EOH Settles R112m SARS Dispute, Closes Chapter on Legacy Issues

EOH, the South African technology services giant listed on the Johannesburg Stock Exchange (JSE), has reached a conclusive settlement with the South African Revenue Service (SARS) for a sum of R112 million, resolving a pay-as-you-earn (PAYE) tax dispute concerning its subsidiary, EOH Abantu. This settlement marks the resolution of the company's final significant legacy issue that predates the tenure of outgoing CEO Stephen van Coller.

The PAYE dispute has its roots in 2012 and pertains to two of EOH's staff outsourcing businesses. EOH Abantu, finding itself at odds with SARS, took the matter to the high court. EOH had been in discussions with SARS to find a potential settlement under the Tax Administration Act and had reserved R115 million for the assessed PAYE liability as disclosed in their financial statements dated 31 July 2023.

In an unprecedented turn of events, October 2022 saw EOH Abantu initiating a review application against SARS. However, EOH today announced that the two parties have since been working collaboratively through a compromise process, resulting in the agreed-upon settlement terms.

Per the arrangement, EOH is obligated to fulfill the payment of R112 million to SARS by 1 March 2024. This amount aligns with the provisions recorded by Abantu at the fiscal year’s end, leaving no impact on the group income statement. Furthermore, the settlement also stipulates Abantu's surrender of its tax receivable credit worth R6.9 million, which was not accounted for previously and is expected to impact the income statement negatively. The assessed loss of R34.5 million is also to be forfeited by Abantu; however, this will have no significant impact on the financial statements since no deferred tax provision was raised in the past.

In light of EOH’s settlement and the forthcoming transition in leadership, Van Coller expressed contentment and relief at resolving this intricate matter and acknowledged the diligence of SARS officials in securing an optimal outcome for South Africa. Van Coller emphasized that EOH can now channel its energies towards its strategies concerning growth, efficiency, and talent. His tenure has been marked by rigorous efforts to redress governance and corruption challenges within EOH. With Andrew Mthembu taking the reins as interim CEO, EOH remains on the lookout for a new executive leader following Van Coller's scheduled retirement post-March 2024.

Investors, stakeholders, and the broader business community can anticipate EOH's announcement of their financial outcomes for the six-month period concluding on 31 January 2024, expected to be broadcast around 26 March 2024.