BGR – Rust Gold

Interpretation Note 30 (“IN 30”) by the South African Revenue Service (“SARS”) explains the requirements that need to be adhered to and prescribes the documentary proof, acceptable to the Commissioner, that must be obtained and retained by a vendor in order to levy value-added tax (“VAT”) at zero rate on a supply of movable goods, where those goods are consigned or delivered to a recipient at an address in an export country. Should these requirements not be adhered to, exports could potentially be accounted for at the standard VAT rate of 15%, which will result in adverse tax (and commercial) consequences for vendors.

Binding General Ruling 52 (“the BGR”) extends the periods to export movables, apply for a VAT refund and obtain relevant documentary proof of export as per the Export Regulations and IN 30.

The default position

The Export Regulations and IN 30 prescribe specific periods for exportation of goods, applications for VAT refunds and obtaining the relevant documentary proof of export for the process. The Export Regulations and IN 30 allow for an extension of the periods where they cannot be met due to circumstances beyond the control of the vendor. These circumstances include, amongst others, natural or human-made disasters and serious illness of a vendor, a qualifying purchaser, or a person duly authorised to represent these parties.

In light of the global Covid-19 pandemic, many vendors will have difficulty in meeting the timeframes as required. This is a situation that is considered to be beyond the control of the vendor, or qualifying purchaser or duly authorised representative as per the Export Regulations and IN 30.

The BGR

The BGR only applies to supplies of movable goods in respect of which the original timeframes in the Export Regulations and IN 30 have not been exceeded and prescribe for extended periods as follows:

Indirect exports

The time periods prescribed under regulation 3(a) of the Export Regulations have been extended by an additional three months.

The time period to apply for a refund as prescribed in regulation 3 of the Export Regulations is extended by 6 months from the date of export.

Direct exports

The time period to export movable goods is extended by an additional 3 months.

Period for which ruling is valid

The ruling applies from the date of issue on 26 March 2020, and is valid until it is withdrawn, amended or the relevant legislation is amended.

If the BGR does not provide for a specific scenario in respect of exporting movable goods, vendors or qualifying purchasers may apply for a VAT ruling.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).

In terms of the Tax Administration Act, the South African Revenue Service (“SARS”) can issue Binding General Rulings (“BGR”) on matters of general interest or importance and clarifies the Commissioner’s application or interpretation of the tax law relating to these matters.BGR 50 provides clarity on the so-called “no-value” provision in respect of the rendering of transport services by an employer to its employees.

Background

Employers may often provide employees with transport services from their homes to the place of employment. Although it typically applies where places of work are remote, such as in the farming or mining sectors, the provision of such services has also become prevalent in urban areas where traffic congestion takes up significant employee hours. In terms of the Seventh Schedule to the Income Tax Act, which deals with fringe benefits, these transport services are taxable as a fringe benefit in the hands of employees. The benefit may, however, attract no value where certain conditions are met, which effectively results in no tax consequences for the employee. Confusion has often arisen on the application of the “no-value” provision, especially where the transport is outsourced to a third party.

Paragraph 2(e) of the Seventh Schedule provides that a taxable benefit is deemed to have been granted by an employer to an employee where the transport service, at the expense of the employer, has been rendered to the employee for private or domestic purposes.

Paragraph 10(2)(b), in turn, provides that such a taxable benefit will attract no value if transport services are rendered by the employer to its employees in general for their conveyance between work and home. The focus of this section is that the “no-value” provision applies where the employer renders the transport service and does not contract it to another party. This is the essence of the distinction for the BGR.

Ruling

Where the transport is not provided directly by the employer (and is outsourced to a specific transport service provider), the employer must make the conditions of the provision of the transport services clear. Transport services:

Should be exclusively offered to employees based on predetermined routes;
Cannot be requested on an ad-hoc basis by employees; and
The contract for the service is between the employer and the transport provider, and no employee is a party to the contract.

The provision and access to general public transport will not be regarded as a transport service provided by the employer and the “no-value” provision will not apply in these circumstances.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Extending Export Regulations

Tax law for employer transport services