Telkom will fight the South African Revenue Service (Sars) in the constitutional court after an adverse judgment handed down against it at the supreme court of appeal that could severely dent its cash flow.

“The appeal against the tax court judgment received on the dispute between Telkom and Sars relating to the tax treatment of the loss that arose in the 2012 financial year on the sale of a foreign subsidiary was heard by the supreme court of appeal on 4 March,” the company said. “The judgement was handed down on 25 March 2020 Telkom. We intend to apply to the constitutional court for leave to appeal the judgment.”

Moneyweb reported on Tuesday that the supreme court judgment held that a R3.9-billion foreign exchange loss and a R136-million incentive bonus, related to its former subsidiary Multi-links, were not deductible. As a result, a tax liability of R875-million raised by Sars for the 2012 tax year would now stand, and Telkom would have to pay the tax commissioner’s legal costs.

‘Fully provided for’

“Shareholders are reminded Telkom fully provided for the implications of the matter, as it relates to both the 2012 and 2014 years of assessment, in prior financial years and therefore this will be earnings neutral,” the company said in a statement on the JSE’s stock exchange news service.

“However, the cash-flow implications of the outstanding liability of approximately R1-billion, which includes the implications of the judgement on the 2014 financial year, will be informed by a payment arrangement to be agreed with Sars.”