CAPE TOWN, South Africa (Jan. 25, 2010) — According to an article in Cape Business News, the Western Cape High Court recently ruled in RCI’s favor in a tax dispute with The South African Revenue Service (Sars).
It seems that when members of Vacation Exchanges International (Pty) Ltd (trading as RCI) traded their timeshare rights in exchange for points to use at other resorts, RCI, granted a number of those points to its employees, which allowed them to utilize the resorts.
SARS took the position that the provision of points constituted a taxable benefit for the employees, determined a market value for the points and assessed RCI for it directly, as the employer.
RCI initially argued before the Tax Court that because the points had no cash equivalent value they were not subject to employees’ tax. They argued further that SARS had erred in assessing the company rather than the employees themselves. The Tax Court rejected RCI’s appeal, finding in favor of Sars. RCI then appealed to the Western Cape High Court, using another tactic.
According to Cape Business News:
The employees’ tax legislation contains a remedy for Sars to re-determine the tax due, on the assessment of employees, if it believes that their employer did not correctly determine the cash equivalent of a taxable benefit. RCI contended that this was the only approach available to Sars in the present case. Sars argued that it was one of the approaches available to it, along with the option of assessing RCI (as employer) directly.
The Western Cape High Court agreed with RCI, and the tax assessment was set aside.
You can read the entire article, with more details, at Cape Business News.