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Is VAT payable on delivery fees?

22 August 2016   (0 Comments)
Posted by: Author: Gerhard Badenhorst
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Author: Gerhard Badenhorst (ENSafrica)

It is common practice for suppliers to deliver the goods that they supply at the premises of their customers on the customer’s request. The suppliers then either deliver the goods themselves or they contract the services of third parties to deliver the goods on their behalf, for which they charge a delivery fee. The question that arises is whether the supplier should charge value-added tax ("VAT”) on the delivery fee, particularly where the supplier acquires the services of a third party to deliver the goods, and merely recovers the delivery fee from the customer charged by the third party.

The tax court recently considered the VAT status of delivery fees charged by a taxpayer that carries on a fast foods delivery business. The taxpayer contracts with fast food outlets to advertise their menus in a booklet, which it then distributes to households in the area in which the taxpayer operates. Customers order fast foods from the taxpayer by placing a telephonic order. The taxpayer in turn places the order with the relevant fast food outlet, dispatches a driver to the outlet to collect and pay for the food, and to deliver the food to the customer.

The taxpayer charges a fixed percentage of the price of the food purchased by customers as a commission to the fast food outlet, on which it levies and accounts for VAT. The taxpayer charges the price of the food to the customer without any mark-up, and also includes a delivery charge on the tax invoice issued to the customer, which it describes as "driver’s petrol money”. The driver, who is required to wear the branded clothing of the taxpayer and to carry hotboxes branded with the taxpayer’s logo, is entitled to retain the "driver’s petrol money” collected from the customer. The issue under dispute was whether the "driver’s petrol money” is subject to VAT in the hands of the taxpayer.

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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