Aveng Mining Shafts & Underground v The Commissioner for the South African Revenue Service

Aveng Mining Shafts & Underground, a division of Aveng (Africa) (Pty) Ltd, is a VAT-registered vendor conducting an enterprise of shaft sinking and mining construction. For specific mining projects between June 2012 and August 2016, Aveng employed workers who were required to stay near mine sites and were provided with accommodation and food. Aveng paid third-party suppliers for these accommodation and catering costs, which were common cause to constitute 'entertainment' expenses under the Value-Added Tax Act 89 of 1991. Aveng did not separately charge employees for these costs and did not directly invoice its mining clients for them, although estimated costs were included in tender prices. Aveng claimed input tax deductions amounting to R17,495,071.81 in respect of these expenses under s 17(2)(a) of the Act. The Commissioner for the South African Revenue Service disallowed the deductions, and the Tax Court upheld the disallowance. Aveng appealed to the Supreme Court of Appeal, limited to the interpretation of s 17(2)(a)(i)(bb).

The appeal was dismissed with costs, limited to the costs of one counsel.

The judgment clarifies and restricts the scope of the entertainment exceptions under s 17(2)(a) of the Value-Added Tax Act, confirming that vendors whose core enterprise is not entertainment cannot rely on s 17(2)(a)(i)(bb) to deduct input tax on employee accommodation and meals. It reinforces that the VAT neutrality principle cannot override express statutory exclusions and that exceptions to the entertainment prohibition must be interpreted strictly. The decision provides authoritative guidance for employers in project-based industries on the VAT treatment of employee accommodation and catering.