Page 500 - Juta's Indirect Tax

IN 84
VaLue-added tax act: InterPretatIOn nOtes IN 85
full and proper description of the goods (indicating, where applicable, that the goods are second-hand goods) or services supplied;
the quantity or volume of the goods or services supplied;
(e)
(i) the value of the supply, the amount of tax charged and the consideration for the supply; or
(ii) where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either the amount of the tax charged, or a statement that it includes a
charge in respect of the tax and the rate at which the tax was charged:
Provided that the requirement that the consideration or the value of the supply, as the case may be, shall be in the currency of the Republic shall not apply to a supply that is charged with tax under section 11.
Interpretation Note: No. 85
(f)
(g) either—
DATE: ACT: SECTIONS: SUBJECT:
Preamble
27 March 2015
VALUE-ADDED TAX ACT 89 OF 1991
SECTION 11 (2) (l)
THE MASTER CURRENCY CASE AND THE ZERO-RATING OF SUPPLIES MADE TO NON-RESIDENTS
In this Note unless the context indicates otherwise –
• ’Master Currency case’ means the judgment handed down by the SCA in Master Currency (Pty) Ltd v Commissioner
for South African Revenue Service (155/2012) [2013] ZASCA 17; [2013] 3 All SA 135 (SCA) dated 20 March 2013;
• ‘SCA’ means the Supreme Court of Appeal of South Africa;
• ‘section’ means a section of the VAT Act;
• ‘VAT’ means value-added tax;
• ‘VAT Act’ means the Value Added Tax Act 89 of 1991; and
• any other word bears the meaning ascribed to it in the VAT Act unless the context indicates otherwise.
1. Purpose
This Note discusses the impact of the judgment of the SCA in the Master Currency case on the interpretation and the application of section 11(2)(l), with particular reference to the principles highlighted by the SCA.
2. JudgmentoftheSCAintheMasterCurrencycase
2.1 Factual background
The Master Currency case concerned an appeal by Master Currency (Pty) Ltd (the appellant) against the dismissal of its appeal by the Johannesburg Tax Court about revised VAT assessments relating to the October 2003 to January 2005 tax periods.
The appellant operated two bureaux de change in the duty free area at O.R. Tambo International Airport (previously Johannesburg International Airport) in the Republic. Shops located in the duty free area are able to supply goods free of certain taxes and duties to departing passengers.
The appellant rendered services to non-resident passengers whereby they presented their South African rand to the appellant, who would convert the rand into foreign currency. In doing so, the appellant would calculate the exchange rate margin, and charge a commission and transaction fee. The relevant amounts would all be indicated on an invoice presented to the passenger when the services were rendered.
The dispute between the parties related to whether the appellant was, (on the currency exchange services rendered), obliged to levy and pay VAT at the standard rate of 14%, as per section 7(1)(a), or at the rate of 0% by virtue of section 11(2)(l) (as the appellant contended).
2.2 SCA decision
The SCA dismissed the appeal by the appellant against the decision of the Johannesburg Tax Court and found that the services supplied by the appellant in the duty free area at an international airport were subject to VAT at the standard rate and therefore correctly assessed by the Commissioner.
(The complete facts of the Master Currency case and the arguments of both the Commissioner and the appellant may be found in the reported judgment and are therefore not repeated in this Note.)
3. The law
The relevant sections of the VAT Act are reproduced in the Annexure.
Basic principles of section 11(2)(l)
Section 11(2)(l) provides for services supplied by a vendor to a person who is not a resident of the Republic (non- resident) to be zero-rated subject to certain conditions. This section has three subparagraphs directing the circumstances which speci cally prohibit the zero-rating otherwise intended by section 11(2)(l). The supply of services to a non- resident must be tested against all three of these exclusions in order to qualify to be zero-rated.
492 Juta’s IndIrect tax 2016