The Gauteng High Court's recent judgment in BASF South Africa (Pty) Ltd v Commissioner for SARS is likely to become one of the most significant procedural tax judgments of 2026, particularly for taxpayers and SARS litigating transfer pricing disputes. While the case arose from a transfer pricing dispute, its broader significance lies in the Court's treatment of amendments to pleadings in Tax Court proceedings and the limits placed on both taxpayers and SARS when refining their respective cases.

The judgment addresses the interaction between Rule 31 and Rule 32 of the Tax Court Rules and provides a view on when new grounds may be introduced during tax litigation. At the same time, the decision leaves several practical questions unanswered, ensuring that debate around the boundaries of permissible amendments will continue.

The Dispute

The underlying dispute concerned SARS' transfer pricing adjustment. SARS contended that BASF's purchases of platinum group metals from a related Swiss entity were not conducted at arm's length and relied on a benchmarking analysis based on the Transactional Net Margin Method (TNMM).

As the matter progressed, SARS sought to amend its Rule 31 statement by introducing additional benchmarking studies and an argument relating to multi-national enterprise (MNE) group synergies. BASF opposed the amendments, arguing that SARS fundamentally altered the factual and legal basis of the original assessment. BASF simultaneously sought amendments to its own Rule 32 statement to expand on certain grounds supporting its challenge to the TNMM transfer pricing adjustment.

The Tax Court allowed SARS' amendments, but refused portions of BASF's proposed amendments. BASF appealed.

High Court Findings

This Court held otherwise, that SARS' proposed amendments exceeded the limits permitted by Rule 31(3).

According to the Court, Rule 31 permits SARS to advance new grounds of assessment only where those grounds do not constitute a novation of the whole factual or legal basis of the disputed assessment. The Court found that the introduction of three new benchmarking studies effectively replaced the factual foundation upon which the original assessment had been built. Similarly, the proposed reliance on MNE group synergies was viewed as introducing a legal basis not contemplated by the Income Tax Act as it existed in 2011.

On that basis, the Court concluded that SARS' amendments amounted to an impermissible novation of both the factual and legal foundations of the assessment.

In contrast, the Court found that BASF's proposed amendments were directed at the same transfer pricing adjustment that had already been disputed in its objection. The amendments merely introduced additional arguments and factual explanations supporting BASF's challenge to the amount assessed. They did not seek to challenge a new portion of the assessment and were therefore permissible under Rule 32(3).

Why the Judgment Matters

The BASF judgment reinforces an important principle: tax litigation ought not to be an open-ended opportunity for parties to reformulate their cases continuously. Where SARS seeks to introduce materially different factual foundations or legal theories after an assessment has been raised, Courts are likely to regard such attempts as impermissible novations.

The decision also provides comfort to taxpayers by confirming that Rule 32 allows new grounds of appeal to be introduced, provided they relate to portions of an assessment that were already placed in dispute through the objection process.

This distinction between introducing a ‘new argument’ and introducing a ‘new case’ is likely to become increasingly important in many tax disputes.

Continuing Uncertainty

Despite the significance of the judgment, considerable uncertainty remains.

The concept of novation under Rule 31 has long generated debate, and BASF may not provide the final word. Questions remain regarding how much refinement, supplementation, or expert analysis SARS may introduce before a court will conclude that the factual basis of an assessment has fundamentally changed.

Similarly, the practical limits of Rule 32 continue to evolve. While BASF confirms a relatively generous approach to new grounds of appeal, future cases will likely explore where the line should be drawn between a permissible expansion of an existing dispute and the introduction of a new objection disguised as an appeal ground.

Given recent decisions such as Free State Development Corporation, Virgin Mobile, Baseline Civil Contractors, and now BASF, it is evident that South African courts are actively shaping the procedural landscape of tax litigation.

Looking Ahead

For taxpayers and advisers, the BASF judgment serves as a timely reminder of the importance of carefully formulating objections, appeals, and pleadings from the outset. For SARS, it underscores the need to ensure that assessments are supported by a sufficiently robust factual and legal foundation before litigation commences.

While the decision provides welcome guidance, it is unlikely to end the debate. The boundaries of Rule 31 and Rule 32 amendments remain a developing area of tax procedure, and further judicial clarification can be expected in the years ahead.