Court Upholds SARS's Right to Withdraw Headquarter Company Status

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Case Summary: The Lion Match Company (Pty) Ltd v CSARS (2025)

What Was the Case About?

The Lion Match Company challenged SARS’s decision to withdraw its approved “headquarter company” (HQC) status, which gave it certain tax benefits on foreign investments. SARS withdrew this status back in 2016, arguing that Lion Match no longer qualified. Lion Match disagreed and took the matter to the Tax Court, which ruled in SARS’s favour. Lion Match then appealed to the Supreme Court of Appeal (SCA).

What Is HQC Status and Why Does It Matter?

Companies with HQC status under section 9I of the Income Tax Act benefit from special tax rules that encourage South African companies to hold and manage investments in foreign subsidiaries. It's a key part of South Africa’s international tax strategy.

Key Legal Issues

Did Lion Match meet the HQC requirements? SARS argued that Lion Match didn’t meet the 10% shareholding threshold in a key foreign company. Lion Match claimed that SARS did not follow a fair process in withdrawing the HQC status as they were not properly consult them or give reasons.

What Did the Court Say?

The SCA agreed with the Tax Court and upheld SARS’s decision. It found that Lion Match no longer qualified for HQC status at the time it was withdrawn. The court also said SARS had acted lawfully and fairly, giving adequate notice and reasons for the withdrawal.

Why This Case Matters

This is the first time the SCA has ruled on the withdrawal of HQC status. The judgment clarifies SARS’s powers and the importance of ongoing compliance with the HQC requirements. It’s also a warning to other multinationals using the HQC regime: you must continuously meet all conditions, or risk losing your tax benefits.