Page 408 - Juta's Indirect Tax

IN 42 VaLue-added tax act: InterPretatIOn nOtes IN 42
In this case, both the point of origin and the point of destination of the transport of the passengers must be located
outside the Republic in order for the supply to qualify for zero-rating.
(ii) The transportation of passengers from a place in the Republic to a place in an export country:
The passengers are transported from the Republic to an export country. The point of origin must be located in the Republic and the point of destination in the export country, and the supplier of the transport service must be responsible for the entire movement of the passengers between such points.
(iii) The transportation of passengers from a place in an export country to a place in the Republic:
The passengers are transported from an export country to the Republic. The point of origin must be located in an export country and the point of destination in the Republic, and the supplier of the transport service must be responsible for the entire movement of the passengers between such points.
(iv) The transportation of passengers from a place in the Republic to another place in the Republic to the extent that that transport is by aircraft and constitutes ‘international carriage’:
Where passengers are transported by air from one place in the Republic to another place in the Republic, and such transport constitutes ‘international carriage’ as de ned in Article 1 of the Convention set out in the Schedule to the Carriage by Air Act of 1946, such transport is zero-rated. Therefore, VAT at the zero rate is also applicable to domestic transportation by air to the extent that the domestic air journey is one leg of an overall journey that involves international air travel.
Example: A passenger arranges for a ight from Cape Town to Germany. As part of the international ight, the airline operator provides the passenger with a ight from Cape Town to Johannesburg and from Johannesburg to Germany. This ight from Cape Town to Johannesburg falls within the de nition of ‘international carriage’.
The supply for the ight from Cape Town to Johannesburg will be zero-rated for VAT purposes as it constitutes ‘international carriage’. In addition, the supply of the ight from Johannesburg to Germany will also be zero-rated.
In order to substantiate the zero-rating of the supply in the aforementioned circumstances, the documentation as set out in Interpretation Note 31 must be retained.
4.3.1.2 Domestic Air Travel
Unlike international air travel, all domestic air travel will be subject to VAT at the standard rate, provided that it is not part of an international air ticket (i.e. international carriage).
Example: An air ticket between Cape Town and Durban or between Port Elizabeth and Johannesburg will be subject to VAT at the standard rate.
4.3.1.3 Sea Travel
The services of transporting passengers (or goods in some instances) provided by a shipper (the supplier), being a vendor for VAT purposes, may be zero-rated in the following circumstances:
(i) The transportation of passengers from a place in an export country to a place in another export country:
In this case both the point of origin and the point of destination relating to the transportation of the passengers must be located outside the Republic in order for the supply to qualify for zero-rating.
(ii) The transportation of passengers from a place in the Republic to a place in an export country:
The passengers are transported from the Republic to an export country. The point of origin must be located in the Republic and the point of destination in the export country, and the supplier of the transport service must be responsible for the entire movement of the passengers between such points.
(iii) The transportation of passengers from a place in an export country to a place in the Republic:
The passengers are transported from an export country to the Republic. The point of origin must be located in an export country and the point of destination in the Republic, and the supplier of the transport service must be responsible for the entire movement of the passengers between such points.
In order to substantiate the zero-rating of the supply in the aforementioned circumstances, the documentation as set out in Interpretation Note 31 must be retained.
4.3.1.4 International Road or Rail Travel
As in the case of international air travel (see paragraph 4.3.1.1), where a vendor provides passenger transport by road or rail, such supply may be zero-rated in the following circumstances:
(i) The transport is between two places both in export countries:
In this case both the point of origin and the point of destination of the transport of the passengers must be located outside the Republic in order for the supply to qualify for zero-rating.
(ii) Between a place within the Republic and a place in an export country:
The supply of passenger transport by road or rail will be zero-rated where the transport is from a place in the Republic to a place in an export country where the point of origin is located in the Republic and the point of destination in the export country (or vice versa), and the supplier of the transport service is responsible for the entire movement of the passengers or goods between such points.
4.3.1.5 Domestic Road or Rail Travel
The transport by road or rail (excluding a funicular railway which is in essence one operated by cable with ascending and descending cars counterbalanced) within the Republic, of any fare-paying passengers and their personal effects is exempt from VAT. In terms of section 12 (g) of the VAT Act, this transport service is an exempt supply only if the supplier operates a transport business which involves operating a vehicle to transport passengers and their belongings for a fare. In order to determine the scope of this exemption, refer to VAT Practice Note 7 issued by SARS on 10 February 1992. 4.3.2 Accommodation Services
The supply of ‘commercial accommodation’, as de ned in section 1 of the VAT Act, by a vendor to any person (including a non-resident) will be subject to VAT at the standard rate.
400 Juta’s IndIrect tax 2016