during subsequent periods since the establishment of the first European settlement at the Cape of Good Hope in 1652, up to the present. This survey first touches upon the position regarding the official language and, more specifically, the judicial means of communication in each era, and then covers the status of Afrikaans as a language of tuition. Regarding the first theme, the following periods are subjected to scrutiny: (i) the mainly Dutch East India era: 1652-1806; (ii) the position in the Cape since 1806 and Natal since 1843; (iii) the position in the Boer republics; (iv) the period after the Second Anglo-Boer War: 1902-1910; and (v) the period after Unification: 1910 to the present. Thereafter the emergence of Afrikaans as a language of tuition is evaluated.
In the second part of the article dealing with the continued viability of Afrikaans as an official language and language of record, as well as a medium of tuition, the main reasons for the decline of Afrikaans are addressed and evaluated. The establishment of 11 official languages in our constitution and the decree in terms of which Mogoeng CJ declared English as the only official language of record in 2017 are identified as the main reasons for the decline of Afrikaans as a means of communication in legal practice. The abolition of Afrikaans as language of tuition at all previously Afrikaans tertiary institutions – with concomitant effects such as the reluctance of publishers to continue producing Afrikaans textbooks and academics’ preference for publishing in English in order to gain a good rating from the National Research Foundation (NRF) – is identified as a crucial debilitating factor for Afrikaans as a medium of tuition.
It is suggested that Afrikaans may still survive as a medium of communication in the legal sphere if the method of the Canadian supreme court of writing judgments in two columns (English and French) is followed. This method has recently found favour in judgments of our supreme court of appeal (English and Xhosa) and constitutional court (English and Afrikaans). This strategy is particularly commendable, because it represents a “practical and positive” measure as determined by section 6(2) of the constitution, which recognises the historically diminished use and status of our indigenous languages and mandates the state to take practical and positive measures to elevate their status and advance their use. Although the future of Afrikaans is ultimately dependent on the loyalty of its speakers towards the language in which they were brought up, its continued existence is bolstered by the fact that there are still numerous Afrikaans legal firms conducting their day-to-day business in Afrikaans, while the possibility of financial inputs by Afrikaans capital may present additional support for enhancing the relevance of Afrikaans as a language of record.

Towards repair? Incoherences in the Societies for the Prevention of Cruelty to Animals Act and the need for legislative reform

by | Sep 27, 2025 | TSAR, TSAR 2025 I4

ARTIKEL

Towards repair? Incoherences in the Societies for the Prevention of Cruelty to Animals Act and the need for legislative reform

Author: D Bilchitz

ISSN: 1996-2207
Affiliations: Professor of Law, University of Johannesburg; Professor of Law, University of Reading
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 4, 2025, p. 670-695
https://doi.org/10.47348/TSAR/2025/i4a2

Abstract

Hierdie artikel spreek ’n onontginde tema in akademiese literatuur aan rakende die ontwerp van strukture om diere te beskerm. Suid-Afrika het ’n ongewone wet, naamlik die Wet op Dierebeskermingsverenigings 169 van 1993, wat ’n regspersoon stig wat bekend staan as die Nasionale Raad van Dierebeskermingsverenigings. Deur sommige parlementêre debatte rondom hierdie wetgewing, sowel as die bepalings daarvan te ondersoek, argumenteer ek dat die wet verskeie teenstrydighede rakende die aard, rol en befondsing van die Nasionale Raad van Dierebeskermingsverenigings bevat.
In die besonder argumenteer ek dat die wet (saam met die grondwet van die Nasionale Raad van Dierebeskermingsverenigings) twee teenstrydige sienings aangaande die Nasionale Raad van Dierebeskermingsverenigings bevat. Die eerste is as ’n “sambreelorganisasie” wat die belange van sy lede verteenwoordig – outonome individuele dierebeskermingsverenigings. Die tweede is as ’n “regulatoriese afdwingingsliggaam” oor daardie individuele dierebeskermingsverenigings. Daardie twee benaderings is onversoenbaar. Dit word uitgelig deur verskeie onlangse voorbeelde van hoëprofiel-litigasie wat individuele verenigings teenoor die Nasionale Raad van Dierebeskermingsverenigings stel. Hierdie gevalle illustreer ook hoe hierdie teenstrydighede lei tot kommer dat die regulatoriese afdwingingsbevoegdhede van die Nasionale Raad van Dierebeskermingsverenigings nie te goeder trou uitgevoer word nie. Byvoorbeeld, ’n onlangse saak het behels dat die Nasionale Raad van Dierebeskermingsverenigings sy regulatoriese afdwingingsbevoegdhede na bewering misbruik het om die samestelling te bepaal van sy eie algemene jaarvergadering waar kontroversiële besluite bespreek is wat nie deur die Nasionale Raad van Dierebeskermingsverenigings se leierskap ondersteun is nie. Hierdie probleem word vererger deur die teenstrydige bepalings in die wet oor befondsing en funksies. Dit lei tot ’n strukturele belangebotsing aangaande die manier wat die Nasionale Raad van Dierebeskermingsverenigings sy regulatoriese afdwingingspligte uitvoer – dit kan byvoorbeeld finansieel baat by die beperking van die aantal verenigings wat geregistreer kan word, sowel as die sluiting van sommige van die verenigings.
Ek stel voor dat wetshervorming die beste manier is om hierdie teenstrydighede aan te spreek. Ek stel verder voor dat die Nasionale Raad van Dierebeskermingsverenigings se regulatoriese afdwingingsbevoegdhede oor individuele verenigings geskrap moet word. In plaas daarvan behoort die organisasie ’n baie duideliker stel doelwitte te hê – wat insluit om ’n spreekbuis op nasionale vlak vir individuele verenigings te wees, dierewelsynsprobleme van nasionale belang aan te spreek, dierewelsynsdienste te verskaf in dele van Suid-Afrika wat nie deur individuele verenigings bedien word nie en voort te gaan om sy afdwingingsbevoegdhede teen dieremishandeling deur private vervolgings uit te oefen.

