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- SARS has rejected a Gupta company treating the infamous Sun City wedding as a “business expense.”
- As part of a tax audit, SARS also found R105 million in previous payments through the same company that were allegedly falsely claimed as business expenses.
- The Guptas now face a tax liability of about R80 million related to this small part of their local corporate empire.
On August 19, the South African Revenue Service (SARS) sent two letters of “audit findings” to a lawyer representing Linkway Trading, a discreet cog in the Gupta family’s money laundering machine.
The SARS cards was required to inform Linkway that its VAT and income tax assessments had been massively adjusted for fiscal years 2013 to 2016.
SARS alleged that Linkway had effectively underreported R197.5 million taxable income and had claimed R24.5 million in VAT for which it was not eligible.
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That translates into a tax liability probably in the region of R80 million, excluding interest and penalties.
Linkway’s main claim to fame is being the conduit through which R30 million came to the country from Dubai to pay for the infamous and absurdly lavish Sun City wedding of 2013.
The extravagance was claimed as a business expense using creative accounting and the collusion of KMPG’s audit partner Jacques Wessels, as previously reported by amaBhungane and our #GuptaLeaks partners.
The money was diverted from the Estina dairy project in the Free State before being sent through a Dubai company called Accurate Investments back to Linkway in South Africa.
SARS has finally taken action against this blatant abuse. The Independent Regulatory Board of Auditors canceled Wessels’ registration last year for his role in the scandal.
Part of the adjustment that SARS threatens to Linkway’s taxable income is that the entire wedding expense will not be allowed as “business expense” and will become taxable.
“It appears that Linkway Trading was simply a conduit or acted directly and indirectly as an agent for Islandsite and the four directors,” SARS notes in one of its letters.
Linkway is a subsidiary of Islandsite Investments 180, the company that also owns the Gupta family’s luxury properties, aircraft, and other assets in South Africa.
The four Islandsite directors that SARS referred to are two of the Gupta brothers, Rajesh “Tony” and Atul, and their wives, Arti and Chetali.
Beyond Sun City
The infamous wedding is apparently far from the only use for Linkway, SARS audits reveal.
The company was primarily active in fiscal years 2013 and 2014 (March 1, 2012 to February 28, 2014). The total amount of cash that was moved through his account dwarfed the amount spent on the nuptials.
In fiscal year 2013, the company received deposits of R113.2 million and made payments of R112.6 million, the SARS found.
In fiscal year 2014, she received R106.1 million, which includes the money from Dubai for the wedding.
The surprising thing about 2013 is that almost the entire amount of money that moved through Linkway’s account, R105 million, arrived in a short period of 12 days between June 29 and July 10, 2012.
There is compelling evidence that Linkway lied about the purpose of this money.
It allegedly consisted of payments made by another Gupta company, Confident Concept, for unidentified “goods or services” that it purchased from Linkway.
However, Linkway was buying the same “goods and services” from Islandsite with a negligible profit margin of 0.33%.
Confident Concept is owned by the four Guptas who own Islandsite.
A set of invoices was produced on the exact same day for both sides of the alleged transactions: that is, Linkway issued an invoice to Confident Concepts and simultaneously received an invoice from Islandsite. But this was only done about seven months later, in February 2013.
The problem is that Linkway never paid anything to Islandsite. The transaction appears to be fictitious.
“Scrutiny of the company’s bank statements revealed that Linkway Trading (Pty) Ltd had not made any payments to lslandsite Investment 180,” SARS noted.
To the tax collector, this means that the alleged business expense of buying things from Islandsite was “exaggerated” to the extent that it did not exist at all. These 105 million rand become taxable.
There were also other problems pointed out by SARS on the fiscal front, such as the absence of invoices for alleged purchases of the Gupta ANN7 television channel.
Given that the same company, Linkway, received the laundered money months later, the R105 million raises an obvious question: why was it moving through a well-known Gupta money laundering vehicle in the early days of the state capture adventures? of the family?
The dates of the payments to Linkway do not correspond to any of its known projects or scandals.
Who pays?
Linkway was given 21 business days to challenge the SARS audit findings, otherwise it will be liable for the adjusted tax. That grace period expired on the 15th of this month and it is unclear whether the company accepted the offer.
The process began on November 19 of last year, when SARS first requested information to conduct an audit. Linkway cooperated until a further request for information on July 17. Linkway fell silent, prompting SARS to send the discovery letters last month.
It is unclear why the company initially cooperated and then discontinued communication. The SARS letters were sent to Linkway’s attorney, Michelle du Preez.
Du Preez confirmed to amaBhungane that he was acting for the company, but said he could not answer questions due to taxpayer confidentiality.
If the fiscal adjustment is confirmed, it remains to be seen how the money could be recovered and not simply add to the billions of rand in damage the Guptas caused to the South African economy.
Linkway is in the process of being terminated, which means that SARS can go after its directors for the taxes it says they are owed.
Although Rajesh Gupta and other recurring Gupta executives had previously been directors of Linkway, the only directors during the period covered by the audits were Ronica Ragavan, a loyalist to Gupta, and Kevin Thysse.
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