Taxpayer TAT: What the Test Case Interlocutory Judgment Means for Employment Tax Incentive Disputes

by | Mar 15, 2026 | BTCLQ, BTCLQ V17 I1

Taxpayer TAT: What the Test Case Interlocutory Judgment Means for Employment Tax Incentive Disputes

Author: Joon Chong

ISSN: 2219-1585
Affiliations: Partner, Webber Wentzel
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 1, 2025, p. 1 – 12

Abstract

This article examines the evolution of Employment Tax Incentive (ETI) disputes in South Africa focusing on legislative amendments, test case litigation, and the systemic challenges facing over 400 employers with disputed assessments. The ETI, introduced in 2014 to reduce youth unemployment, has become a significant source of tax litigation following SARS’ disallowance of claims under training-based arrangements. Key legislative amendments in 2018 and 2022 responded first to the Assign Services judgment on labour broking, then to perceived abusive schemes involving training arrangements. The designated test case, Taxpayer TAT (IT 46233) has not been heard on the merits. A recent judgment from the Tax Court disallowed the SARS’ application to amend its pleadings by introducing new legal grounds based on the Occupational Health and Safety Act. The Tax Court held that this was a novation prohibited under rule 31(3). The interlocutory application judgement highlights fundamental issues of procedural fairness, the impermissible importation of definitions from unrelated statutes, and the impact of systemic delays on employers facing accumulating interest and penalties. With the merits still unresolved and potential appeals looming, affected employers remain in legal and financial limbo, bearing mounting tax debt exposures while the substantive questions of what constitutes ‘work’ and ‘remuneration’ under the ETI Act await determination.

The Paradox(es) of General Anti- Avoidance Rules — Part I

by | Mar 15, 2026 | BTCLQ, BTCLQ V17 I1

The Paradox(es) of General Anti- Avoidance Rules — Part I

Author: Ed Liptak

ISSN: 2219-1585
Affiliations: Independent Consultant
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 1, 2025, p. 13 – 21

Abstract

This article considers the role that a so-called General Anti-avoidance Rule (GAAR) can or should play in changing the odds in a continuous battle between taxpayers and SARS as regards the parameter of permissible tax avoidance. Put another way, the question posed by the article is whether, or to what extent, the principles underlying the economic tax base can help to inform the application of the GAAR so as to guarantee fairness.
It is argued that any answer to this question is subject to one fundamental caveat. It is widely recognised that adopting a pure academic tax base is simply unfeasible and that the task for policy makers, therefore, is to devise a ‘second best’ solution, one that tracks that tax base as closely as possible but can work in practice. Amongst other things, this requires that the law identifies the correct taxable person; that it provides clear rules when realised income or gains should be recognised for tax purposes; that items and transactions are treated consistently; and that any deviations from the economic tax base are supported by clear policy considerations. Unfortunately, the article suggests, all too often the Income Tax Act (Act) falls short in these areas.
The ‘business purpose tests’ as used in several countries to identify impermissible tax avoidance are discussed. It is noted that the tests may look solely to the subjective purpose of the taxpayer, as was the case under section 103 of the South African Act, the objective purpose of the arrangement at issue, as in the case of New Zealand, or a combination of the two, as is currently the case under the South African GAAR.
The article notes that the degree of ‘business purpose’ required also varies. It ranges from the relatively high threshold required under the South African GAAR to the stringent New Zealand GAAR, which applies if an arrangement directly or indirectly has tax avoidance as its purpose and effect, but only if that purpose or effect is ‘not merely incidental’ to ordinary business or family dealings.

The GAAR’s Objectively Subjective Purpose Requirement

by | Mar 15, 2026 | BTCLQ, BTCLQ V17 I1

The GAAR’s Objectively Subjective Purpose Requirement

Authors: Albertus Marais and Dewald Pieterse

ISSN: 2219-1585
Affiliations: Attorney of the High Court, CA(SA), Certified Tax Advisor (SAIT); LLM (Tax Law) (UCT)
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 1, 2025, p. 22 – 40

Abstract

This article examines whether the ‘sole or main purpose’ requirement of the so-called general anti-avoidance rule (‘the GAAR’) in sections 80A–80L of the Income Tax Act1 is tested subjectively, objectively, or, as some commentators and the recent Tax Court judgment in Mr Taxpayer G2 have suggested, involves a ‘hybrid’ of the two.
The article begins by explaining the distinction between a subjective and an objective approach to the sole or main purpose requirement, before outlining the approach as it previously existed in section 103(1) of the Income Tax Act. It then critically examines the principal arguments advanced in favour of a ‘more objective’ or hybrid test under the new GAAR, after which the arguments in favour of a subjective test are expounded on.
The authors conclude that the sole or main purpose test in the GAAR today must necessarily be binary, meaning it can be either objective or subjective, but cannot be a hybrid of the two. In light of the compelling arguments in favour of such a position, it is ultimately concluded that the test for the sole or main purpose requirement in the new GAAR remains decidedly subjective, and, ironically, that the test applied in Mr Taxpayer G, notwithstanding the Court’s doctrinal endorsement of a ‘more objective’ hybrid test, is in fact the very same subjective purpose test that has applied to the GAAR since its inception.

Equal Treatment of Post-Commencement Creditors in Business Rescue Proceedings: Commentary on Mashwayi Projects v Wescoal and Others

by | Mar 15, 2026 | BTCLQ, BTCLQ V17 I1

Equal Treatment of Post-Commencement Creditors in Business Rescue Proceedings: Commentary on Mashwayi Projects v Wescoal and Others

Author: Siyabonga Nyezi

ISSN: 2219-1585
Affiliations: Legal Advisor, Nedbank
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 1, 2025, p. 41 – 46

Abstract

This case note examines the treatment of post-commencement creditors in business rescue proceedings in South Africa, following the Supreme Court of Appeal ruling in Mashwayi Projects v Wescoal and Others [2025] 2 All SA 57 (SCA). Business rescue, regulated by Chapter 6 of the Companies Act 71 of 2008, aims to rehabilitate financially distressed companies. Attempts at rescuing the company must, in terms of section 7(k) of the Companies Act, also consider the interests of other stakeholders such as creditors. The main issue in Mashwayi was whether post-commencement creditors have voting rights in relation to a proposed business rescue plan in terms of section 152(2) of the Companies Act. Pre-commencement creditors argued for their exclusion, citing the absence of explicit legislative reference to post-commencement creditors. The Supreme Court of Appeal rejected this interpretation, holding that the term ‘creditor’ bears its ordinary meaning — any person to whom a debt is owed — and that the Companies Act does not distinguish between pre- and post-commencement creditors. This article aligns with the court’s view and asserts that equal recognition of creditors not only fosters confidence in the post-commencement credit market but also reinforces the principle of equitable stakeholder treatment.