South African Breweries (SAB) is facing a potential tax bill of R6.4 billion and R17.7 billion in penalties and interest from the South African Revenue Services for the sale of SAB’s stake in Coca-Cola Beverages Africa.
AB InBev, SAB’s parent company, said SARS had conducted an audit of the company about the 2017 repurchase of SAB’s equity stake in Coca-Cola Beverages Africa by Coca-Cola.
SAB owned Coca-Cola’s bottling operations in South Africa until 2014, when The Coca-Cola Company (Coke), SABMiller, and Coca-Cola SABCO joined their operations to form Coca-Cola Beverages Africa.
SAB owned 57% of the new company, which began operating in 2016.
In October 2016, AB InBev announced it would merge with SAB. In the same month, Coke announced its intention to acquire SAB’s stake in CCBA.
Coke’s deal to acquire SAB’s stake was concluded in October 2017. The company now owns 66.5% of CCBA, with the rest held by Gutsche Family Investments.
The sale of SAB’s stake to Coke is what SARS is currently investigating as part of its audit.
Preliminary findings from SARS in March showed that SAB owes R6.4 billion in tax in addition to any penalties and interest incurred.
However, in AB InBev’s half-year financial statements, the company said that SARS claims SAB owes R6.4 billion in taxes and R17.7 billion in penalties and interests.
R6.4 billion is substantial, making up nearly 5% of AB InBev’s total revenue from its African operations in 2022. Including the penalties and interest, the amount owed to SARS may make up close to 20% of total revenue from Africa.
AB InBev also said that Coca-Cola Beverages Africa had received an assessment from SARS for R8.9 billion relating to the transaction.
The company said both of these assessments from SARS are being contested.
AB InBev said that SAB may be required to pre-pay some or all of the amounts assessed, pending the outcome of the challenge and any appeals.
The company has made no related provision for these matters as it considers the chances of losing the challenge to be minimal.