Masters Degrees (School of Accountancy)

Permanent URI for this collection

https://scholar.sun.ac.za/handle/10019.1/704

Browse

Browsing Masters Degrees (School of Accountancy) by Author "Brink, Sophia M."

Now showing 1 - 1 of 1
  • Thumbnail Image
    Item
    Belasbaarheid van klientelojaliteitsprogramtransaksies in Suid-Afrika
    (Stellenbosch : Stellenbosch University, 2012-03) Brink, Sophia M.; Viviers, H.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Accountancy..
    ENGLISH ABSTRACT: Client loyalty programmes are a common phenomenon in the South African market. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980‟s, the South African Revenue Service has issued no guidance on the treatment of client loyalty programme transactions in the hands of the consumer. Benefits received in the form of goods, services or discounts from a client loyalty programme are not subject to normal South African income tax based on the current practice in South Africa. The main objective of this study was to determine whether or not the current practice applied in South Africa is correct. In order to obtain a better understanding of the functioning of client loyalty programmes a selection of the most popular client loyalty programmes in South Africa was made and the terms and conditions of these respective client loyalty programmes were analysed. Taking into account the way client loyalty programmes function, the taxability of client loyalty programme transactions were reviewed and analysed with reference to relevant tax law sections and case law. In order to investigate a client loyalty programme transaction as a whole, the tax treatment of the supplier that grants points or miles was included in the scope of the study. The tax treatment of the supplier could potentially shed more light on the tax treatment of the consumer who earn points or miles. The consumer and the supplier have possible income tax (which includes capital gains tax) and VAT implications, consequently both the income tax treatment and the VAT treatment for the consumer and the supplier were considered. In addition, the tax treatment of client loyalty program transactions in South Africa was compared with a country (Australia) whith similar tax laws to South Africa and income tax principles or practices were identified which might be useful within a South African context. It was found that client loyalty programme transactions satisfy the general gross income definition and that the value of the transaction must be included in the consumer's gross income. Only when employees earn points or miles in their own name by virtue of goods or services purchased by their employer, a possible employees‟ tax obligation arises. It was found that within an employee/employer relationship, the requirements of paragraph (c) and paragraph (i) of the "gross income" definition are not met due to the fact that there are no causal connection or direct relationship between the benefit received and the services rendered and also because the client loyalty programme supplier is not an associated institution of the employer. Australian case law confirms the above conclusions in a South African context. The VAT implications of a client loyalty programme transaction occur for the consumer when the consumer exchange points or miles for benefits at a programme partner and not when the points or miles are earned. Capital gains tax implications will only be applicable if a consumer disposes of a capital asset obtained in terms of a client loyalty programme transaction. It was found that the current practice in South Africa of not taxing benefits received from a client loyalty programme is incorrect. To implement the taxability of client loyalty programme transactions in South Africa it is recommended that SARS should formulate guidelines regarding the tax treatment of client loyalty programme transactions. The study includes recommendations to facilitate the implementation of the taxability of client loyalty programme transactions.