Sasol Oil (Pty) Ltd v Commissioner for the South African Revenue Service

Sasol Oil (Pty) Ltd was part of the Sasol Group of companies. In 2001, contracts were concluded within the group for the supply of crude oil by a company incorporated in the Isle of Man to a group company in London, which in turn sold the crude oil to Sasol Oil in South Africa. The Commissioner for the South African Revenue Service (CSARS) contended that these arrangements were simulated transactions designed to avoid South African income tax following the introduction of residence-based taxation in 2001. The Tax Court (Johannesburg) accepted this view and held that the contracts should be disregarded, entitling CSARS to issue additional tax assessments against Sasol Oil for the 2005, 2006 and 2007 tax years. Sasol Oil appealed to the Supreme Court of Appeal.

The appeal was upheld. The decision of the Tax Court was set aside, and the additional tax assessments issued by the Commissioner for the 2005, 2006 and 2007 tax years were found to be invalid.

This case is significant in South African tax jurisprudence for clarifying the approach to simulated transactions and reaffirming that tax authorities must establish a lack of commercial substance and a genuine intention to disguise the true nature of transactions. It underscores that intra-group arrangements will not be disregarded merely because they have tax consequences, provided they are commercially justified.