It is often confusing to determine when to charge Value Added Tax (VAT) on goods or services at zero rate (0%) instead of the standard rate of 14%. Below are some basic examples to illustrate the charging of the correct rate by South African VAT vendors. These are general illustrations and it is prudent to contact your tax practitioner if there is any uncertainty in this regard.
Direct Export of Goods – 0%
A direct export is the delivery of moveable goods to a recipient at an address outside of the Republic of South Africa (RSA) by a South African VAT vendor. The vendor must therefore physically deliver the goods to the recipient at the address outside the RSA or arrange for the delivery of the goods on behalf of the vendor with a cartage contractor (who must be a resident of the RSA as well as a registered VAT vendor). VAT at 0% may then be charged on these sales.
Strict documentation requirements are set by the South African Revenue Service (SARS) in order to charge 0% VAT, and the exports must take place through any of the designated ports.
Indirect Export of Goods – 14%
An indirect export is when the South African VAT vendor sells moveable goods to a foreign recipient, but the recipient will remove or arrange for the removal of the goods from the RSA to the foreign address. In such a case, the vendor will charge VAT at the standard rate of 14%.
However, the foreign recipient may be able to claim a VAT refund at the exit of the goods from the RSA at any of the designated commercial ports. The foreign recipient must be a qualifying purchaser (as defined) and the goods must be exported within 90 days from the date of the tax invoice. Strict documentation requirements are set in order to claim the VAT refund.
The only exception to this is if the supply is made in terms of Part Two of the VAT Export Scheme. In that case, VAT may be charged at 0%.
Local Services to Foreigners – 0%
Services delivered locally to non-residents by the South African VAT vendor will generally be subject to VAT at 0%. It is important to remember that the non-resident recipient of these services must not be physically present in the RSA at the time of the delivery of the service.
The exceptions to this (and therefore subject to 14% VAT) will be where the services are supplied:
- in respect of fixed property in the RSA,
- in respect of movable property in the RSA, unless the property is destined for export or forms part of a supply to a registered vendor, or
- to a recipient who is in the RSA when the services are rendered (unless it relates to a restraint of trade).
Services Delivered outside the RSA – 0%
Services that are physically delivered outside the RSA will carry VAT at 0%.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)