Page 319 - Juta's Indirect Tax

IN 30 (3) VALUE-ADDED TAX ACT: INTERPRETATION NOTES IN 30 (3)
Section 10(12) sets out a special valuation rule which provides that the vendor must account for output tax on the supply of the second-hand movable goods at the standard rate on a consideration (inclusive of VAT) equal to the original purchase price of those goods by the vendor. Thus, output tax equal to the amount of notional input tax previously deducted, is declared in the tax period during which the goods are supplied.
The vendor must furthermore ensure that the tax invoice issued for a supply of second-hand movable goods complies with the provisions of section 20(4).
Example 1 – Second-hand movable goods
Facts:
On 28 July 2013, ABC Motors sells a second-hand motor vehicle for R150 000 (including VAT) to B (a resident of Botswana) and issues a tax invoice for the supply on the same date. ABC Motors undertakes to deliver the motor vehicle to B at B’s residence in Botswana. ABC Motors enters into a contract to engage RSA Transporters to transport the motor vehicle by road, via the Ramatlabama designated commercial border post, to B at B’s residence in Botswana. The motor vehicle was initially acquired by ABC Motors from a private individual for R90 000. On acquiring this motor vehicle, ABC Motors deducted notional input tax of R11 052,63 (R90 000 × 14 /114). Can ABC Motors charge VAT at the zero rate on the supply of the motor vehicle to Mr B?
Result:
As ABC Motors acquired the motor vehicle from a private individual under a non-taxable supply and deducted notional input tax on the acquisition of the second-hand motor vehicle, the supply of the motor vehicle to B cannot be subject to VAT at the zero rate even though it is a ‘direct export’. The special valuation rule applicable to second- hand goods in such cases requires that VAT must be declared at the standard rate on the consideration of R90 000, being ABC Motors’ cost of acquisition of the motor vehicle from the private individual. ABC Motors must, therefore, charge VAT of R11 052,63 (R90 000 × 14 / 114) on the supply even though the motor vehicle was sold for R150 000.
8.2 Movable goods exported from the Republic before an invoice is issued or payment is received for the supply
In the event that movable goods are exported by the vendor prior to an invoice being issued or payment being received for the supply, the time of supply is only triggered when an invoice is issued or any payment for the supply is received. In this regard, the 90-day period referred to in 7(a) will be calculated from the time of supply. The vendor must comply with the documentary requirements set out in 6. The documentary proof, for example, the export documentation, will therefore pre-date the tax invoice and/or proof of payment.
8.3 Movable goods situated outside the Republic
8.3.1 Movable goods temporarily exported from the Republic which are subsequently supplied whilst situated outside the Republic (i.e. changes from a temporary export to a permanent export)
In the event that movable goods are temporarily exported from the Republic by a vendor, for example, for exhibition, demonstration or display purposes in an export country and those goods are sold by the vendor whilst still located in that export country, that is, before being re-imported into the Republic, the vendor may apply the zero rate to the supply of such movable goods.
The vendor must comply with the documentary requirements set out in 6 as well as complete a substitute bill of entry as contemplated in paragraph 3.1.6 of the Completion Manual for Bills of Entry for customs purposes. In this regard, the 90-day period referred to in 7(a) will be calculated from the time of supply. The recipient’s order or the contract between the recipient and the vendor is not required in this instance. The documentary proof, for example the export documentation, will therefore pre-date the tax invoice and proof of payment.
8.3.2 Sale of movable goods situated outside the Republic
In instances where a vendor sells movable goods situated outside the Republic, for example, a sale on the high seas, and the vendor consigns or delivers those movable goods to the recipient at an address in an export country, the supply of the movable goods is subject to VAT at the zero rate under section 11(1)(a)(i), read with paragraph (a) of the de nition of ‘exported’ in section 1(1). In this instance, ‘at an address in an export country’ includes consignment or delivery of the movable goods to the recipient on board a ship while on the high seas. The vendor must obtain and retain the required documentary proof as stipulated in 6.
In addition to the documentation required in 6, proof that the movable goods were situated outside the Republic at the time of supply must also be obtained and retained by the vendor, for example the applicable customs documentation proving the export. In the event that such movable goods are subsequently imported into the Republic by the recipient, VAT on importation will be levied under section 7(1)(b).
8.3.3 Sale of consignment stock in an export country
In the event that movable goods are situated outside the Republic (that is, in an export country) at for example a distributor’s or third party’s premises as consignment stock, that is, the South African vendor is the owner of such goods, the supply of such movable goods in that export country is subject to VAT at the zero rate under section 11(1)(a)(i) read with paragraph (a) of the de nition of ‘exported’ in section 1(1).
The vendor must comply with the documentary requirements set out in 6. In this regard, the 90-day period referred to in 7(a) will be calculated from the time of supply. The recipient’s order or a contract between the recipient and the vendor is, however, not required in order to zero rate the supply. The documentary proof, for example the export documentation, will pre-date the tax invoice and proof of payment. In the event that the consignment stock is not sold but returned to the Republic by the vendor, the provisions of rebate item 409.00 and Schedule 1 of the VAT Act must be complied with.
Juta’s IndIrect tax 2016 311