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Must a vendor pay customs VAT on imported goods and again when the goods are sold?

Tuesday, 19 May 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: SARS has disallowed all the customs VAT claimed for the January 2015 VAT period, even though the amounts were paid by the taxpayer in the month of January.  We were unaware that our clearing agent has a deferred tax agreement with SARS, so the amounts were only paid over to SARS in February.  Basically what SARS seems to want here is that the taxpayer should pay the customs VAT on import of the goods and then pay the VAT on the sales to SARS (effectively paying the VAT twice), then claim it back the following month. The imported goods are high value items and the effect on the taxpayer’s cashflow is extreme.  Is there any remedy for this?

A: The Value-Added Tax was changed (with effect 1 April 2014 and again in April 2015).  Your request relates to the law as it applied before the most recent change. 

Section 16(2) basically provides that "no deduction of input tax in respect of a supply of goods or services, the importation of any goods into the Republic or any other deduction shall be made in terms of this Act, unless a bill of entry or other document prescribed in terms of the Customs and Excise Act together with the receipt for the payment of the tax in relation to the said importation have been delivered in accordance with that Act and are held by the vendor making that deduction, or by his agent as contemplated in section 54(3)(b), at the time that any return in respect of that importation is furnished…” and section 16(3)(a)(iii) then provides that charged in terms of section 7 (1)(b) in respect of goods imported into the Republic by the vendor and paid during that tax period. 

The last part (section 16(3)(a)(iii)) was the one that became effective 1 April 2014 and replaced the "invoiced or paid, whichever is the earlier, during that tax period” principle that applied before then. 

The requirement therefore, at the time concerned, was that the vendor could only make the deduction if the agent also paid in the same period.  Most importers were aware of this change last year and the agents changed the way in which they were doing business by only using the deferral arrangement when payment could still be made in the same month. 

The vendor must therefore deduct the input tax in the period that the payment was made to SARS and not to the agent. 

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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