Page 320 - Juta's Indirect Tax

IN 30 (3) VaLue-added tax act: InterPretatIOn nOtes IN 30 (3)
8.4 Supplies that are subject to a process of improvement, manufacture, assembly or alteration
The supply of movable goods by a vendor to a recipient in an export country –
(a) for which the time of supply is regulated by sections 9(1) or 9(3)(b)(i) or (ii);
(b) which are subject to a process of repair, improvement, manufacture, assembly or alteration by a third party in the
Republic;
(c) are delivered to that third party’s premises in the Republic for such further processing, repair, improvement,
manufacture, assembly or alteration; and
(d) are subsequently delivered back to the vendor by the third party who then consigns or delivers the movable goods
at an address in an 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 third party must –
(a) provide the vendor with a statement containing the details as set out in (c)(i) and (ii) below within 21 days from the
date that the movable goods were exported or required to be exported.
The vendor must –
(a) ensure that the movable goods are delivered to the third party’s premises for further processing, repair, improvement,
manufacture, assembly or alteration;
(b) ensure that the movable goods are delivered back to the vendor after completion of such further processing, repair,
improvement, manufacture, assembly or alteration; and
(c) obtain and retain the documentation as set out in 6. In addition, the vendor must obtain and retain a statement from
the third party containing –
(i) the invoice number and the date of issue of the tax invoice issued by the third party to the recipient for the
services rendered or the contract for the services rendered entered into by the third party and the recipient; and (ii) con rmation that the movable goods supplied by the vendor and exported to the recipient have been used in the
further processing, repair, improvement, manufacture, assembly or alteration.
8.5 Movable goods supplied to a vendor and delivered to that vendor’s customer at and address in an export country
The supply of movable goods by a vendor to a recipient who is also a registered vendor which are delivered directly to that recipient’s customer at an address in an 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). Two separate supplies of the movable goods take place which can be illustrated by way of an example:
Example 2 – Movable goods exported and delivered to the recipient’s customer in an export country
Facts:
ABC, a company incorporated in Switzerland, orders movable goods from XYZ (Pty) Ltd, a South African registered company and a registered vendor. XYZ (Pty) Ltd orders the movable goods from another company incorporated in South Africa and also registered as a vendor, CDE (Pty) Ltd with the instruction to deliver the goods directly to its customer, ABC at its premises in Switzerland.
Question 1:
Can CDE (Pty) Ltd zero rate the supply of movable goods to XYZ (Pty) Ltd?
Result 1:
As the movable goods are consigned or delivered by CDE (Pty) Ltd at an address in an export country, CDE (Pty) Ltd may levy VAT at the zero rate on the supply of movable goods to XYZ (Pty) Ltd. CDE (Pty) Ltd must furthermore ensure that the required documentary proof stipulated in 6 is obtained and retained as set out in 7. The documentary proof must re ect the delivery address in the export country.
Question 2:
Can XYZ (Pty) Ltd zero rate the supply of movable goods to ABC?
Result 2:
As the movable goods are consigned or delivered at an address in an export country, XYZ (Pty) Ltd may zero rate the supply of movable goods that are to be exported or that are situated outside the Republic at the time of the supply to ABC.*
The following documentary proof is required:
• A copy of the zero-rated tax invoice for the supply of the movable goods by XYZ (Pty) Ltd to ABC.
• The order or the contract between XYZ (Pty) Ltd and ABC.
• Proof that the movable goods are to be exported or are situated outside the Republic (copies of the documents
required under Question 1 above will constitute suf cient proof).
• Proof that the movable goods have been received by ABC.
• Proof of payment for the supply of the movable goods to ABC.
* Paragraph (a) of the de nition of ‘exported’ in section 1(1) does not require the movable goods to be exported from the Republic, but rather stipulates that the vendor must consign or deliver the movable goods to the recipient at an address in an export country.
312 Juta’s IndIrect tax 2016