Recent Tax Court Rulings Explained

This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.

If you work with tax, these recent court cases are worth a look — they offer real-life lessons on VAT claims, trust payouts, deductions, and how far SARS can go during an audit.

🧾 Case 1: Fidelity Fund Wins VAT Dispute on Insurance Premiums

SARSTC VAT 22558 (VAT) [2025] ZATC CPT (11 February 2025)

Case Description
The Legal Practitioners Fidelity Fund claimed input VAT on professional indemnity insurance premiums paid for legal practitioners. SARS disallowed the claims, arguing that the Fund did not receive any taxable supply in return and lacked valid tax invoices.

Court Ruling
The Tax Court found that the Fund was entitled to claim the input VAT:

• It was the principal in the transaction.

• The insurance services related to taxable activities.

• SARS had accepted similar claims in the past without objection.

The Impact of the Ruling
The ruling clarifies that principal entities may claim input VAT even if acting on behalf of others, provided services relate to taxable supplies. It also stresses SARS’s obligation to treat similar cases consistently.

🧾 Case 2: Trust Payments Deemed Taxable Income, Not Dividends

SARSTC IT 45776 (IT) [2024] ZATC JHB (29 November 2024)

Case Description

The taxpayer received over R632 million from a trust and claimed the amount was exempt as trust distributions (dividends). SARS argued that the trust was a vehicle to disguise employment income and the payments should be taxed as ordinary income.

Court Ruling
The court held in favour of SARS:

• The taxpayer had an unconditional right to the funds.

• The arrangement was a simulation lacking genuine commercial substance.

The Impact of the Ruling
This case confirms that SARS can disregard artificial structures used to avoid tax. Income cannot be disguised through trust distributions when the economic reality suggests otherwise.

🧾 Case 3: Deductions Disallowed and Penalties Upheld Due to Lack of Evidence

SARSTC IT 25209 (ADM) [2025] ZATC JHB (3 February 2025)

Case Description
The taxpayer challenged SARS's refusal to allow deductions and the imposition of penalties. They argued SARS had erred in their assessment and that penalties were excessive.

Court Ruling
The Tax Court upheld SARS’s position:

• The taxpayer failed to provide sufficient records to support the deductions.

• SARS acted within its legal rights to impose penalties.

The Impact of the Ruling
This ruling emphasises the taxpayer's duty to maintain and submit proper documentation to support deductions. Without sufficient proof, SARS is justified in disallowing claims and imposing penalties.

🧾 Case 4: Procedural Challenge to SARS Audit Dismissed

SARSTC 2023-22 (ADM) [2024] ZATC JHB (27 December 2024)

Case Description
The taxpayer objected to SARS’s audit procedures and the issuance of additional assessments, claiming they were procedurally unfair or unlawful.

Court Ruling
The Tax Court ruled that SARS acted within the scope of its statutory powers:

• SARS followed lawful audit and assessment procedures.

• The taxpayer’s procedural objections lacked substance.

The Impact of the Ruling
This case confirms SARS's authority to conduct audits and issue assessments, as long as it complies with the relevant legislative framework. Taxpayers must show valid grounds if they intend to challenge administrative decisions.