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16 November 2018
The South African Revenue Service (SARS) recently published Binding Private Ruling 310, which deals with the tax treatment of customer loyalty programmes.
The applicant was a local company supplying goods and services in the course of trade. In order to enhance its business, the applicant proposed to implement a customer loyalty programme through which participating customers could benefit.
Specifically, the loyalty programme would entail the following:
The trust would apply the capital contribution, on behalf of the vested participants, to either:
Where credits are obtained against the applicant, the trust would use the capital contribution to pay the applicant for such credits, as opposed to the applicant merely crediting customer accounts.
In respect of income tax, SARS ruled that the applicant could deduct the capital contribution under Section 11(a), as read with Section 23(g), of the Income Tax Act (58/1962).
In respect of value added tax (VAT), SARS ruled as follows:
For further information on this topic please contact Heinrich Louw at Cliffe Dekker Hofmeyr by telephone (+27 115 621 000) or email (firstname.lastname@example.org). The Cliffe Dekker Hofmeyr website can be accessed at www.cliffedekkerhofmeyr.com.
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