VW SA at loggerheads with SARS over PAA taxing

Reading Time: 2 minutes

Volkswagen South Africa says it will be an injustice if Sars is allowed to tax the investment incentive used to improve the automotive industry.

The two parties were at loggerheads in the Supreme Court of Appeal over benefits emanating from the Productive Asset Allowance, PAA.

The PAA scheme is a government incentive to support the objectives of the Motor Industry Development Programme.

Sars and VW South Africa are battling it out in the Supreme Court of Appeal.

The high court ruled that government grants between 2008 and 2010 were part of VW’s gross income. As a result, the car manufacturer was ordered to pay outstanding taxes.

The amount in dispute is in excess of R200 million.

VW is challenging the order, arguing it did not violate terms of the Productive Asset Allowance.

It has invested in bigger technologically efficient plants, manufacturing more vehicles at a lower cost.

Volkswagen SA lawyer, Adv Michael Janisch, says, “So, the rationalisation reducing the number of vehicles and types of vehicles that were to be produced was a core part of the achievement of the capital expenditure.”

Appellants further argued that plants modernisation could not work without capital investment.

Sars hit back, saying the car manufacturer misunderstood the Productive Asset Allowance and that the incentive was part of taxable gross income.

Sars lawyer, Adv Richard Buchanan, says, “But that doesn’t make it the reason to make the grant. The reason was not to ensure capital expenditure,;the reason was to rationalise and in order to rationalise it was understood that amongst other things there would have to be capital expenditure.”

Judgment has been reserved.