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SARS Explains VAT Rules On International Transport Services

by Lorys Charalambous, Tax-News.com, Cyprus

07 April 2017


The South African Revenue Service has released guidance on when a zero-rate of value-added tax (VAT) should apply to international transportation services of goods and passengers.

Under the VAT Act, the international transportation of goods or passengers is a taxable supply. So is the supply of any ancillary transport services associated therewith. These services must, however, be zero-rated under the various provisions contained in Section 11(2) subject to the requirements for the zero-rating being met.

To determine which rate should be applied, a vendor supplying domestic or ancillary transport services in connection with imported or exported goods must establish whether the vendor has contracted directly with a non-resident, non-vendor, or with the agent of the non-resident non-vendor, before applying the zero or standard rate.

The guidance explains that for the domestic leg of an international flight carrying goods, Section 11(2)(c) zero-rates the domestic leg of the international transportation of goods, as well as any ancillary transport services rendered, where these services are supplied by the same vendor who is contracted by the customer to provide the zero-rated international transport service.

The other exceptions that may permit zero-rating, which are explained in the guidance, concern domestic or ancillary transport services supplied to an agent of a non-resident and domestic and/or ancillary transport services supplied to non-resident, non-vendors.

The guidance also discusses the documentary requirements that the vendor must comply with to apply the zero rate, as set out in Interpretation Note 31. If the vendor is unable to provide acceptable documentary proof, the vendor is expected to charge output tax by applying the tax fraction to the consideration for the supply, SARS said.

Comments are invited on the draft interpretation note by May 4, 2017.

TAGS: South Africa | compliance | VAT tax authority guidance | tax | value added tax (VAT) | tax authority | services | VAT compliance matters | Africa

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