VAT Judgment On Imported Services

In a recent case, XYZ Co v The Commissioner for the South African Revenue Service (VAT 382), the Tax Court held that advisory services acquired from a foreign supplier in relation to an offer which unit holders in XYZ Co had received to eliminate their interests in the company, do not comprise imported services for Value-Added Tax ("VAT") purposes. The Tax Court further held that the VAT incurred on local services acquired from legal and financial advisors in relation to the transaction, is not deductible as input tax.

The trading activities of XYZ Co involved the mining and selling of diamonds from South Africa. It received a proposal from three of its main shareholders as a consortium to acquire the interests of the remaining shareholders in the company.