Editorial

• Date: 01 March 2021
• Author: Michael Rudnicki Rudnicki
• DOI: 10.10520/ejc-btclq_v12_n1_a1
• Pages: v-vi
• Published date: 01 March 2021

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Editorial

MICHAEL RUDNICKI

In this issue we welcome the contributions of two very distinguished

guest authors, namely David Clegg and Professor Fareed Moosa, an Asso-

ciate Professor in the Department of Mercantile & Labour Law, Univer-

sity of the Western Cape. As the darkest days of the Covid experience are

hopefully dissipating, we remind ourselves that only a year ago very few

had the courage to attempt the use of virtual interaction for purposes of

conducting meetings and presentations. Even our courts and legal counsel

were required to adapt to the non-physical vigour of arguing tax matters;

evident in the content of some of our articles hereunder. Let’s hope and

pray that these really difficult times we have all had to experience will

transform the minds and actions of all stakeholders in our South African

society to being more collaborative, free of corruption and evil, and that it

will result in the greater South African society that we all so dearly desire.

The first article deals with the often difficult Capital Gains Tax (‘CGT’)

concept of whether a personal right constitutes an asset. Many instances

arise where personal rights are created in relation to contractual arrange-

ments, such as a right to delivery in relation to a sale of goods, and a bene-

ficiary right against the trustees of a trust. The very broad definition of

‘asset’ in our CGT legislation has resulted in much tax commentary on the

subject as to whether every personal right constitutes a distinct asset for

CGT purposes.

The author provides compelling arguments, which in his view may

settle the matter, against the circularity of the creation of assets, and

distinguishes between the primary asset and the subordinate or secondary

asset in each transaction. He proposes that the transaction that creates

the contractual right to the primary asset, constitutes the asset for CGT

purposes, for example the sale of goods. The subordinate asset, the right to

the delivery of the goods upon payment, does not create a further asset as

the contractual arrangement between the parties is one of acquisition and

sale of an asset.

The article by Des Kruger considers the VAT consequences of an indem-

nity payment under commercial sale agreements, and contrasts it with

an indemnity under an insurance contract. A supply of services for VAT

purposes arises where a vendor receives an indemnity payment under

a contract of insurance. The article concludes that only an insurer who

provides insurance in exchange for the payment of premiums, makes an

indemnity payment within the ambit of section 8(8) of the VAT Act. The

ambit of section 8(8) of the VAT Act is that the recipient vendor of the

compensation is required to account for VAT in respect of such payment.