Is ‘dance’ considered a sport for the purpose of the ‘personal service’ definition in section 12E?
10 November 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: My client has
a dance school. Would she qualify as a small business corporation in terms of
section 12E of the Income Tax Act, because of the fact that dance may or may
not be considered a sport? Sport is included in the definition of a ‘personal service’
in section 12E.
A: The relevant
words in the current definition are "... any service in the field of ... sport
...” The Act does not provide clarity
in this regard. SARS states the
following in Interpretation Note: No. 9 (Issue 5):
"In general terms, a personal service refers to a service
rendered and for which the income derived is mainly a reward for the personal
efforts or skills of an individual. However, the term is capable of expansion
or limitation depending on the scope of the specific law in which it used.
Section 12E(4)(d) (as quoted below) defines "personal service” which merely
lists a class of activities that would be regarded as a personal service. For
the sake of clarity, the ordinary, grammatical meaning is to be ascribed to
each word. Accordingly, each of these entries is to be construed in their
widest possible sense.”
The Tax court considered the meaning of the words
"consulting, braking and management", (as also used in this
definition) and Judge Mbha made the following comments in this regard:
"It is accepted generally that the meaning of words in a
statute is derived from the common law.
The basic rule of interpretation is that the meaning must, unless a
statute provides otherwise, or unless it would result in an absurdity, be taken
to be the ordinary meaning of the word which can be found in a dictionary of established
Note: SARS changed its Interpretation note after this
The Oxford dictionary defines ‘sport’ as "An activity
involving physical exertion and skill in which an individual or team competes
against another or others for entertainment”. We are not sure if the phrase ‘in
the field of sport’ narrows the meaning.
It may well be that the service offered by the company is a
personal service, but it is outside the scope of the service offered by SAIT to
give an opinion on the matter. As the
taxpayer would bear the onus of proof in this regard, should SARS dispute the
view taken, we suggest that you advise your client to obtain a legal opinion or
an advance tax ruling or opinion from SARS in this regard.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.