Master Currency loses SARS tax dispute
22 March 2013
Posted by: SAIT Technical
By Amanda Visser (Business Day)
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.
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