1 September 2009

SARS loses fringe benefits case

On 7 August 2009 Davis J delivered judgment in the unreported case between Vacation Exchanges International (Pty) Ltd and SARS (Case No A253/2008) and held that SARS could not hold an employer liable for under deducted employee's tax where the value of a fringe benefit is re-determined.

Where SARS is not satisfied with the determination of any cash equivalent under the Seventh Schedule, the High Court held that it cannot assess the employer by way of an employee's tax assessment. Instead, it must assess the individual for income tax on the re-determined fringe benefit through the normal income tax assessment process, which in the case of a large workforce would be difficult and costly.

Employers that are currently in dispute with SARS over employee's tax assessments involving re-determined fringe benefits may be able to, based on the strength of the case argue that assessments have been raised on the wrong taxpayer. The consequence is that employee's may be targeted by SARS for unpaid income tax.

Ruaan van Eeden
Senior Associate, Tax 

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