Page 306 - Juta's Indirect Tax

PN 11/1992 VaLue-added tax act: PractIce nOtes PN 11/1992
the particular movement of speci c goods from one point to another. They can never be rendered independently of the movement of goods to which they relate. These services are dealt with in VAT Practice Note 10. The transport related services, which form the subject of this practice note, can be distinguished from transport services and ancillary transport services in that they may be rendered independently of any particular movement of speci c goods. They are usually rendered in connection with the means of conveyance of goods or passengers.
Various parties may be involved in supplying transport related services. It is important for any person involved in the supply of, or in the arranging of the supply of, transport related services to determine what service he is rendering and in what capacity he is acting. The determination of what service is being rendered will determine at what rate VAT must be charged on that service, i.e. whether the supply of the service attracts VAT at the standard rate of 10 per cent or at zero per cent. The determination of the capacity in which he is acting will determine in which manner any VAT charged by other parties involved in providing transport related services should be treated.
In order to determine what service is being rendered it is essential to examine the terms of the contract between the supplier of the service and the recipient of the service.
In order to determine the capacity in which a person is acting the contractual relationship between that person and his client must be examined. The person supplying transport related services will often need to involve other parties in order to render his services. He may contract with these parties as a principal or as an agent on behalf of his client.
The name or style under which a person’s trade or occupation is carried on is irrelevant in determining the capacity in which he acts. The contractual relationship between his client and himself is the determining factor. Where the person enters into contracts with other parties in his own name or upon his own liability and responsibility he is acting as a principal. Any goods or services supplied to him in order to enable him to render his service will give rise to an input tax deduction in his hands.
Where in addition to the charge for his own service, the costs of these goods or services are passed onto his client, whether a pro t margin is added to these costs or not, the rate of VAT applicable to his total service is determined by the nature of his own service. The itemising of the various goods or services acquired in order to render his service does not affect this principle.
Where the person acts as an agent on behalf of his client any goods or services acquired on behalf of his client will not give rise to an input tax deduction in his own hands and the costs of the goods or services, including any VAT charged by the supplier of those goods or services will be passed on to his client. Depending on the client’s circumstances the VAT charged on the goods or services may give rise to an input tax deduction in the client’s hands. Where the person enters into contracts for the supply of goods or services to his client on his client’s behalf and upon his client’s liability and responsibility he is acting as an agent. There is one exception to the rule that an agent cannot obtain an input tax deduction in his own hands in respect of goods or services acquired on behalf of his principal. This exception is dealt with in paragraph 6 of this practice note.
2 SHIP AND AIRCRAFT HANDLING SERVICES
The supply in the Republic or a speci ed country of any ship handling or aircraft handling services are subject to VAT at the standard rate of 10 per cent. An exception to this general rule is contained in paragraph 5 Examples of handling services are:
• Ship handling
• Port and harbour dues.
• dock and berth charges.
• dry dock charges.
• mooring charges.
• demurrage (charge for failing to load or discharge a ship within speci ed time).
• security and re services.
• Aircraft handling
• Aircraft landing, parking or housing fees.
• apron services.
• security and re services.
3 PILOTAGE, SALVAGE AND TOWAGE SERVICES
The supply in the Republic or a speci ed country of any pilotage, salvage and towage services are subject to VAT at the standard rate of 10 per cent. An exception to this general rule is contained in paragraph 5.
4 SERVICES PROVIDED IN CONNECTION WITH THE OPERATION OR MANAGEMENT OF SHIPS AND AIRCRAFT
Services supplied in connection with the operation or management of ships and aircraft are subject to VAT at the standard rate of 10 per cent. An exception to this general rule is contained in paragraph 5.
Examples of these services are:
• Supervision of maintenance, survey and repair of ships and aircraft.
• engagement and provision of crews.
• arrangements for loading and discharging.
• arrangements for bunker fuel.
• arrangements for victualling and storing.
5 HANDLING SERVICES; PILOTAGE, SALVAGE AND TOWAGE SERVICES; SERVICES SUPPLIED IN CONNECTION WITH OPERATION OR MANAGEMENT OF SHIPS AND AIRCRAFT; SUPPLIED TO FOREIGN-GOING SHIPS AND FOREIGN-GOING AIRCRAFT
In terms of section 11 (2) (h), the supply of services which comprise—
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