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Will exported goods be zero rated when a foreign customer arranges for the transportation?

21 April 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: If a company exports good across the border and the customer sends their own courier to collect the goods and take them across the border, can this sale be "zero rated” for VAT or must the company use their own courier to have it zero rated?

Or must VAT be charged and the VAT reclaimed at the border?

A: We submit that what we have here is what was previously referred to as an indirect export or a paragraph (d) of the definition of export supply.  In terms of the definition of export in section 1(1) of the Value-Added tax Act "exported”, in relation to any movable goods supplied by any vendor under a sale or an instalment credit agreement, means (d) removed from the Republic by the recipient for conveyance to an export country. 

The rate of zero per cent will then apply, assuming the required documentary proof will be obtained, if the supplier has supplied the movable goods in terms of a sale or instalment credit agreement and by the recipient the goods have been exported by the recipient and the supplier has elected to supply the goods at the zero rate as contemplated in Part 2 of an export incentive scheme referred to in paragraph (d) of the definition of "exported” in section 1(1). 

Regulations were issued on 2 May 2014 (Gazette 37580, notice 316) prescribing the application of paragraph (d) of the definition of "exported" in section 1(1) read with section 11(1)(a) of the Value-Added Tax Act, with the regulations in the attached Schedule.. 

Principally the recipient must not be a resident of the RSA and Part Two (Section B of the regulations) applies where a vendor supplies movable goods to a qualifying purchaser and those goods are to be exported from the Republic by the qualifying purchaser's agent and the vendor elects to levy tax at the zero rate on the supply of the goods.  Paragraph 12(4) and 12(5) of section B set out the obligations of the agent or cartage contractor before the rate of zero per cent can apply.  Note that the qualifying purchaser must also comply with the requirements in paragraph 12(6). 

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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