Concourt judgment puts SA loyalty programmes under scrutiny

Health and beauty retailer, Click’s loss against the South African Revenue Service (Sars) last month in the Constitutional Court has put beloved loyalty programmes in the country under scrutiny. The OFM Business Hour spoke to Jean du Toit, the head of Tax Technical at TaxConsulting SA to reflect back on the arguments made by each party over the years in litigation and determine what the ramifications the judgment from the apex court could have on other loyalty programmes in the country. According to du Toit the piece of legislation in contention between the two parties, is section 24 C of the Income Tax Act. The section says taxpayers who carry on a trade are entitled to deduct their expenses from their income for tax purposes. Whilst Clicks was of the view that they qualified for this deduction in light of a portion of their income from sales, going back to customers in the form of discounts via the loyalty programme,

Sars did feel that Clicks met the requirements for the deduction. Du Toit elaborates further on the back and forth legal battle in the interview.