The Commissioner for the South African Revenue Service v Char-Trade 117 CC t/a Ace Packaging

Char-Trade 117 CC made loans to related close corporations and companies within its group during the 2007 to 2011 years of assessment. SARS audited Char-Trade and determined that these loans constituted deemed dividends under ss 64B and 64C of the Income Tax Act 58 of 1962 because they bore interest at less than the official rate, triggering liability for Secondary Tax on Companies (STC). SARS issued STC assessments on 9 November 2012 for the 2007–2011 dividend cycles. Char-Trade never submitted any STC return nor paid STC for the 2007 dividend cycle. In proceedings before the Tax Court, Char-Trade conceded the merits of the STC assessments for all years except 2007 and relied solely on the defence that the 2007 assessment had prescribed under s 99 of the Tax Administration Act 28 of 2011. The Tax Court upheld the prescription defence, finding that prescription commenced in March 2007. SARS appealed to the Supreme Court of Appeal.

The appeal was upheld. The order of the Tax Court was set aside and replaced with an order confirming the STC assessment for the dividend cycle ending in the 2007 year of assessment. Char-Trade was ordered to pay the costs of the appeal.

The judgment clarifies the commencement of prescription for self-assessed taxes under South African tax law, confirming that prescription does not run against SARS where a taxpayer fails to submit a required return. It strengthens SARS’s ability to assess unpaid taxes in cases of non-compliance and provides authoritative guidance on the interpretation of s 99 of the Tax Administration Act in relation to self-assessments.