You should have charged 0% VAT, but you charged 14% - how to get it back
23 March 2015
Posted by: Author: SAIT Technical
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.