CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. South Africa Consults On Diesel Fuel Tax Refund Overhaul

South Africa Consults On Diesel Fuel Tax Refund Overhaul

Lorys Charalambous, Tax-News.com, Cyprus

16 February 2017


The South African National Treasury has issued a discussion paper on a new diesel tax refund system, reviewing its administration and addressing anomalies related to its qualifying activities and beneficiaries.

South Africa's existing diesel refund system provides full or partial relief for the fuel levy (FL) and Road Accident Fund (RAF) levy to primary producers in the agriculture, forestry, fishing, and mining sectors. It was introduced from 2000 and is aimed at protecting the international competitiveness of local industries and reducing the road-related tax burden of the RAF levy for certain non-road users.

Diesel refunds are claimed based on the fuel's use, with different settings for primary producers (on land), offshore activities (including commercial fishing and offshore mining), rail freight, and peak power electricity generation plants (with a capacity of more than 200 MW).

For example, primary producers on land (farming, forestry, and mining) qualify for a refund amounting to 100 percent of the RAF levy and 40 percent of the FL in respect of 80 percent of their eligible diesel fuel purchases. Rail freight is refunded the RAF levy only. Full refunds of both the FL and RAF levy apply to offshore activities and peak power electricity generation plants, although the FL refund for electricity generation has been reduced to 50 percent since April 1, 2016.

The discussion paper follows from announcements made in the 2015 Budget that delinked diesel refunds from the country's value-added tax system and committed the National Treasury and South African Revenue Service (SARS) to explore alternative, more equitable rules and administrative procedures, following consultation with affected industries.

It is recognized that the implementation of a new standalone diesel refund administration will have to be phased in to ease the compliance burden on beneficiaries and the administrative burden on SARS. The design of the proposed new system is envisaged to be finalized by the end of 2017 after the public consultation, which is due to end on May 15. That will be followed by an announcement of the details in the 2018 Budget.

The paper noted that the current diesel refund system "has faced several technical administrative and legal challenges, including some eligible firms being unable to benefit from the system, while others appear to be making disproportionate refund claims."

In that respect, as "the systemic problems confronting the current administration of the diesel refund system are due to the emphasis on eligible diesel purchases by qualifying users," it is proposed that "the basis of the diesel refund administration be shifted to qualifying primary production activities."

An indicative list of the type and nature of qualifying activities and use by primary producers is provided in the discussion paper, and is expected to be finalized through the consultation process.

Audits by SARS under the proposed new diesel refund regime will be based on the risk profiling of diesel refund beneficiaries, while enforcement will continue to rely on taxpayer compliance with logbook obligations. Beneficiaries will be expected to update and maintain their diesel refund registration profiles electronically to validate their claims, while claims outside the scope of the beneficiary's registration profile will be denied.

In addition, refunds will only be allowed in respect of diesel dispensed from storage facilities formally on record with SARS to diesel-powered equipment and vehicles, also formally on record with SARS. There will also be a link of the qualifying activities to the physical location of the primary production activities.

TAGS: South Africa | compliance | tax | business | marine | value added tax (VAT) | tax compliance | mining | oil and gas | excise duty | enforcement | ministry of finance | tax authority | offshore | tax breaks | Africa

To see today's news, click here.

Leave a comment

Read our Posting Guidelines

 






Close

Password Reminder

Please enter your email address to receive a password reminder.

 

Log into Tax-News+
Not registered yet? Find out about our daily news alert service »

 Email: 
 Password: 

Login »

Forgotten your password?







Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Tax-News+ Updates

Receive FREE daily updates from Tax-News.com, straight to your inbox. Register Now!

For a tailored solution, choose to receive selected news updates for your preferred jurisdictions and topics, with our enhanced Tax-News+ subscriber service. Read more...

 

Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »