Tshwane, 15 April 2024 – The South Africa Revenue Service (SARS) wishes to comment briefly on the decision of the Constitutional Court issued on 12 April 2024 in the matter between Capitec Bank Limited v SARS.
As always, SARS welcomes the clarity and certainty provided by courts, since this is in line with our strategic intent of voluntary compliance.
SARS wishes to emphasise that this judgment is unique and specific to the circumstances surrounding this taxpayer and the particular transaction involved. It is important to note that originally Capitec sought to deduct the full amount of R 71 million as an input claim, however the court noted “That is a battle that it has lost”.
As SARS was substantially successful in the Supreme Court of Appeal, which ought to have awarded a modest, 8% to 10% apportionment, legal costs was granted in favour of SARS. The Constitutional Court found, however, that Capitec’s initiation and service fees generated a surplus that covered other lending costs, and that an apportionment was appropriate. The Constitutional Court recognised, nevertheless, that the VAT Act makes “no explicit provision for apportionment in this situation” and therefore ordered SARS to consider an apportionment methodology. SARS’ success in the Supreme Court of Appeal remained substantially unchanged, legal costs in the SCA was granted in favour of SARS.
SARS and Capitec are now required to engage in order to determine an appropriate apportionment methodology.
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