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VAT implications on exports

15 October 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: A client is selling goods to Mauritius. He is invoicing the company in Mauritius and getting paid from the Mauritius bank account. I understand this transaction to be VAT Exempt. If the Company in Mauritius decides to use their own courier company to collect the goods (not a forwarding and clearing agent) would this transaction still be exempt from VAT?

A: The first point is that the supply of goods, by a RSA vendor, is not exempt from the tax (Value-Added Tax Act).  It may qualify for the rate of zero per cent in terms of section 11(1)(a).  The person making the delivery is in fact of crucial importance in this instance.  Our guidance accepts that the goods are in fact delivered in Mauritius.  

Section 11(1)(a) of the Value-Added Tax Act (the rate of zero per cent) applies where the supplier has supplied the goods (being movable goods) in terms of a sale or instalment credit agreement and the supplier has exported the goods in the circumstances contemplated in paragraph (a), (b) or (c) of the definition of "exported” in section 1(1).  The definition of exported (referred to above) requires the goods be consigned or delivered by the vendor to the recipient at an address in an export country as evidenced by documentary proof acceptable to the Commissioner.  See page 9 of Interpretation Note 30 for the documentary requirements.  

According to Interpretation Note 30 "consigned or delivered” means –

(a) the delivery of movable goods by a cartage contractor contracted by the vendor to deliver the movable goods on the vendor’s behalf to the recipient at an address in an export country, where the cartage contractor –

  • is engaged by and contractually liable to the vendor to effect delivery of the movable goods; and
  • invoices the vendor and the vendor is liable for the full cost relating to such delivery; or

(b) physically delivered by the vendor to the recipient at an address in the export country including the export of the movable goods in the vendor’s baggage or by means of the vendor’s own transport;

  • "cartage contractor” means a person whose activities include the transportation of goods and includes couriers and freight forwarders;

If the goods are removed by the recipient (the person in Mauritius), in other words where "the Company in Mauritius decides to use their own courier company to collect the goods” it is an indirect export (in the old terms).  We submit that none of the instances where the vendor can elect to "to levy tax at the zero rate on the supply of the goods”  are applicable– refer to paragraph 8 in Section A of part two of the Regulations.  This means that tax at the standard rate (14%) must be levied and the recipient will claim a refund from the refund administrator.  

Disclaimer:  Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


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