GAAR
General Anti-Avoidance Rules
Tax Evasion:
Illegal activities deliberately taken to free himself from tax burden.
E.g omits income from annual tax return or overstating expenditure.
Subject to severe penalties in terms of s234 and s235
Tax avoidance:
Arrangement of affairs that is perfectly legal and lawful that results in a
reduction of income.
E.g donate interest bearing investment of R 100 000 to major child
without being affected by s7(3) or donations tax.
Impermissible (unallowed) tax avoidance:
S80A-s80L
Provisions can only be applied if the following are met:
1. Arrangement
2. The arrangement must result in tax benefit (defined in s1)
3. Sole or main purpose was to obtain tax benefit.
4. If avoidance was in the context of the business, then one of the
following:
a. Means/ manner not normally employed. S80A(a)(i)
b. Rights/ obligation not normally created. S80A(c)(i)
c. Lack of commercial substance. S80A(a)(ii)
d. Misuse/ abuse of provisions of the Act. S80A(c)(ii)
If avoidance was in the context other than business (personal/ private),
then one of the following:
a. Means/ manner not normally employed. S80A(a)(i)
b. Rights/ obligation not normally created. S80A(c)(i)
c. Misuse/ abuse of provisions of the Act. S80A(c)(ii)
General Anti-Avoidance Rules
Tax Evasion:
Illegal activities deliberately taken to free himself from tax burden.
E.g omits income from annual tax return or overstating expenditure.
Subject to severe penalties in terms of s234 and s235
Tax avoidance:
Arrangement of affairs that is perfectly legal and lawful that results in a
reduction of income.
E.g donate interest bearing investment of R 100 000 to major child
without being affected by s7(3) or donations tax.
Impermissible (unallowed) tax avoidance:
S80A-s80L
Provisions can only be applied if the following are met:
1. Arrangement
2. The arrangement must result in tax benefit (defined in s1)
3. Sole or main purpose was to obtain tax benefit.
4. If avoidance was in the context of the business, then one of the
following:
a. Means/ manner not normally employed. S80A(a)(i)
b. Rights/ obligation not normally created. S80A(c)(i)
c. Lack of commercial substance. S80A(a)(ii)
d. Misuse/ abuse of provisions of the Act. S80A(c)(ii)
If avoidance was in the context other than business (personal/ private),
then one of the following:
a. Means/ manner not normally employed. S80A(a)(i)
b. Rights/ obligation not normally created. S80A(c)(i)
c. Misuse/ abuse of provisions of the Act. S80A(c)(ii)
