SARS going after Adidas

SARS is going after international sportswear manufacturer Adidas for R1.9 billion in customs duties for allegedly underpaying these duties from 2007 to 2013.

Adidas admitted to the dispute in its annual report, released in May, where the company said the ongoing dispute would be heading to the High Court. A court date has not yet been set. 

In 2018, SARS issued a claim for R1.87 billion in customs payments, including interest and penalties for the years following 2013.  

Adidas applied for a suspension of the payment demand and initiated legal action against the decision in the High Court of South Africa. 

SARS has not commented on the case, as individual taxpayer information is confidential. 

The receiver of revenue claims that transactions between Adidas International and Adidas South Africa were “simulated” to reduce the amount of customs duties payable. 

SARS views Adidas International as the import as it placed the orders for the goods with producers, paid for them, and then sold them to Adidas South Africa. 

Adidas International has no physical presence in South Africa and no staff. All of what it would have been required to do, were it genuinely selling its goods locally after importation, was done by Adidas SA employees and its UTI warehouse.

Adidas views its South African unit as the importer. 

This has led to a discrepancy between the value of the goods imported according to SARS and the value ascribed to them by Adidas. 

Adidas has pushed back against the claim and wants the courts to rule on the dispute and clarify the relevant regulations. 

The German company has also stated its intention to appeal against the ruling if it is in SARS’ favour. 

It has not raised any provisions for the payment of the claim as the company believes it will be successful in dismissing the payment claim. 

This case is similar to a previous case involving Levi’s South Africa, where the American company was accused of using “fictitious invoices” to reduce the customs duties it had to pay. 

In that matter, the Supreme Court of Appeal dismissed SARS’ claim for R140 million from Levi’s South Africa.

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