Grain SA fights for VAT-free farmer development

The Grain SA farmer development programme emerged victorious in a court battle against the South African Revenue Services (SARS) at the Free State High Court recently.

SARS demanded that the funds donated by The Maize Trust for Grain SA’s (GSA) Farmer Development Programme, which contributes to the commercialisation of black farmers, should incur a 14% VAT, said Johan Kotze, head of tax dispute resolution at Bowman Gilfillan, the law firm representing Grain SA.

Had the court ruled against them, “it would’ve seriously jeopardised GSA’s purpose towards development,” said GSA CEO Dr Kobus Laubscher. In 2008, they approached SARS to have the funding GSA receives from the trust to be declared donations, and therefore VAT-free. But SARS said the money was subject to VAT, because it wasn’t a donation as defined in the VAT Act.

Acting for GSA, Gilfillan approached SARS again. This time a new ruling held that all money received from the trust for purposes such as acquisition, assimilation and dissemination of market information for maize producers and the broader maize industry were donations. “Yet SARS was adamant that payments by the trust to GSA for the Farmer Development Programme would remain subject to VAT,” said Kotze.

Now the Free State High Court ruled that these are indeed donations in terms of the VAT Act, because the payments were made voluntarily by the trust to GSA. It was found that no “identifiable direct valuable benefit” arose to the trust or anyone connected to the trust.