Page 793 - SAIT Compendium 2016 Volume1

CASE DIGEST 2014-2015
Core reasoning
The Tax Court held that the services special inclusion of Article 5(2) (k) of the United States/South African Income Tax Treaty were not dependent on the existence of a general xed place of business in order to create a permanent establishment. The court also held that, even if a xed place of business was a prerequisite, the ongoing and exclusive access that the taxpayers employees had to the South African client boardroom did indeed constitute a xed place of business. Therefore, the boardroom itself was a permanent establishment.
Furthermore, throughout the employees’ stay in South Africa, they had exclusive use of the boardroom during working hours even though at times some of its employees moved to other areas of the South African client premises. The failure to have access to the premises during non-working hours was not necessary because regular intensive interaction with South African client employees was most suitable during normal working hours.
In respect of the additional tax levied by SARS, the court held that the taxpayer must accept responsibility for its own error regardless of whether the error was bona de. In these circumstances, the taxpayer’s conduct falls short of what is expected of a reasonable international corporation operating on such a large scale.
12. South African Reserve Bank and Another v Shuttleworth and Another [2015] ZACC 17; 2015 (5) SA 146 (CC); (CC Cases Nos: CCT 194/2014 & CCT 199/2014 (18 June 2015)
Issue
Exchange Control Regulations: At issue was whether an exit charge imposed on capital exported out of South Africa via certain Exchange Control regulations was constitutionally valid.
Posture of the case
The case is before the Constitutional Court after the taxpayer won in the Supreme Court of Appeal.
Facts
In a budget speech delivered in 2003, the Minister of Finance (Minister) imposed a 10 per cent exit charge on capital exceeding R750 000 as a condition for the export of that capital. In 2009, Mr Shuttleworth applied to the South African Reserve Bank for permission to transfer capital (approximately R2.5 billion) out of South Africa. The Reserve Bank granted Mr Shuttleworth permission to transfer this amount on condition that he pay the exit charge. Mr Shuttleworth paid the charge and challenged the imposition of this charge on the grounds that the Exchange Control regulations were invalid on constitutional grounds.
Outcome
The Constitutional Court found in favour of the South African Reserve Bank and the Minister of Finance with the Constitutional Court holding that the exit ley was a regulatory levy and not a tax. As a result, the levy was not required to be enacted as a money bill.
Core reasoning
Justice Moseneke (with all but one sitting judge concurring) held that the dominant purpose of the exit charge was not to raise revenue but rather to regulate the conduct of discouraging the export of capital to protect the domestic economy. As a result, the charge should not be viewed as a tax requiring a money bill process.
The Constitutional Court also held that Exchange Control regulations were constitutionally valid despite their breath because these broad discretionary powers ensured a speedy and exible approach to the South African exchange control system. These regulations are also reasonably necessary to stem the out ow of capital, protect the local currency and safeguard the domestic economy.
In a dissenting judgment, Judge Froneman held that national revenue of any sort, tax or not, must be raised by way of original legislation passed in Parliament. Only the manner of its implementation, not the decision to raise it, may be regulated in delegated legislation. This is because Parliament may only delegate subordinate regulatory authority to the Executive and not assign plenary legislative power. The regulation-making power granted effectively assigns plenary legislative power to the President, which is constitutionally impermissible.
13. Commissioner for the South African Revenue Service v Africa Cash and Carry (Pty) Ltd 2015 JDR 1339 (GP); GNP HC Case No: 49274/2014 NG (25 June 2015)
Con rmation of provisional preservation order - section 163 of the Tax Administration Act (No. 28 of 2011).
Posture of the case
The respondents brought forth an application to the Gauteng Division of the High Court for an extension of the return date to le opposing af davits against the preliminary preservation order.
Facts
SARS on 10 July 2014 obtained a provisional preservation order in terms of section 163 of the Tax Administration Act in respect of the 1st and 2nd respondent company’s assets, including loan accounts. On 25 July 2014 some of the respondents entered a notice of intention to oppose but this was withdrawn on the 26th August 2014. Notwithstanding, some of the
SAIT CompendIum oF TAx LegISLATIon VoLume 1 785
CASE DIGEST 2014-2015