1|Page
RRLLB81 Assignments 2 & 3 2026 (Answer Guide) – All Topics
VERIFIED AND CERTIFIED ANSWERS. WRITTEN IN REQUIRED FORMAT AND WITHIN
GIVEN GUIDELINES. IT IS GOOD TO USE AS A GUIDE AND FOR REFERENCE, NEVER
PLAGARIZE. Thank you and success in your academics.
UNISA, 2026
Department of Mercantile Law: TOPIC ONE
Tax Planning and Impermissible Tax Avoidance
THE LEGAL FEASIBILITY OF SOUTH AFRICA'S GENERAL ANTI-AVOIDANCE
RULES: A CRITICAL ANALYSIS
ABSTRACT
The distinction between legitimate tax planning and impermissible tax avoidance remains
a contentious issue in South African revenue law. This research report critically examines
the legal feasibility of the General Anti-Avoidance Rules (GAAR) contained in sections
80A to 80L of the Income Tax Act 58 of 1962. It investigates whether these provisions
strike an appropriate balance between protecting the fiscus and respecting taxpayers'
rights to arrange their financial affairs efficiently. Through analysis of relevant case law,
statutory provisions, and academic commentary, the report argues that while the GAAR
provisions are legally sound, their application creates uncertainty for taxpayers. The
research concludes that the "tainted element" requirement and the sole or main purpose
test remain difficult to apply consistently, potentially penalising legitimate business
restructuring.
KEYWORDS
,2|Page
Tax avoidance; GAAR; impermissible avoidance arrangement; tax planning; Income Tax
Act
LIST OF ABBREVIATIONS AND ACRONYMS
Abbreviation/acronym Meaning
CIR Commissioner for Inland Revenue
GAAR General Anti-Avoidance Rules
ITC Income Tax Case
SARS South African Revenue Service
Stell LR Stellenbosch Law Review
THRHR Tydskrif vir Hedendaagse Romeins-Hollandse Reg
TSAR Tydskrif vir die Suid-Afrikaanse Reg
,3|Page
CHAPTER 1
INTRODUCTION
1.1 Background
The relationship between a taxpayer and the fiscus is inherently adversarial in nature.
Taxpayers naturally seek to minimise their tax liability, while the South African Revenue
Service (SARS) endeavours to maximise revenue collection for the public purse. Within
this dynamic, the law recognises that taxpayers are entitled to arrange their financial
affairs in a manner that reduces their tax burden. This entitlement, however, is not without
limits. When the arrangement of a taxpayer's affairs crosses the threshold from legitimate
tax planning into impermissible tax avoidance, the law intervenes through specific
statutory mechanisms.1
The Income Tax Act 58 of 1962 contains specific provisions that empower the
Commissioner to disregard or recharacterise transactions that fall foul of the General Anti-
Avoidance Rules (GAAR) contained in sections 80A to 80L.2 These provisions were
substantially reformed in 2006 to provide SARS with more effective tools to combat
aggressive tax avoidance schemes.3 The reform was necessitated by the perception that
previous anti-avoidance provisions were too easily circumvented by sophisticated
taxpayers and their advisers.
The background provided in the tutorial letter highlights a significant legal problem: a
businessperson who restructures their business for efficiency and profitability could
potentially be penalised merely on the grounds of such restructuring.4 The example of
incorporating a close corporation to derive financial benefit illustrates the tension between
legitimate business planning and transactions that may be regarded as impermissible tax
avoidance.
1.2 Problem Statement
, 4|Page
From the background provided, a clear legal problem emerges: when does legitimate
business restructuring for efficiency and profitability become impermissible tax avoidance
subject to the application of the GAAR? The tutorial letter poses the question whether it
is legally viable to argue that incorporating a close corporation amounts to impermissible
tax avoidance requiring a "tainted element" to be present.5 This research report
addresses the following question: Do the General Anti-Avoidance Rules in sections 80A
to 80L of the Income Tax Act strike a legally feasible balance between protecting the
fiscus from abusive tax schemes and permitting taxpayers to structure their businesses
for legitimate commercial purposes?
1 Van Heerden L and others Silke: South African Income Tax (LexisNexis 2025) 23-5.
2 Income Tax Act 58 of 1962 ss 80A-80L.
3 Kujinga BT 'Analysis of Misuse and Abuse in Terms of the South African General Anti-
avoidance Rule: Lessons from Canada' (2012) 45 CILSA 42 at 43.
4 University of South Africa 'Tutorial Letter 103/1/2026: RRLLB81 Research Report'
(2026) 54.
5 University of South Africa (2026) 54.
1.3 Aims of the Research
The primary aim of this research is to critically examine the legal feasibility of the GAAR
provisions in distinguishing between legitimate tax planning and impermissible tax
avoidance. Specifically, the research aims to:
1. Analyse the statutory requirements for the application of the GAAR under sections 80A
to 80L;
2. Examine judicial interpretation of these provisions and their predecessors;
3. Investigate the concept of the "tainted element" and its role in identifying impermissible
arrangements;
4. Evaluate whether the current legal framework provides sufficient certainty for taxpayers
engaging in business restructuring; and
RRLLB81 Assignments 2 & 3 2026 (Answer Guide) – All Topics
VERIFIED AND CERTIFIED ANSWERS. WRITTEN IN REQUIRED FORMAT AND WITHIN
GIVEN GUIDELINES. IT IS GOOD TO USE AS A GUIDE AND FOR REFERENCE, NEVER
PLAGARIZE. Thank you and success in your academics.
