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You should have charged 0% VAT, but you charged 14% - how to get it back

23 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: When a company export horses they charge VAT the zero rate. But my client only found out about this recently, and incorrectly charged VAT at 14% on an export to a customer who based overseas. Is there any way possible that this customer can claim the VAT back from SARS? It is a large sum of money. In effect the customers weren’t supposed to pay VAT. If yes, what is the process to follow and what documentation should be filled in, and where do they find this documentation?

A: The rate of zero per cent applies (in terms of section 11(1)(a) and subject to compliance with section 11(3) – documentary proof) to a supply of goods where the supplier has supplied the goods (being movable goods) in terms of a sale or instalment credit agreement and the supplier has supplied the goods (being movable goods) in terms of a sale or installment 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. 

The concept "movable things” is not defined and therefore takes its common-law meaning, as applied by the courts.  Its meaning is summarized as follows by CG van der Merwe in Joubert (ed) The Law of South Africa vol 27 'Things' para 34:

'A thing is considered to be movable if it can be moved from one place to another without being damaged and without losing its identity. Things that can move on their own, like animals are also considered to be movables. Immovable things, on the other hand, are things which cannot be moved from one place to another without damage or change of form...'

Our guidance assumes that the client will be able to meet the onus of proof that the horses were exported and will be able to submit the required supporting documentation.  In other words it qualified to apply the rate of zero per cent. 

There are two options available to the client.  The first is to use the "request correction” function available and then submit an amended return.  If that is not available the client will have to lodge an objection.  It is settled law that the taxpayer can "rely upon an error that it made in its return”- see the most recent SCA case (GB Mining). 

The objection is made by submitting an ADR1.  The documents required to prove this is listed in Interpretation note 30 (direct export) or Interpretation note 31 (issue 3) in other cases. It is advisable to add this as supporting documents to the ADR1.  The original invoice will also have to be amended. 

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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