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Must repair services done in RSA for a foreign company be zero-rated?

Monday, 09 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: My client (a CC) is a VAT Vendor in South Africa and on a regular basis does work for his client (a company located in Congo). The truck will come across the border from the Congo and my client will in South Africa do refurbishment and repairs on the truck. The truck will then again go over the border back to Congo. My client will invoice the Congo client and they pay via EFT.

Must my client charge VAT to his client in the Congo?

A: Services supplied to a non-resident (not physically rendered outside South Africa) may only be zero-rated if the services are supplied directly to that non-resident, or any other person, and both the non-resident and the other person are not in South Africa at the time the services are rendered.

Where services are supplied to a non-resident who is not in the RSA at the time the services are rendered, the supply will qualify for the zero rate [section 11(2)(ℓ)]. Note that the standard rate will apply where the services are directly in connection with: 

  • Fixed property (land and improvements) situated in the Republic; or 
  • Movable property which is situated in the RSA at the time the services are rendered. However, the services supplied may still qualify for the zero rate if: 
    • the said movable property is subsequently exported; or 
    • the services supplied by the RSA vendor forms part of a supply by the non-resident to the recipient vendor and the services are acquired wholly for taxable purposes by that recipient.  

Where goods are temporarily admitted into the RSA for processing, repair, cleaning or reconditioning, the services supplied directly in connection with those goods are zero-rated. Any goods which are consumed or permanently affixed to those goods as a consequence of the services being rendered will also be zero-rated.

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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