UNISA, 2026
Department of Mercantile Law: TOPIC ONE
Tax Planning and Impermissible Tax Avoidance
THE LEGAL FEASIBILITY OF SOUTH AFRICA'S GENERAL ANTI-AVOIDANCE
RULES: A CRITICAL ANALYSIS
ABSTRACT
The distinction between legitimate tax planning and impermissible tax avoidance remains
a contentious issue in South African revenue law. This research report critically examines
the legal feasibility of the General Anti-Avoidance Rules (GAAR) contained in sections
80A to 80L of the Income Tax Act 58 of 1962. It investigates whether these provisions
strike an appropriate balance between protecting the fiscus and respecting taxpayers'
rights to arrange their financial affairs efficiently. Through analysis of relevant case law,
statutory provisions, and academic commentary, the report argues that while the GAAR
provisions are legally sound, their application creates uncertainty for taxpayers. The
research concludes that the "tainted element" requirement and the sole or main purpose
test remain difficult to apply consistently, potentially penalising legitimate business
restructuring.
KEYWORDS
,2|Page
Tax avoidance; GAAR; impermissible avoidance arrangement; tax planning; Income Tax
Act
LIST OF ABBREVIATIONS AND ACRONYMS
Abbreviation/acronym Meaning
CIR Commissioner for Inland Revenue
GAAR General Anti-Avoidance Rules
ITC Income Tax Case
SARS South African Revenue Service
Stell LR Stellenbosch Law Review
THRHR Tydskrif vir Hedendaagse Romeins-Hollandse Reg
TSAR Tydskrif vir die Suid-Afrikaanse Reg
,3|Page
CHAPTER 1
INTRODUCTION
1.1 Background
The relationship between a taxpayer and the fiscus is inherently adversarial in nature.
Taxpayers naturally seek to minimise their tax liability, while the South African Revenue
Service (SARS) endeavours to maximise revenue collection for the public purse. Within
this dynamic, the law recognises that taxpayers are entitled to arrange their financial
affairs in a manner that reduces their tax burden. This entitlement, however, is not without
limits. When the arrangement of a taxpayer's affairs crosses the threshold from legitimate
tax planning into impermissible tax avoidance, the law intervenes through specific
statutory mechanisms.1
The Income Tax Act 58 of 1962 contains specific provisions that empower the
Commissioner to disregard or recharacterise transactions that fall foul of the General Anti-
Avoidance Rules (GAAR) contained in sections 80A to 80L.2 These provisions were
substantially reformed in 2006 to provide SARS with more effective tools to combat
aggressive tax avoidance schemes.3 The reform was necessitated by the perception that
previous anti-avoidance provisions were too easily circumvented by sophisticated
taxpayers and their advisers.
The background provided in the tutorial letter highlights a significant legal problem: a
businessperson who restructures their business for efficiency and profitability could
potentially be penalised merely on the grounds of such restructuring.4 The example of
incorporating a close corporation to derive financial benefit illustrates the tension between
legitimate business planning and transactions that may be regarded as impermissible tax
avoidance.
1.2 Problem Statement
, 4|Page
From the background provided, a clear legal problem emerges: when does legitimate
business restructuring for efficiency and profitability become impermissible tax avoidance
subject to the application of the GAAR? The tutorial letter poses the question whether it
is legally viable to argue that incorporating a close corporation amounts to impermissible
tax avoidance requiring a "tainted element" to be present.5 This research report
addresses the following question: Do the General Anti-Avoidance Rules in sections 80A
to 80L of the Income Tax Act strike a legally feasible balance between protecting the
fiscus from abusive tax schemes and permitting taxpayers to structure their businesses
for legitimate commercial purposes?
1 Van Heerden L and others Silke: South African Income Tax (LexisNexis 2025) 23-5.
2 Income Tax Act 58 of 1962 ss 80A-80L.
3 Kujinga BT 'Analysis of Misuse and Abuse in Terms of the South African General Anti-
avoidance Rule: Lessons from Canada' (2012) 45 CILSA 42 at 43.
4 University of South Africa 'Tutorial Letter 103/1/2026: RRLLB81 Research Report'
(2026) 54.
5 University of South Africa (2026) 54.
1.3 Aims of the Research
The primary aim of this research is to critically examine the legal feasibility of the GAAR
provisions in distinguishing between legitimate tax planning and impermissible tax
avoidance. Specifically, the research aims to:
1. Analyse the statutory requirements for the application of the GAAR under sections 80A
to 80L;
2. Examine judicial interpretation of these provisions and their predecessors;
3. Investigate the concept of the "tainted element" and its role in identifying impermissible
arrangements;
4. Evaluate whether the current legal framework provides sufficient certainty for taxpayers
engaging in business restructuring; and
