The Choice Principle After Absa: Does the Modern GAAR Compel Taxpayers to Pay the Most Tax? A Critical Analysis of the Tax Court Judgment in Company AF and Others v Commissioner for SARS

by | Oct 24, 2026 | BTCLQ, BTCLQ V17 I3

The Choice Principle After Absa: Does the Modern GAAR Compel Taxpayers to Pay the Most Tax? A Critical Analysis of the Tax Court Judgment in Company AF and Others v Commissioner for SARS

Authors: Matthew Blumberg SC and Michael Rudnicki

ISSN: 2219-1585
Affiliations: N/A
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 3, 2025, p. 1 – 15

Abstract

In April 2026 the Constitutional Court delivered its landmark judgment in Absa Bank Ltd and Another v Commissioner for the South African Revenue Service, the first authoritative interpretation of the post-2006 general anti-avoidance rules in sections 80A to 80L of the Income Tax Act 58 of 1962. Three months later, the Tax Court in Cape Town applied those principles in Company AF and others v Commissioner for SARS, a case involving seven corporate appellants that sold their shareholding in a self-storage property company through a four-step dividend-and-subscription structure which had the effect of converting taxable capital gains into exempt inter-company dividends. This article recaps the key holdings in Absa, including the objective sole-or-main purpose enquiry, the expanded definition of ‘party’, and the counterfactual comparator for determining tax benefit. It then provides a detailed analysis of the Tax Court judgment – its application of Absa, the tax benefit finding, and the treatment of the Conhage choice principle. The article advances a critical thesis: that section 80G of the Income Tax Act is an evidentiary presumption and objective-purpose provision, not a statutory mandate to pay the most tax. It argues that the choice principle affirmed in Conhage survives Absa and retains real content (though subject to the constraints built into the choice principle itself). The GAAR should not be read as compelling taxpayers to select, from amongst various legitimately available paths to achieving a given commercial objective, that which is fiscally the costliest. The article concludes with practical implications for structuring transactions in light of these developments.

Taxpayer TAT: What the Test Case Interlocutory Judgment Means tor ETI Disputes

by | Oct 24, 2026 | BTCLQ, BTCLQ V17 I3

Taxpayer TAT: What the Test Case Interlocutory Judgment Means tor ETI Disputes

Author: Joon Chong

ISSN: 2219-1585
Affiliations: Partner, Webber Wentzel
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 3, 2025, p. 16 – 27

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 judgment 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.

Remote Work and PE: What the OECD’s New Framework Clarifies, and What it Leaves Unresolved

by | Oct 24, 2026 | BTCLQ, BTCLQ V17 I3

Remote Work and PE: What the OECD’s New Framework Clarifies, and What it Leaves Unresolved

Author: Joon Chong

ISSN: 2219-1585
Affiliations: Partner, Webber Wentzel
Source: Business Tax & Company Law Quarterly, Volume 17 Issue 3, 2025, p. 28 – 33

Abstract

This article examines the 2025 Update to the OECD Model Tax Convention Commentaries on Article 5 and its guidance on when cross-border remote working arrangements may result in a permanent establishment (PE). The OECD has introduced a structured framework for assessing whether a home office or other remote location constitutes a fixed place of business PE, centred on a two-stage inquiry involving a time-based indicator and a commercial nexus analysis. The article considers the significance of the OECD’s indication that a place from which an individual works for less than 50% of their working time over a 12-month period will generally not constitute a place of business, while emphasising that the threshold is not a statutory safe harbour and does not, by itself, determine the PE outcome. The article analyses the OECD’s distinction between remote working arrangements motivated by personal preference and those that serve a commercial purpose for the enterprise. Particular attention is given to the concept of a ‘commercial reason’ for an individual’s presence in a jurisdiction and the circumstances in which remote work facilitates the business of the enterprise in that State. The article further examines the OECD’s distinction between employees carrying on the business of an enterprise and individuals who effectively constitute the enterprise itself, highlighting the different PE consequences that may follow from otherwise similar working arrangements. The article argues that, while the 2025 Update provides welcome guidance on fixed place of business PEs arising from remote work, significant areas of uncertainty remain. The guidance does not alter the application of other PE rules, including dependent agent PEs, which in many cross-border remote working arrangements may present a greater risk than the fixed place of business analysis. The article concludes that businesses should avoid relying solely on the new framework and should continue to undertake a comprehensive PE analysis that considers the broader treaty context, the functions performed by remote workers, and the commercial realities of each arrangement.