ConCourt Rules: Not Knowing Is No Excuse

Absa Bank v SARS — South Africa’s most important tax judgment in years

Case:       Absa Bank Ltd & United Towers (Pty) Ltd v CSARS  [2026] ZACC 15 Date:      22 April 2026 Outcome:  SARS wins — Absa’s appeal dismissed with costs Amount:   R1.9 billion in preference share investments

What happened?

Between 2011 and 2015, Absa invested R1.9 billion in a preference share structure introduced by the Macquarie Group. Absa received tax-free dividends on those shares — perfectly legal on the face of it.

What Absa says it did not know was that, behind the scenes, the money flowed through a chain of companies and a foreign trust, ultimately funding a swap deal designed to turn taxable interest into tax-free income. SARS said the whole thing was a tax avoidance arrangement, re-assessed Absa, and treated the dividends as taxable interest.

What was the legal fight about?

Absa raised two defences:

• “We didn’t know about the downstream steps, so we can’t be part of the arrangement.”
• “Even if there was avoidance, we only got a financial benefit — not a tax benefit.”

The Constitutional Court rejected both arguments.

What did the Court decide?

On the first point, the Court said that being a ‘party’ to a tax avoidance arrangement does not require you to know every step in it. What matters is whether you played an objective role — and without Absa’s R1.9 billion, none of the downstream steps could have happened.

On the second point, the Court said the right comparison is not ‘what if there was no deal at all?’ but ‘what would Absa have earned if the deal had no avoidance features?’ The answer: taxable interest. The tax-free dividends came entirely from the structure — that is a tax benefit.

Why should you care?

• This is the first time the Constitutional Court has interpreted the GAAR (General Anti-Avoidance Rules) since they were rewritten in 2006 — nearly 20 years of uncertainty, now resolved.
• ‘I didn’t know’ is no longer a defence. If your money funded a scheme, you may be caught by GAAR even if you were kept in the dark about how it worked.
• Structured finance products — preference shares, SPVs, multi-entity funding chains — are now firmly in SARS’s crosshairs.
• SARS can go after investors and lenders, not just the architects of a scheme.

What should you do now?

• Review any investment that produces tax-exempt dividends through a special purpose vehicle or intermediary structure.
• Ask your advisors to assess whether any arrangement you participate in could be re-characterised under the GAAR in light of this judgment.
• Boards and audit committees should put this on the agenda — this is not just a problem for the tax team.

The bottom line: If your capital made the scheme possible, the Constitutional Court says you are part of the scheme — whether you knew about it or not.