Coronation bags major legal win against SARS

The Constitutional Court has ruled in favour of asset manager Coronation in its legal battle against the South African Revenue Service (SARS) that has plagued the company for years.

The matter relates to SARS’ assessment of Coronation’s taxable income in 2012 when it included the profits earned by Coronation Global Fund Managers (CGFM), which is based in Ireland.

Coronation appealed the assessment to the Western Cape Tax Court, which ruled in their favour in 2021 and set aside SARS’ assessment.

SARS then appealed this ruling to the Supreme Court of Appeal (SCA), which ruled in favour of the taxman in February 2023 and reinstated the assessment.

The SCA ruled that, in addition to the additional taxes, Coronation has to pay the interest accrued on the amount assessed by SARS and costs. The SCA dismissed SARS’ claim for penalties.

After this ruling, Coronation applied to the Constitutional Court for leave to appeal the SCA judgement.

However, the SCA’s ruling was considered an obligating event and therefore, Coronation had a present obligation to pay the additional taxes and interest, which includes years of assessments from 2012 to 31 March 2024.

This is why Coronation’s total obligation payable to SARS in 2023 for this matter amounted to R716 million, contributing to its hefty bill that year.

Today, Coronation informed shareholders that the Constitutional Court has delivered its judgment on the tax matter, ruling in favour of the company and setting aside the SCA’s orders.

“Coronation welcomes the judgement of the Constitutional Court, which confirms that Coronation Investment Management SA’s interpretation and application of the relevant tax legislation has been correct and appropriate,” the company said.

Coronation Investment Management SA’ is the name of Coronation’s holding company and its locally registered tax entity.

It said the full impact of the lawsuit as of 31 March 2024 amounted to R794 million and had been provided for in Coronation’s financial accounts.

The asset manager told investors that caution is no longer required when dealing with the company’s shares.

Coronation’s shares rallied following the announcement, and its share price is up almost 4% at the time of writing.