Petrochemical group Sasol has been granted leave to appeal against a high court decision that its treasury unit domiciled in the Isle of Man is liable to pay taxes in SA, in a high stakes case that might see the company cough up as much as R3bn in its dispute with the SA Revenue Service (Sars).
The JSE-listed group has already set aside nearly R3bn should it lose the battle.
The high court in Johannesburg last week ruled that the Supreme Court of Appeal might come to a different conclusion, in a matter that will go a long way in determining how SA tax authorities treat offshore treasury activities of the country’s multinational companies.
The company’s financial statements for the year to end-June show the tax agency conducted an audit over a number of years on Sasol Financing International (SFI), culminating in Sars issuing revised tax assessments.
Sasol, which has a global footprint, incorporated SFI in the Isle of Man to perform internal treasury functions including pooling foreign currency, extending loans to others in the group and investing surplus funds.
The Sars dispute centres on the tax agency’s decision to register SFI as an SA taxpayer in terms of the Tax Administration Act. It was this decision that gave rise to Sars reassessing tax years 2002-12.
Sasol, worth R81bn on the JSE, has recently reported a contingent liability of R2.87bn, including interest and penalties regarding the dispute.
“Sars dismissed Sasol’s objection to the revised assessments and Sasol appealed this decision to the tax court. In parallel, Sasol launched a review application in respect of certain elements of the revised assessments in respect of which the tax court does not have jurisdiction. Sasol also brought a review application against the Sars decision to register SFI as an SA taxpayer,” the company said in its 2024 annual report, published two months ago.
“SFI and Sars have agreed that the tax court-related processes will be held in abeyance pending the outcome of the judicial review applications. The two review applications were heard in the high court on November 16 and 17 2022. On August 1 2023, the high court handed down its decision dismissing both the SFI review applications.
“SFI filed an application for leave to appeal the high court decision and a hearing date for this application will be set in due course.
“The review applications relate to the challenge by SFI of certain administrative decisions of Sars and the high court decision does not directly affect the merits of the substantive dispute before the tax court, which remains in abeyance while the appeal of the review applications continues,” the statement reads.
Sars has been testing the law in terms of the tax treatment of SA’s multinationals.
The Constitutional Court in June ruled in favour of Coronation in its protracted battle against Sars. The matter, which has been dragging on since 2012, related to SA-controlled foreign company rules and the foreign business establishment tax exemption, in a ruling that brought relief to other JSE-listed groups operating beyond SA.
In that matter, Sars’ stance that an Irish company in the Coronation group, which has about R630bn in total assets under management, was not conducting its primary business operations in Ireland and was therefore liable to pay tax in SA.
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