Sasol prepares for tax battle | Fin24
  • Covid-19 Money Hub

    The hub will help answer your business and money questions during the coronavirus crisis.

  • The R450bn Question

    The Covid-19 crisis has delayed finding a solution for Eskom's debt, says Pravin Gordhan.

  • Public Investment Corp.

    The asset manager's new head Abel Sithole faces a long to-do list from workers and business.


Sasol prepares for tax battle

Aug 21 2017 20:02
Yolandi Groenewald

Johannesburg - Sasol could potentially end up with a R12.8bn tax bill, but the petrochemicals group believes it has an excellent chance of having it set aside.

The hefty bill emerged due to Sasol subsidiary Sasol Oil’s dispute with the South African Revenue Service (SARS) over international oil acquisitions from 2005 to 2014 at its Natref oil refinery in Sasolburg.

Sasol was slapped with a R1.2bn tax provision by the Tax Court on June 30 on the back of its international crude oil purchases between 2005 and 2012. In its 2017 financial results announced on Monday, the chemical conglomerate stated that it made a provision of R1.2bn foot the tax liability.

But the worst may be yet to come for the petrochemical giant. Sasol also warned on Monday that if the court’s interpretation is followed, Sasol Oil’s crude purchases in 2013 and 2014 could result in a further tax exposure of R11.6bn.

Sasol has appealed the Tax Court decision, and the Supreme Court of Appeal (SCA) is set to hear the case in the coming year.

Co-Chief Executive Officer Bongani Nqwababa believed that Sasol would be able to reverse the court's decision.

He told Fin24 that the case could potentially set an important precedence for similar tax actions in the years to come. The R11.6bn should also be set aside, if the SCA rules in favour of Sasol in the R1.2bn matter.

“We are very confident of our position,” Nqwababa said.

Sasol’s company based in UK, Sasol International, buys crude oil from whatever source globally, trading in London and then ships it to South Africa for use at Natref, together with its trading partner, French oil giant Total. Sasol Oil operates the refinery with Total in Sasolburg.

“This is not a unique structure. I know of other oil companies that operate similar structures. London is a great trading hub,” Nqwababa said.

“Basically what SARS is saying is that we don’t need this structure, you can just buy straight from the source and cut out the middleman,” he said. “What we are saying is that London is the marketplace to trade in.”

As a result of this dispute Sasol incurred the R1.2bn tax liability. 

Nqwababa explained that it was only from 2013 that SARS has adopted an aggressive style, disallowing expenses.

He said because SARS taxed the company on its revenue alone and excluded the expenses in procuring the oil, the bill quickly added up. The tax liability also included taxing base costs, with interest.

According to Nqwababa, engagements with SARS have been constructive.

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter:

sasol  |  sasolburg  |  financial results  |  tax


Company Snapshot

Voting Booth

How has Covid-19 impacted your financial position?

Previous results · Suggest a vote