Zero-rating of VAT where a local (RSA) vendor performs service for RSA client in a foreign country
28 November 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Just wanted to make sure that we can
zero-rate VAT on exported services if the service is performed in outside the
country by a RSA resident company, to the non-RSA office of a SA company.
The contract is in rands and we invoice the SA company
(situated in RSA) but we perform the service to one of its'
branches/subsidiaries situated in an African country.
A: The fact the
contract is in rands is irrelevant to the issue. Section 11(2) of the Value-Added Tax Act
provides for two instances where the supply of services can be zero rated. The first is section 11(2)(k) which applies
where the services are physically rendered elsewhere than in the RSA. You state that you supply ‘(perform) the
service to one of its' branches / subsid(i)aries in Mozambique’ and we accept
that the provision may apply. Remember
that where the rate of zero per cent apply, the documents to support that, as
listed in Interpretation Note 31, must be obtained.
Services physically rendered in the RSA to a person who is
not a resident of the RSA can only be zero-rated if section 11(2)(l) applies
and the required documents to prove this were obtained. In this instance the company in Mozambique
must NOT be present in the RSA at the time the service is rendered (section
11(2)( l )(iii)) for the rate of zero per cent to apply. If the non-resident is present in the RSA at
the time, the service will be standard rated (section 7(1)(a)).
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