Page 307 - Juta's Indirect Tax

PN 11/1992 VaLue-added tax act: PractIce nOtes PN 11/1992
(i) the handling, pilotage, salvage or towage of any foreign-going ship or foreign-going aircraft while situated in the Republic or a speci ed country; or
(ii) services provided in connection with the operation or management of any foreign-going ship or foreign-going aircraft,
are subject to VAT at the rate of zero per cent provided—
(a) the services are supplied to a person who is—
• not a resident of the Republic; and
• not resident nor carrying on business in a speci ed country; and • not a vendor;
(b) the services are supplied directly to the aforementioned person otherwise than through an agent or other person. In order to qualify for a zero-rating all of the following conditions must therefore be met:
5.1 The services must be of the nature described in paragraphs (i) or (ii) above.
5.2 The services must be supplied in connection with a foreign-going ship or a foreign-going aircraft. If the ship or
aircraft does not fall within the de nition of a foreign-going ship or foreign-going aircraft, the services will not
qualify for a zero-rating.
5.3 The services must be supplied to a person who is—
• not a resident of the Republic; and
• not resident nor carrying on business in a speci ed country; and • not a vendor.
If the recipient of the services does not meet one or more of the above criteria the supply of the services will not
qualify for a zero-rating.
5.4 The services must be supplied directly to the person otherwise than through an agent or other person. The supplier
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of the service must therefore contract with a person directly and not through an agent or other intercessionary in the Republic or a speci ed country. Where the supplier of these services debits the charges for the services to a ledger account held, for example, by a ship’s agent on behalf of his client, the supplier of the service will charge VAT at the standard rate of 10 per cent. This will apply whether the supplier issues an invoice in the name of the agent, some other intercessionary or the recipient of the services himself. The addressing of an invoice as follows:
Master & Owners, m/v (name of vessel) c/o Ship’s Agent (Pty) Ltd.
P.O. Box XXX
DURBAN
does not in itself alter the fact that the services have been rendered through an agent or other person.
HANDLING SERVICES; PILOTAGE, SALVAGE OR TOWAGE SERVICES; SERVICES PROVIDED IN CONNECTION WITH THE OPERATION OR MANAGEMENT OF FOREIGN-GOING SHIPS AND FOREIGN-GOING AIRCRAFT ACQUIRED ON BEHALF OF A FOREIGN PRINCIPAL
The general rule is that services supplied to an agent on behalf of his principal are supplied to the principal and not to the agent. The implication of this rule is that the principal and not the agent is entitled to claim an input tax deduction in respect of the supply of those services. An import exception to this rule exists in the case of handling, pilotage, salvage and towage services and services rendered in connection with the operation or management of ships and aircraft.
In terms of section 54 (6) (b) (ii), provided certain conditions are met, the agent acting on behalf of a principal, who is not a resident of the Republic and is not a vendor, may treat the supply of services made to him on behalf of his principal as if the supply had been made to him. The implication of this is that the agent may claim a deduction of input tax in respect of these supplies in his own hands and pass the costs of those goods or services on to his principal without any VAT.
The conditions which must be met are—
• the supply to the agent must be a taxable supply charged with VAT at 10 per cent; and
• the supply must comprise—
• the handling;
• pilotage, salvage or towage of any foreign-going ship or foreign-going aircraft while present in the Republic or
a speci ed country; or
• services provided in connection with the operation or management of any foreign going ship or foreign-going
aircraft;
• the agent and principal agree that the agent is to act as principal in relation to the supplies.
This arrangement is not available where an agent is acting for a principal who is a resident of the Republic or is registered as a vendor.
Services supplied to passengers or crew are not supplied in connection with the operation or management of a ship or aircraft. Examples of these services are—
• accommodation supplied to crews;
• medical and dental services supplied to crews;
• domestic transport supplied to crews.
The suppliers of these services will charge VAT at the standard rate of 10 per cent. As the services are not supplied in connection with the operation or management of a foreign-going ship or aircraft, but rather in respect of the crews, the agent may not claim a deduction of input tax in respect of these services. The cost of these services including VAT would therefore be passed on to the owner or master by the agent.
Juta’s IndIrect tax 2016 299