Commissioner for the South African Revenue Services v Tourvest Financial Services (Pty) Ltd

Tourvest Financial Services (Pty) Ltd, a licensed foreign exchange dealer trading as American Express Foreign Exchange, operated a nationwide branch network providing currency exchange services. Its business involved earning income through exchange rate margins and charging commissions on transactions, with VAT levied on the commission. Historically, Tourvest apportioned VAT input tax under s 17(1) of the Value-Added Tax Act 89 of 1991 on the basis that it made both taxable and exempt supplies. In September 2013, after obtaining legal advice, it changed its approach and claimed that all goods and services acquired were used wholly in making taxable supplies, claiming a full input tax deduction of approximately R24.3 million for the prior five years. SARS initially refunded the amount but, following an audit, issued an additional assessment disallowing the full deduction on the basis that Tourvest made both taxable (commission) and exempt (currency exchange) supplies and that apportionment was required. The Tax Court upheld Tourvest’s appeal and set aside the additional assessment, prompting SARS to appeal to the Supreme Court of Appeal.

The appeal was upheld with costs, including the costs of two counsel. The order of the Tax Court was set aside and substituted with an order dismissing Tourvest’s appeal against the additional assessment.

This judgment clarifies the VAT treatment of foreign currency exchange transactions in South Africa. It confirms that currency exchange remains an exempt financial service, notwithstanding the charging of commissions, and that the proviso to s 2(1) merely renders the commission component taxable. The case is significant for vendors in the financial services sector as it reinforces the requirement to apportion input tax where mixed taxable and exempt supplies are made.