As the world becomes more sophisticated and industries look for ways to increase revenues and decrease expenses, we will see the Commissioner challenge the tax treatment of new and untested contractual arrangements between businesses and their customers and the insurance industry is right in the way. Insurers are responding to the challenge of differentiating themselves through innovative solutions and the more innovative they get the more they and SARS will need to work together to reach consensus on what these changes mean to both parties.

With this new business reality, we have noticed stricter revenue collection methods and more queries being raised by SARS. Put the above into a melting pot with far-reaching proposed tax amendments and stir in some interesting new tax case law and suddenly your tax environment becomes more complex and unpredictable. In this article we highlight certain proposed tax amendments and recent court cases relevant to the insurance industry, which may lead to SARS audits and queries on these matters:

– proposed lowering of the corporate income tax rate;

– prepayments (Telkom court case); and

– loyalty programmes (Clicks court case).