Tax Court Backs SARS in ETI Crackdown — and 330 Companies Are in the Firing Line
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Legal-DRJ-TC-2025-17-SARSTC-2023-47-ADM-2025-ZATC-JHB-9-December-2025. This article is for informational purposes only and does not constitute legal or tax advice.
SARS has won a significant Tax Court battle that clears the way for it to pursue over 330 companies accused of abusing the Employment Tax Incentive. If your clients have claimed ETI, this judgment is worth understanding.
What Is the ETI and Why Does It Matter?
The Employment Tax Incentive was designed to help young, first-time workers find jobs by giving employers a tax break for hiring them. In simple terms, qualifying employers can reduce the amount of employees' tax they pay to SARS, making it cheaper to take on new staff.
The problem is that some employers found ways to claim these tax credits without actually creating real jobs. SARS has identified a scheme involving over 330 companies that allegedly claimed ETI credits for workers who were not genuinely employed. Instead of real jobs, these arrangements involved Limited Duration Contracts tied to training programmes, and SARS says the workers were not truly employed, did not truly work, and were not truly remunerated in the way the ETI Act requires.
What Happened in Court?
Rather than take on each of the 330-plus companies individually, SARS used a legal mechanism called a test case. This allows one representative case to be heard in full, with the outcome then applied to all the similar cases. Think of it as SARS fighting one battle to settle hundreds.
One of the affected companies, Taxpayer SX (Pty) Ltd did not want to simply wait for the test case to be decided. It had over R20 million in tax at stake and wanted to argue its own case separately, claiming its circumstances were different from the others.
Taxpayer SX tried a clever move: it said it would agree to pause its own appeal, but only on condition that it be allowed to join and participate in the test case. The court said that is not how it works. The Tax Administration Act Rules give a taxpayer three clear choices when a test case is designated. You can fight the designation, fight the pause of your case, or ask to join the test case. What you cannot do is attach conditions. Taxpayer SX tried to do two things at once, and the court rejected that approach outright.
Who Won and Why?
SARS won. Taxpayer SX's application was dismissed and it was ordered to pay costs.
The court found that the central legal questions in Taxpayer SX's case were no different from those in the test case. Namely, were these genuine employment relationships, did real work take place, and was real remuneration paid? The specific details Taxpayer SX raised, such as multiple IRP5s being issued for certain workers, were not sufficiently different to justify separate treatment.
The court was also clear that Taxpayer SX is not permanently without recourse. Once the test case is decided, it can still approach the court and argue that the outcome does not apply to its specific situation, but it must wait its turn like everyone else.
What This Means for Tax Practitioners
This judgment sends a clear message: SARS is pursuing ETI abuse seriously and at scale, and it has the legal tools to do so efficiently.
For CIBA members who assist clients with tax compliance, there are three practical takeaways.
First, if any of your clients have claimed ETI credits under arrangements involving training programmes or short-term contracts, now is the time to review whether those claims were legitimate.
Second, if a client receives a test case designation notice from SARS, the procedural response must be handled carefully, the rules are strict and there is no room for conditional or ambiguous responses.
Third, where the tax exposure is significant, clients should be referred to a tax professional without delay.
The ETI is a valuable incentive when used correctly. But as this case shows, SARS is watching, and the consequences of getting it wrong can be severe.
