Page 308 - Juta's Indirect Tax

PN 11/1992 VaLue-added tax act: PractIce nOtes PN 11/1992
7 ARRANGING OF SUPPLY OF CERTAIN GOODS OR SERVICES PERTAINING TO FOREIGN-GOING SHIPS AND FOREIGN-GOING AIRCRAFT
Various parties act as representatives for the masters and owners of foreign-going ships and foreign-going aircraft while these craft are situated in the Republic. These parties arrange and may even contract for a wide variety of goods and services to be supplied to the masters and owners of foreign-going ships and foreign-going aircraft.
A fee is usually charged for the service of arranging the supplies of various goods and services. In terms of section 11 (2) (i) where the service of arranging is rendered to a person who—
• is not a resident of the Republic;
• is not resident nor carrying on business in a speci ed country; and
• is not a vendor,
the fee for the service of arranging the supply of the goods or services may be zero-rated provided the fee is charged in relation to the arranging of the supply of certain speci ed goods or services.
The supplies of speci ed goods and services are—
• goods delivered to the owner or charterer of any foreign-going ship or foreign-going aircraft provided the supply of the
goods would be subject to VAT at the rate of zero per cent. (Refer paragraph 9). The goods contemplated are victuals
and ships stores, fuel and any other goods which are for consumption or use in the ship or aircraft, but not cargo;
• the repair, maintenance, cleaning or reconditioning of a foreign-going ship or foreign-going aircraft;
• the services comprising 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;
• services provided in connection with the operation or management of any foreign-going ship or foreign-going aircraft.
Where a composite management fee is charged to a ship-owner or aircraft owner in respect of the arranging of some or all of the speci ed goods or services listed above, the dominant or main reason for the composite fee will determine its VAT treatment. The fact that various ancillary services falling outside the ambit of the speci ed goods or services are also arranged by the representative of the shipowner or aircraft owner does not detract from the essential nature of the services supplied in return for the composite fee charged.
Where the fee for arranging the supply of goods or services is charged to a resident of the Republic, or a person resident or carrying on business in a speci ed country or a vendor, the fee will attract VAT at the standard rate of 10 per cent.
8 REPAIR, MAINTENANCE, CLEANING AND RECONDITIONING OF FOREIGN-GOING SHIPS AND FOREIGN-GOING AIRCRAFT
In terms of section 11 (2) (g) (iv), services supplied directly in respect of the repair, maintenance, cleaning or reconditioning of a foreign-going ship or foreign-going aircraft are subject to VAT at the rate of zero per cent.
In order to qualify for zero-rating—
• the service must be supplied directly in connection with repair, maintenance, cleaning or reconditioning;
• the craft in respect of which the services are rendered must qualify as a foreign-going ship or foreign-going aircraft.
It is important to note that in the case of services which meet these conditions, the service will be zero-rated irrespective of to whom the service is rendered. The zero-rating will therefore apply whether the services are rendered directly to the master or owner of a foreign-going ship or a foreign-going aircraft or whether they are supplied via an agent or other intermediary.
In terms of section 11 (1) (b), the supply of any goods in the course of repairing, renovating, modifying or treating a foreign-going ship or foreign-going aircraft is zero-rated provided the goods supplied—
• are wrought into, af xed to, attached to or otherwise form part of the foreign-going ship or foreign-going aircraft; or • being consumable goods, become unusable or worthless as a direct result of being used in that repair, renovation,
modi cation or treatment process.
The zero-rating therefore applies to goods such as parts, components or other materials provided by the supplier of the service in order to effect the repair or maintenance service. The zero-rating does not extend to the supply of the parts, components or materials to the supplier of the service. The repair of parts or components, if carried out on board a foreign-going ship or foreign-going aircraft is regarded as the repair of the ship or aircraft. The repair of a part or component which is removed from the ship or aircraft for repair may also be regarded as the repair of the ship or aircraft, provided that it is to be replaced in the same ship or aircraft after repair.
9 GOODS FOR USE OR CONSUMPTION IN A FOREIGN-GOING SHIP OR FOREIGN-GOING AIRCRAFT
In terms of section 11 (1) (a) read with paragraphs (b) and (c) of the de nition of ‘exported’ the supply of any goods under a sale is zero-rated if the goods are delivered by the vendor (supplier) to the owner or charterer of any foreign going ship or foreign-going aircraft when such ship or aircraft is going to a destination in an export country and the goods are for use or consumption in such ship or aircraft.
In order to qualify for the zero-rating the supply of the goods must ful l the following conditions:
• The goods must be movable goods;
• the goods must be supplied by way of a sale (or an instalment credit agreement);
• the goods must be delivered to the owner or charterer of a foreign-going ship or a foreign-going aircraft;
• the foreign-going ship or foreign-going aircraft must be going to a destination in an export country; and
• the goods must be for use or consumption in the foreign-going ship or foreign-going air craft.
An exception applies in the case of goods delivered to the owner or charterer of a ship or vessel which is—
• registered in an export country;
• utilised for the purposes of a commercial, shing or other concern conducted outside the Republic and any speci ed
country;
• utilised by a person who is—
300 Juta’s IndIrect tax 2016