Supreme Court of Appeal dismisses MTN appeal

MTN, Africa’s largest mobile operator, has lost a court battle over when it must account for VAT on prepaid vouchers, as the Supreme Court of Appeal (SCA) dismissed its appeal costs on Monday.

According to a summary of the judgement, MTN had previously sought a private binding ruling from the Commissioner of the South African Revenue Service (SARS) that the prepaid voucher fell under the provisions of section 10(18) of the Value-Added Tax Act rather than section 10(19), which had previously been applied.

Section 10(18) essentially attracts VAT when the voucher is used to obtain services by the customer rather than when it is first sold to the customer. The commissioner ruled against MTN, starting that section10(19) applied.

MTN then applied to the North Gauteng High Court in Pretoria for declaratory order stating that the prepaid vouchers were covered by section 10(18). the court heard the application for declaratory relief but denied it on the merits.

The SCA decision states that considerable difficulty was experience during argument in obtaining clarity on the nature of airtime as used by MTN and how the prepaid vouchers function in practice.

This also applied to whether the services provided were specified by usage or arrangement. The judgement stated that this was not a case involving a set of clear, sufficient, uncontested facts, which distinguished it from previous cases in which courts granted declaratory orders in tax matters.

The court determined that the matter was better suited to the Tax Administration Acts dispute resolution procedures.

The summary stated, “That being the case, the merits could not be considered and the application was correctly dismissed by the high court, albeit for different reasons. As a consequence the Supreme Court of Appeal refused the appeal with costs.” 

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