It is a settled principle in our tax law that a court will not be deceived by the form of a transaction, but that effect will be given to the true substance thereof. This principle, embodied in the common law doctrine of substance over form, has been affirmed and applied by the judiciary for well over a century, especially in matters where taxpayers avoid the imposition of potential tax through simulating their transactions. If a court was satisfied that the parties subjectively intended to give effect to some other agreement between them, the court would only have regard to the actual rights and obligations created by the parties and impose tax on their real transactions in accordance with the provisions of a taxing statute. The law in respect of simulated transactions was clear. However, in Commissioner for the South African Revenue Service v NWK Ltd [2011 (2) SA 67 (SCA)] the court ostensibly introduced the requirement of commercial substance as a criterion to determine simulation. The requirement postulates that a transaction which lacks commercial substance will be regarded as simulated, irrespective of the parties’ genuine intention to give effect to the agreement between them. The requirement appears to overrule the entrenched test under the common law doctrine of substance over form and ostensibly established a new objective, independent common law criterion to determine simulation. The NWK requirement invariably ventures into the sphere of legitimate tax planning by virtue of its wide-ranging nature. Taxpayers need to understand the boundaries within which they may legitimately structure their affairs to reduce a potential tax burden as this advances the predictability of the law and respects the rule of law. NWK has, however, rendered the law on this subject rather uncertain and it is therefore crucial to establish the effect and applicability of the requirement to provide guidance to taxpayers on how to structure their affairs to legitimately avoid tax. The question, therefore, is whether the requirement is capable of independent application to determine simulation, or whether the requirement is only indicative of the presence of simulation in a transaction? If the latter, the common law position prior to the judgment will continue to prevail. In this dissertation, compelling arguments which illustrate the incapability of the requirement to function independently to determine simulation is researched, analysed and advanced. These arguments support the view that from a legal and logical point of view, the requirement cannot constitute an independent criterion to determine simulation. In the premise, it is submitted that the established common law doctrine of substance over form, as enunciated in Zandberg v Van Zyl [1910 AD 302], remains reflective of the law on simulated transactions and that the commercial substance requirement is only indicative of the presence of possible simulation in a transaction. / Dissertation (LLM)--University of Pretoria, 2013. / am2014 / Mercantile Law / unrestricted

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements for the degree of Master of Commerce (specialising in Taxation) / Tax avoidance is the legal utilisation of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. Tax evasion entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities in order to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating the deductions). The revised general anti-avoidance measures were introduced in the Income Tax Act 58 of 1962 ('the Act') on 2 November 2006 in the form of section 80A to 80L, in order to replace the complicated and confusing as well as ineffective anti-avoidance measures contained in section 103(1). / AC 2018