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Master Currency loses SARS tax dispute

22 March 2013   (0 Comments)
Posted by: SAIT Technical
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By Amanda Visser (Business Day)

Executive summary

The SCA dismissed an appeal by Master Currency against a judgment by the Johannesburg Tax Court which dismissed an appeal against a revised VAT assessment. The company had assumed that no VAT was chargeable as it was operating the branches in a "duty free" area.

Full article

THE Supreme Court of Appeal this week dismissed an appeal by licensed foreign exchange dealer Master Currency against a revised VAT assessment for two of its branches in the duty-free area at OR Tambo International Airport.

The company had assumed that no VAT was chargeable as it was operating the branches in a "duty free" area. It argued this assumption was reinforced by complaints from foreign customers when charged VAT after exchanging the rand for other currencies.

However, the South African Revenue Service (SARS) disagreed with this interpretation, saying the fees received by the two branches for the October 2003 to January 2005 tax period at OR Tambo International Airport (then Johannesburg International) were subject to VAT.

SARS then issued a revised assessment and Master Currency took the matter to the Johannesburg tax court. The Supreme Court of Appeal on Wednesday upheld the decision by the tax court that the services rendered by Master Currency at the airport were indeed subject to VAT at the standard rate of 14% and could not be zero-rated.

"Master Currency’s argument that (the VAT Act) does not apply to the supply of goods and services in the duty-free area is not based on any particular provision (in the act)," the appeal court found.

In its argument before the court, Master Currency had suggested the court take "judicial notice" of the "well-established fact" that there are duty-free areas at airports. However, the court found it to be an "excessively broad proposition" full of uncertainty as to the nature of duties and transactions. It said no reliable evidence was presented to support the proposition, especially not as far as services were concerned.

The court referred to section 7(1)(a) in the act, in which the levying of VAT "clearly applies" to the whole of SA, and since Master Currency did not show that it escaped liability from VAT through any "exemptions, exceptions, deductions and adjustments", it was subject to VAT too.

Master Currency was established with the assistance of Rennies Foreign Exchange and had initially used the latter’s point-of-sale systems, which levied VAT on transactions. In October 2003 it started using its own system, which allowed a branch to choose whether to charge VAT.



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