Page 303 - Juta's Indirect Tax

PN 10/1991 VaLue-added tax act: PractIce nOtes PN 10/1991
the ship’s agent does not issue the tax invoice on behalf of the shipowner, the shipowner will be obliged to issue the tax invoice.
The freight forwarder, when charging the exporter for his service of arranging the transport of the goods from Johannesburg to Liverpool, will zero rate his services as he has arranged the entire transportation of the goods from Johannesburg to Liverpool by the same supplier, i.e. the shipowner. This aspect is dealt with in paragraph 5.
As the freight forwarder is merely arranging the transport of the goods and is not providing the transport service in this example, the freight forwarder is required to issue a tax invoice in respect of his services of arranging the transport only. The charge for the services of the shipowner may be included on the tax invoice of the freight forwarder, but it should be clearly identi ed as being in respect of a supply made by another party.
Example 3:
An exporter approaches a freight forwarder to arrange the movement of his goods from Johannesburg to Liverpool.
The freight forwarder approaches a ship’s agent and contracts with the ship’s agent on the exporter’s behalf to provide the carriage from Johannesburg to Liverpool. The ship’s agent contracts with the freight forwarder as agent of his principal, a shipowner, who is not registered as a vendor as the shipowner does not conduct an enterprise in the Republic. The ship’s agent, acting in his capacity as agent for the shipowner contracts with Spoornet to move the goods from Johannesburg to Durban.
Spoornet will charge VAT at 10 per cent on its services of transporting the goods from Johannesburg to Durban as it is providing a local transport service to the shipowner via the ship’s agent. The ship’s agent, in this example, is acting as an agent for the shipowner, and whether or not Spoornet’s tax invoice is made out to the shipowner or to the ship’s agent, the ship’s agent will be entitled to claim a deduction of input tax in respect of the local transport service and pass the cost of Spoornet’s services on to the shipowner free of VAT. This aspect is deal with in paragraph 6.
The shipowner will not charge VAT on his entire service of transporting the goods from Johannesburg to Liverpool as he is not registered as a vendor. The subcontracted local transport service has been supplied to the shipowner by Spoornet through an agent. The ship’s agent, who has acted as the shipowner’s agent in this example, may issue an invoice to the freight forwarder in respect of the services supplied by his principal, the shipowner. The invoice should not be called a tax invoice as the supplier, the shipowner, is not registered as a vendor.
The freight forwarder, when charging the exporter for his service of arranging the transport of the goods from Johannesburg to Liverpool, will zero rate his services as he has arranged the entire transportation of the goods from Johannesburg to Liverpool by the same supplier, i.e. the shipowner. This aspect is dealt with in paragraph 5.
As the freight forwarder is merely arranging the transport of the goods and is not providing the transport service in this example, the freight forwarder is required to issue a tax invoice in respect of his service of arranging the transport only. The charge for the services of the shipowner may be included on his tax invoice, but it should be clearly identi ed as being in respect of a supply made by another party.
3.2 Local transport services supplied directly in connection with the importation or exportation of goods to non-
residents, otherwise than through an agent or other person
In terms of section 11 (2) (e), local transport services are zero-rated provided they are supplied—
(a) directly in connection with—
(i) the exportation of goods from the Republic or a speci ed country; or (ii) the importation of goods into the Republic or a speci ed country; or
(iii) the movement of goods through the Republic or the speci ed country from one export country to another export country; and
(b) directly to a person who is—
(i) not a resident of the Republic; and
(ii) not resident nor carrying on business in a speci ed country; and (iii) not a vendor,
otherwise than through an agent or other person.
To qualify for the zero-rating the supply of the local transport service must meet at least one of the conditions
enumerated in (a) and all of the conditions in (b). It is important to note that the local transport service must be provided to the non-resident otherwise than through an agent or other person who is a vendor. This means that the supplier of the local transport service must contract with the non-resident directly and not through an agent of the non-resident or other intercessionary in the Republic or a speci ed country.
4 ANCILLARY TRANSPORT SERVICES
Ancillary transport services are services which are rendered directly in connection with the transportation of goods, but which are merely incidental to or subsidiary to the transportation service. Ancillary transport services include packing, loading, stevedoring, container handling, cargo inspection, preparation of documentation essential to the movement of the goods and storage.
Supplies of ancillary transport services are as a general rule subject to VAT at the standard rate. There are two exceptions to this general rule.
4.1 Ancillary transport services provided as part of an international transportation of goods [section 11 (2) (c)] Two conditions must be met before any ancillary transport service is zero-rated under section 11 (2) (c):
• The ancillary transport service must be provided as an integral part of the supply of an international transport service; and
• the ancillary transport service must be supplied by the same supplier as the international transport service.
In order to qualify for zero-rating the ancillary transport service must be provided as an integral part of an international transport service and must therefore be provided as part of the same contract.
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