The sequestration and possible rehabilitation of a trust in South African law – a critical analysis of Conradie v Master of the High Court: Kimberley (1260/2006) 2008 ZANCHC 50 (13 June 2008)

by | Sep 27, 2025 | TSAR, TSAR 2025 I4

ARTIKEL

The sequestration and possible rehabilitation of a trust in South African law – a critical analysis of Conradie v Master of the High Court: Kimberley (1260/2006) 2008 ZANCHC 50 (13 June 2008)

Author: P Bothma

ISSN: 1996-2207
Affiliations: Advocate of the high court of South Africa, member of the Cape Bar and the Johannesburg Society of Advocates
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 4, 2025, p. 696-710
https://doi.org/10.47348/TSAR/2025/i4a3

Abstract

Dit is geyk dat insolvente trusts, beide testamentêr en inter vivos, gesekwestreer word ingevolge die Insolvensiewet 24 van 1936 en nie gelikwideer word ingevolge die bepalings van die Maatskappywet 61 van 1973 nie. Daar is egter nie eenstemmigheid oor of ’n gesekwestreerde trust wel gerehabiliteer kan word nie. In weerwil van akademiese kommentaar tot die teendeel, het die Noord-Kaapse hooggeregshof in Conradie v Master of the High Court: Kimberley beslis dat ’n trust wat gesekwestreer is, wél vatbaar is vir rehabilitasie.
Hierdie bydrae ondersoek dié teenstrydige sieninge rakende die rehabilitasie van ’n trust en die gevolgtrekking word bereik dat, weens die besondere aard van die trust in Suid-Afrika, ’n trust nie vatbaar is vir rehabilitasie is nie.
Na aanleiding van ’n kritiese analise van die kommentaar deur die Franse akademikus, Lepaulle, word daarop ag geslaan dat die trust in Suid-Afrika gekonsepsualiseer word as ’n boedel. Oorweging van regspraak insake die insolvensiereg wys daarop dat daar ’n onderskeid getref word tussen ’n “insolvent” en die “insolvente boedel”. Die insolvent verwys na die persoon wie se boedel gesekwestreer word en dit is nie die insolvent wat gesekwestreer word nie, maar wel die insolvent se boedel. ’n Gevolg van sekwestrasie is dat die insolvente boedel voortaan vestig in ’n trustee, gemagtig deur die meester, en dat die regstatus van die persoon wie se boedel gesekwestreer is verander na dié van ’n “insolvent”. Alhoewel ’n insolvent onmiddellik ’n nuwe boedel bekom, is sy vermoë om daarmee te handel beperk gegewe sy status as insolvent. ’n Insolvent se status word gerehabiliteer óf deur die verloop van tyd ingevolge die bepalings van die Insolvensiewet, óf by wyse van ’n hofbevel. So ’n rehabilitasie het egter nie tot gevolg dat die gesekwestreerde boedel voortaan in die voormalige insolvent vestig nie, maar eerder dat die voormalige insolvent onbelemmerd met die nuwe boedel kan handel. Dit is juis hierdie onderskeid tussen “insolvent” en “insolvente boedel” wat verklaar waarom ’n trust nie vatbaar is vir rehabilitasie nie. Aangesien ’n trust gekonsepsualiseer word as ’n boedel, en aangesien ’n gesekwestreerde boedel nie gerehabiliteer word nie, volg dit dat trusts ook nie gerehabiliteer kan word nie.
Hierdie bydrae ondersoek ’n verdere vraag: indien ’n trustboedel nie vatbaar is vir rehabilitasie nie, kan die amp van trusteeskap gerehabiliteer word?
Om hierdie vraag te beantwoord word die wisselwerking tussen die amp van trusteeskap en die trustboedel ondersoek en daar word aan die hand gedoen dat die amp van trusteeskap nie onafhanklik van die trustboedel kan bestaan nie. Trustees word aangestel ten opsigte van ’n spesifieke trustboedel en regverdig nie ’n onafhanklike bestaansreg nie. Gevolglik, sal die amp van trusteeskap ook beëindig word sodra die trustboedel afgehandel is, en kan daar nie sprake wees van die rehabilitasie van die amp van trusteeskap nie.