Consol Glass (Pty) Ltd v The Commissioner for the South African Revenue Service

Consol Glass (Pty) Ltd, a VAT-registered vendor manufacturing and selling glass containers, restructured its debt in 2012 by refinancing earlier Eurobond debt with Rand-denominated loans from South African banks. In doing so, it procured services from local service providers (banks and attorneys) and foreign service providers (advisers on early redemption of Eurobonds and unwinding of hedging instruments). SARS raised additional VAT assessments disallowing Consol’s input tax deductions on fees paid to local service providers and imposed VAT on fees paid to foreign suppliers as imported services. Consol objected unsuccessfully and appealed to the Tax Court, which largely dismissed the appeal. Consol then appealed to the Supreme Court of Appeal.

The appeal was dismissed with costs, including the costs of two counsel.

The case provides authoritative guidance on the interpretation of 'in the course of making taxable supplies' in the VAT Act, particularly in relation to financing, restructuring and refinancing transactions. It clarifies that even where a taxpayer is engaged in a taxable enterprise, not all expenditure incurred by the enterprise will qualify for input tax deductions. The judgment is significant for corporate taxpayers undertaking complex financing or restructuring arrangements.