1. GRAIN SA CASE By Johan Kotze

2. 2 GRAIN SA’S CASE The issue between the parties: Whether funds donated by The Maize Trust to Grain SA, to be used for Grain SA’s Farmer Development Programme, should be subject to VAT The term ‘consideration’ is defined in the VAT Act and excludes any payment made by any person as a ‘donation’ to an association not for gain.

3. 3 GRAIN SA’S CASE Rulings from SARS: Grain SA approached SARS to provide a ruling as to whether SARS agrees that the funding it receives from the Trust is donations for purposes of the VAT Act and therefore exempt from VAT. SARS maintained that payments by the Trust to Grain SA in respect of the Programme are subject to VAT.

4. 4 GRAIN SA’S CASE Declaratory order Grain SA then decided to approach the Free State High Court for a declaratory order, declaring that SARS is wrong to rule that the amounts Grain SA receive from the Trust in respect of the Programme is subject to VAT Declaratory orders are far from common. SARS’ favorite argument - This is the domain of the Tax Court, implying that a taxpayer may not directly approach the High Court for a declaratory order.

5. 5 GRAIN SA’S CASE Matters of law Shell’s Annandale Farm case - Judge Dennis Davis held that the Tax Court was not the only competent authority to decided on tax issues. Where the question was simply one of law – that is, the facts are not in dispute – the matter could be resolved by the High Court by way of a declaratory order. Davis said the court had a discretion to consider an application for a declaratory order; it had to decide whether a specific case was suitable for this purpose. In exercising that discretion, considerations of public policy came into play, because of SARS being placed in an invidious position where it might be faced with taxpayers attempting to short-circuit the Act’s procedural provisions.