JSE-listed Coronation Fund Managers told shareholders today it faces up to a R900 million tax blow after it lost its court battle earlier this month in the Supreme Court of Appeal (SCA) against the SA Revenue Service (Sars).
The group was the subject of a review on a matter of principle relating to its international operations and assessed for the 2012 to 2017 financial periods.
The case focused on the Income Tax Act 58 of 1962 – section 9D exemptions – and whether a “controlled foreign company” was a “foreign business establishment” as defined in Tax Administration Act 28 of 2011 – understatement penalties.
Sars found fault with Coronation’s Ireland-based subsidiary, Coronation Investment Management SA (Cimsa), relating to its international operations and on the interpretation of whether it was considered a foreign business establishment (FBE).
On a JSE Stock Exchange news statement, Coronation said, “The company is required to raise a provision as a consequence of the SCA judgement. The provision is based on all financial years from 2012 to 2022 being impacted by the application of the SCA judgment and is estimated to be between R800m and R900m.”
It cautioned its shareholders that the expected impact of the provision would reduce earnings per share (Eps), headline earnings per share (Heps) and diluted headline earnings per share (Dheps) for the six months ended March 31, this year, when compared to the corresponding period.
Coronation had previously signalled that due to the Sars ruling, it would not be able to pay shareholders interim dividends. Today it confirmed this.
“As conveyed in the previous announcement, the Company is disappointed with the SCA judgment in favour of Sars, which overturned the decision of the Western Cape Tax Court,” it stated.
But Coronation said it won’t take this ruling lying down.
Its next steps in the Sars litigation was that Cimsa should apply to the Constitutional Court for leave to appeal against the SCA judgment.
Such an application would be made within the stipulated timeline, it said.
“Shareholders are advised that this is not a trading statement in terms of the JSE Listings Requirements as the company is not in a position where it has a reasonable degree of certainty regarding the expected range for Eps, Heps and Dheps for the six months ended March 31, 2023,” it said.
BUSINESS REPORT