Well-drafted contract helps Reunert win R80m case brought by SARS
Care in drafting a sales agency contract helped Reunert win a recent R80m case brought against it by the South African Revenue Service (SARS).
Supreme Court of Appeal Judge Azhar Cachalia ruled in Reunert’s favour on November 22 in a dispute with SARS over whether the JSE-listed electronics group needed to pay taxes based on hypothetical or actual sales it made on behalf of Finnish technology group Nokia.
Tax Consulting SA attorney Christopher Renwick said Reunert won its case because its agreement with Nokia tied the clause calculating its commission to another clause saying the actual commission it would receive would be deducted from what Reunert received from Nokia Siemens Networks SA.
Following Nokia Networks’ separation from Nokia Siemens Networks SA, its sales declined sharply, prompting it to appoint Reunert as a sales agent.
In terms of the agreement, Nokia Networks calculated a hypothetical sales commission every six months from its total Southern African turnover, representative of what Reunert used to receive from its 40% shareholding in Nokia Siemens Networks SA, Renwick said.
"Any current dividend paid by Nokia Siemens Networks SA is deducted from the gross commission and the net commission accrues to Reunert. However, if the dividend is greater than the gross commission, Reunert does not receive any commission."
Renwick said, "Although the court frowned on the inconsistency of the note with the terms of the agreement, it agreed that Reunert’s interpretation of the contract’s clauses were unquestionably correct."