Commissioner for the South African Revenue Service v Coronation Investment Management SA (Pty) Ltd

Coronation Investment Management SA (Pty) Ltd (CIMSA) is a South African tax‑resident holding company within the Coronation Group. It wholly owned Coronation Fund Managers (Isle of Man) Ltd, which in turn wholly owned Coronation Global Fund Managers (Ireland) Ltd (CGFM). CGFM was tax resident in Ireland and licensed as a UCITS management company. CGFM operated an outsourced business model: investment management, administration, custody and distribution functions were outsourced mainly to group entities in South Africa and the United Kingdom and to third‑party service providers, while CGFM retained regulatory oversight, compliance, governance, and licence‑holding functions in Ireland. For the 2012 tax year, SARS included CGFM’s entire net income in CIMSA’s taxable income under s 9D of the Income Tax Act 58 of 1962, contending that CGFM was not a ‘foreign business establishment’ (FBE). The Tax Court upheld CIMSA’s objection, finding that CGFM qualified as an FBE and that no s 9D imputation, understatement penalties, or interest were payable. SARS appealed to the Supreme Court of Appeal.

The appeal was upheld. The Tax Court’s order was set aside and replaced with an order directing CIMSA to pay the additional tax arising from the additional assessment dated 23 March 2017, together with interest under s 89quat(2) of the Income Tax Act. CIMSA was ordered to pay SARS’s costs in the Tax Court and on appeal, including the costs of two counsel.

This judgment is a leading South African authority on the interpretation of the s 9D foreign business establishment exemption. It clarifies that economic substance and the location of primary income‑generating operations are decisive, particularly where a controlled foreign company operates an outsourced business model. The case underscores SARS’s and the courts’ scrutiny of offshore fund management structures and limits the ability of South African groups to rely on regulatory oversight functions alone to qualify for the FBE exemption.