Are there any issues with VAT payments made by a clearing agent on behalf of a principal?
17 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have a
client, which is a private company, operating as clearing agents on imported
goods for customers. They do not arrange for any overseas transport or ancillary
services. When the goods arrive to a port in RSA, they arrange for the goods to
be cleared at customs and in return they charge the customers a fee for
clearing the goods.
They charge VAT at standard rate of the fee they charge to
their customers for clearing services in RSA.
As part of their operations and agreement with their
customers, on clearing the goods, the company will disburse VAT on imports and
customs duty on the goods so imported by the customers to SARS. Thereafter the
company will recover VAT and customs duty paid from the customer.
The tax invoice of the company clearly stipulates the VAT
chargeable items and non-VAT items in compliance with S8 (15) of the VAT act.
According to the company’s customised computer programme,
these disbursements are termed zero rating services and is accordingly
disclosed as zero rated supplies on the VAT 201 return.
In my opinion, on the strength of the CSARS v British
airways case, the disbursement made on behalf of customers is a non-supply as
it does not fall within the ambit of s 7 and 8 of the VAT act. It is also
neither a zero rating nor exempt supplies as it does not fall within the ambit
of s11 and 12 of the VAT Act.
Is my reasoning correct?
A: The principle,
in the CSARS v British Airways case, was formulated by Judge Nugent as
"A further tax does not accrue when the vendor of another
service (British Airways) does no more than bring to account and recover the
charge that it was required to pay for the supply of that service by the company
(whether it is supplied to the passengers themselves, or to the airline for the
benefit of its passengers). The moneys
that are recovered by British Airways are not a consideration for the supply by
it of airport services simply because it does not supply them at all.”
This principle is in line with the Value-Added Tax Act –
refer to section 54(2). It states that
"...where any vendor makes a taxable supply of goods or services to an agent
who is acting on behalf of another person who is the principal for the purposes
of that supply, that supply shall be deemed to be made to that principal and
not to such agent...”
and specifically applicable to your scenario, in section
"...where any goods are imported into the Republic by an
agent who is acting on behalf of another person who is the principal for the
purposes of that importation, that importation shall be deemed to be made by
that principal and not by such agent...”
We accept that output tax is levied at the standard rate
because the customers are residents of the RSA.
We agree that any disbursements recovered from their principles do not
qualify for the rate of zero per cent.
We agree with your view that these recoveries should be not
be reflected as zero rated supplies as they are non-supplies.
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.