Infrastructure is one of the top priorities of the South African Government. Substantial
amounts will be invested by the Government in infrastructure between 2014 and 2016 as
good infrastructure plays a pivotal role in the growth of the South African economy.
Government does not have sufficient resources to meet its infrastructure goals and is
therefore dependent on the private construction sector to provide assistance. Discrepancies
were noted between the judgment laid down in CSARS v South African Custodial Services
(Pty) Ltd (SACS) and the interpretations from the relevant sections contained within the
Income Tax Act governing the normal tax treatment of construction contractors. The aim of
this study was to determine whether reliance could be placed on the judgement laid down in
CSARS v South African Custodial Services (Pty) Ltd in order to determine the nature and
deductibility of expenditure incurred by construction contractors in future. It is crucial that
tax legislation should be correctly interpreted and applied in determining the taxable income
of taxpayers as it is evident that tax consequences influence the behaviour of South African
taxpayers. A literature study of prior case law, sections of the Income Tax Act governing the
normal tax treatment of construction contractors as well as other relevant literature was
performed in order to determine the correct application of sections governing the normal tax
position of construction contractors. The negative tax consequences suffered by SACS as a
main contractor due to judgement laid down in CSARS v South African Custodial Services
(Pty) Ltd could influence the willingness of the private construction sector to provide
assistance to Government in future. Based on the literature study performed it was found
that the court's application of Section 22(2A) of the Income Tax Act was correct. It was
further found that the Court erroneously applied Section 11 (a), and as a result incorrectly
determined the normal tax position of SACS. In response to this it is recommended that no
reliance should be placed on the judgement laid down in CSARS v South African Custodial
Services (Pty) Ltd in respect of determining the nature and deductibility of fees paid to subcontractors
by construction contractors, as this could result in negative tax planning
consequences. / MCom (South African and International Tax), North-West University, Potchefstroom Campus, 2015
| Identifer | oai:union.ndltd.org:NWUBOLOKA1/oai:dspace.nwu.ac.za:10394/15555 |
| Date | January 2015 |
| Creators | Smit, Simone |
| Source Sets | North-West University |
| Language | English |
| Detected Language | English |
| Type | Thesis |
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