4 days ago
A VAT crash course, courtesy of 9 000 gold coins
A recent Tax Court judgment stands as a cautionary tale, write Megan Langton and Mornay Bornmann.
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South African Revenue Service (SARS) Commissioner Edward Kieswetter has spelled it out again after the May 2025 Budget Speech: SARS is committed to collecting significantly more tax this year. He warned that SARS will use all legal instruments to address non-compliance.
Despite best efforts to educate and forewarn South Africans, there are still taxpayers and their advisors who make very expensive mistakes when challenging SARS. For delinquent taxpayers who take the risk, the reality is that this Commissioner is not making idle threats.
The recent Tax Court judgment in Southern Africa versus SARS stands as a cautionary tale.
The taxpayer lost its claim for a R26.9 million input VAT refund. This matter relates to 9 000 gold coins, weighing 358 kg and a customs value of R157 million, brought into South Africa.
The taxpayer is a clearing agent operating on behalf of a third party (BIV). The judgment reads that both the taxpayer and BIV 'were under the mistaken impression that no importation VAT was payable on the importation of the coins'.
The taxpayer did not initially declare VAT on the import of the gold coins, which entered through OR Tambo International Airport from the UK.
SARS informed the taxpayer that gold coins are not exempt from VAT and that a Voucher of Correction (VOC) was needed to bring VAT into account. The taxpayer then passed a VOC to declare VAT, which SARS accepted. SARS later deducted R26.9 million in VAT from the taxpayer's deferment account.
The matter was further complicated when the gold coins were subsequently exported back to the UK. However, SARS refused to accept a second VOC, intended to retrospectively cancel the original customs declaration on which the VAT was paid.
The court was not impressed
Failing to convince SARS to issue a refund of the import VAT, the taxpayer took their plethora of arguments to the Tax Court.
This included claims that:
The taxpayer qualified as a representative taxpayer or responsible third party entitled to the refund under sections 154 and 158 of the Tax Administration Act;
No valid importation had occurred because the goods were later exported; and
The taxpayer was entitled to an output tax adjustment under section 21 of the VAT Act.
The presiding officer was Judge J Bam of the High Court, Gauteng Division. In a well-written judgment, the taxpayer's arguments were squashed, with the Court stating:
Through the life of this case, the Commissioner has consistently informed the applicant of its position. The Commissioner cannot be forced to make a refund of VAT contrary to the provisions of the VAT Act.
The Judge agreed with SARS's rejection of the refund on the basis that the taxpayer was not the lawful importer. This was because it was BIV, not the taxpayer, who was reflected as the importer according to all supporting documentation, the VAT registration number, and the accompanying import forms.
In one of the most damning lines of the judgment, the Court concluded:
The appellant has no case against the respondent. It never had.
The taxpayer was ordered to pay SARS's legal costs, including the costs of two counsel.
Applying for a simple VAT ruling from SARS prior to import would have clarified whether the agent could claim input VAT, and under what circumstances. The taxpayer and BIV could have imported the gold coins with no VAT risk.
What is quite striking is not how the case failed, but how easily it could have been avoided.
Megan Langton is a tax attorney at Tax Consulting South Africa, and Mornay Bornmann, attorney for cross-border taxation at Tax Consulting South Africa.
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