Should VAT be levied on the local transportation of passengers?
02 March 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have a client
that does medical trials for pharmaceutical companies. The companies are based overseas
but SA VAT vendors. My client is paid a trial fee and for transporting patients.
The company has advised my client that the clinical trial fee will include VAT but
no VAT will be levied on the transportation of patients.
client charges a total fee to the company for trials and patient transport. The
company has advised that my client should make out 2 invoices, one for the trial
+ vat and another for transporting patients (no VAT).Please advise if this is
A: Section 12(g) of the VAT Act
exempts the supply of services for the local transportation of passengers by
road for a fare in the course of a transportation business. SARS PN 7 sets out
some guidance in this respect. Where cross border transport is being conducting
the supply is zero rated in terms of section 11(2)(a) of the VAT Act.
However we are of the
view that a risk does exist in the current instance that where the transport is
merely incidental to another service being rendered and the fare is merely cost
recovery as part of the main services consideration, as we assume is currently
done, SARS may question whether a transport business is being conducted as
required in section 12(g) of the VAT Act. Therefore is a bona fide business for
profit being conducted for the transport of passengers.
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.