Abstract

In the case of Capitec Bank Limited v Commissioner for the South African Revenue Service, the court addressed the interpretation and application of section 16(3)(c) of the Value-Added Tax Act 89 of 1991. Capitec Bank Limited offered loan financing to unsecured borrowers, together with loan cover at no extra charge. It claimed a tax deduction on indemnity payments made by third party insurers to Capitec Bank Limited that applied against the borrowers’ outstanding loan accounts in the event of their death or retrenchment. The court ruled that Capitec Bank may claim a partial deduction that reflects the extent of taxable supplies made by the bank in accordance with its business of providing loans to unsecured borrowers. The apportionment matter was referred to SARS to determine a reasonable method of apportionment. This case note comments on the pertinent and contentious matters that arise from this judgment, as well as the effect of the recent amendment to the definition of “insurance” and the addition of the definition of “premium” in the Value-Added Tax Act.