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South Africa: Gross income from gift card sales (court decision)

South Africa: Gross income from gift card sales

The Tax Court in South Africa held that, for purposes of determining when revenue from the sale of gift cards is recognized for income tax purposes, the taxpayer only became legally entitled to the proceeds when the gift cards were redeemed or when they expired.


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The court concluded that proceeds from the sale of gift cards, to the extent that such gift cards are considered property of the holder under the Consumer Protection Act, are not considered to have been “beneficially received” by the taxpayer and thus did not form part of gross income for income tax purposes until such time as the gift cards were redeemed or expired.

KPMG observation

Taxpayers may want to consider obtaining an opinion from an independent tax practitioner that satisfies the requirements of section 223 of the Tax Administration Act (28 of 2011), for guidance on how proceeds from gift cards or pre-payments are to be reflected on income tax returns that are due prior to any guidance from the South African Revenue Service. An opinion that confirms the tax treatment used by the taxpayer may help address any substantial understatement penalties asserted as a result of incorrect tax treatment.

Read a June 2019 report [PDF 126 KB] prepared by the KPMG member firm in South Africa

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