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Ruling on customer loyalty programme
- 19 December 2019
- Corporate Tax
- Heinrich Louw
Monday, 01 October 2018
Important:
This article is based on tax law for the tax year ending 28 February 2019.
Author: Heinrich Louw
The South African Revenue Service (SARS) recently published Binding Private Ruling 310, which deals with the tax treatment of a customer loyalty programme.
The applicant was a local company supplying goods and services in the course of trade. In order to enhance its business, the applicant proposed to implement a customer loyalty programme through which participating customers could benefit.
Specifically, the loyalty programme would entail the following:
The applicant would establish a trust, of which the participating customers would be beneficiaries.
During any particular year, customers would earn points when transacting with the applicant.
The applicant would make a capital contribution to the trust every year, based on its profitability for the year.
The contribution would immediately vest in the participating customers (being beneficiaries) in accordance with each participant’s participation ratio, which is calculated with reference to the points earned during the year.
Please click here to read more.
This article first appeared on cliffedekkerhofmeyr.com.