The South African Revenue Service (SARS) has launched an investigation into certain transactions undertaken by many JSE Securities Exchange-listed firms in which it suspects that VAT may have been wrongly claimed back.
As part of the enquiry, SARS has sent 220 questionnaires to South Africa’s top companies asking them to supply details of transactions in recent years.
The move has been prompted after the tax collector argued successfully in the Special Income Tax Court that VAT could not be claimed on certain business expenses incurred in relation to equity capital, such as legal and accounting fees on mergers, acquisitions, corporate restructurings and exchange listings.
According to tax experts in South Africa, the purpose of the SARS enquiry is to ascertain where firms have claimed for expenses that were not part of their activities, including details of management fees paid to group companies.
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