Page 404 - Juta's Indirect Tax

IN 42
4. 4.1 4.2
4.3
5. 5.1 5.2 5.3 5.4 5.5 5.6 6. 6.1 6.2 6.3 6.4 6.5
VaLue-added tax act: InterPretatIOn nOtes
Application of the law
The rationale for the taxation
Agent or principal
4.2.1 Agent
4.2.2 Principal
VAT implications on the various supplies within a tour package 4.3.1 Transport services
4.3.1.1 International air travel
4.3.1.2 Domestic air travel
4.3.1.3 Sea travel
4.3.1.4 International road or rail travel
4.3.1.5 Domestic road or rail travel
4.3.2 Accommodation services
4.3.3 Meals and beverages
4.3.4 Other entertainment
4.3.5 Time of supply
Game viewing
Exempt supply of game viewing
Standard-rated supplies to exempt supplies Standard-rated supply of game viewing
Assessments
The supply of game viewing on or after 1 January 2007 General
Tax Invoices
Consideration for the supply exceeds R50 but not R3 000 Consideration for the supply exceeds R3 000
Agents
General
Examples of tax invoices
IN 42
1. Purpose
The purpose of this Note is to provide—
• clarity on the interpretation of section 11 (2) (l) of the VAT Act as it applies to the tourism industry;
• guidance in assisting travel agents, tour operators and travel brokers (herein after referred to as local
entrepreneurs), who are registered as vendors for value-Added tax (VAT) purposes, in applying and understanding the VAT legislation for the supply of tour packages to non-residents (foreign tourists) within the travel and tourism industry (excluding professional hunters and taxidermists); and
• clarity on the VAT implications on the supply of game viewing in the Republic of South Africa (the Republic).
2. Background
VAT is an indirect tax levied by vendors on the supply of goods or services. Its aim is to tax nal consumption that takes place in the Republic. Accordingly, supplies of goods or services consumed in the Republic, regardless of to whom the services are supplied, are taxable for VAT purposes.
Most local entrepreneurs assemble a marketable tour package of services which, inter alia, consists of transport, accommodation, meals, etc. Such tour package may be sold directly by the local entrepreneur to the foreign tourist or to a foreign entrepreneur who then on-sells the tour package to a foreign tourist. The local entrepreneur either applies a mark-up to the tour package or receives a commission.
The VAT implications of these supplies by local entrepreneurs were addressed in Ruling 52 dated 27 September 1991. However, it has been detected that there is inconsistent VAT treatment of these supplies by local entrepreneurs.
Please note that as a general rule, with effect from 1 January 2007, all rulings issued by the Commissioner prior to 31 December 2006 are withdrawn. However, this will not apply to written decisions issued by the Commissioner in respect of supplies that were made on or before 31 December 2006 (i.e. supplies that will not occur after 1 January 2007). These decisions will remain binding and the vendor can rely on such decisions.
With regard to written decisions issued by the Commissioner prior to 1 January 2007, in respect of supplies made or to be made on or after 1 January 2007, vendors who wish to retain the certainty that a binding ruling provides, must apply to the Commissioner for con rmation of the status of the decision.
This interpretation note, unless otherwise speci cally stated, does not constitute a binding general ruling as envisaged in section 76P of the Income Tax Act, 1962 as made applicable to the VAT Act by section 41A of the VAT Act.
3. The law
Section 1 of the VAT Act — De nitions
‘commercial accommodation’ means—
(a) lodging or board and lodging, together with domestic goods and services, in any house, at, apartment, room,
(b)
hotel, motel, inn, guest house, boarding house, residential establishment, holiday accommodation unit, chalet, tent, caravan, camping site, houseboat, or similar establishment, which is regularly or systematically supplied and where the total annual receipts from the supply thereof exceeds R60 000 per annum or is reasonably expected to exceed R60 000 per annum, but excluding a dwellingsupplied in terms of an agreement for the letting and hiring thereof; lodging or board and lodging in a home for the aged, children, physically or mentally handicapped persons; and
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Juta’s IndIrect tax 2016