Page 747 - SAIT Compendium 2016 Volume1

CASE DIGEST 2012–2013
SARS did not receive payment of the rst cheque. Therefore, the only way to prove enrichment was to show that SARS had a good and viable claim against ABSA.
SARS clearly had a reason to retain payment of the second cheque since it had a statutory obligation to collect VAT. The plaintiff also had a clear reason to make the second payment (it had to discharge its VAT obligation). The second payment was therefore not sine causa.
Accordingly, it was held that the plaintiff had not proved the requirements of condictio indebiti.
The claim was dismissed with costs including the costs of two counsel.
[Link: http://c.ymcdn.com/sites/www.thesait.org.za/resource/resmgr/2014_case_law/lapd-drj-hc-2013-04_-_kirste.pdf]
16. Value-Added Tax charged in airport duty-free areas
[Master Currency v CSARS(2013) 75 SATC 113 ((155/2012) [2013] ZASCA 17)]
Introduction
The Supreme Court of Appeal heard the matter between Master Currency (Pty) Ltd and the Commissioner for the South African Revenue Services (SARS) on 1 March 2013.
Malan JA delivered the judgment on 20 March 2013.
The appellant, Master Currency (Pty) Ltd, appealed against the dismissal by the Johannesburg Tax Court (Victor J) of its appeal against the revised value-added tax assessments in respect of the October 2003 to January 2005 tax period.
Facts
Master Currency (Pty) Ltd (‘appellant’) was awarded the tender to operate two bureaux de change in the duty-free area of the then Johannesburg International Airport in 1999. There were numerous ‘duty-free shops’ in this area where departing passengers were able to purchase goods free of taxes and duties. There was also a VAT refund administrator stationed in the area where departing non-residents could collect cheques for the VAT they claimed back on purchases they had made in South Africa.
The services rendered by the appellant at the two bureaux were mostly cash transactions concluded with departing non-resident passengers in possession of a boarding pass and a passport. These passengers would present South African rand to the appellant either in cash, travellers’ cheques or cheques received from the VAT refund administrator. The appellant would then convert the rand into foreign currency, calculate the exchange rate margin and the commission and transaction fee and present the departing passengers with an invoice.
The two bureaux dealt with non-residents only in accordance with an instruction by the Reserve Bank that residents were not allowed to purchase foreign currency as part of their travel allowance once they had passed through passport control and emigration.
The services rendered by the appellant are ‘ nancial services’ as de ned in s 2(1) of the Value-Added Tax Act (the ‘VAT Act’) consisting of the exchange of currency.
The appellant had previously operated a point of sale computer system that did not have the functionality to turn off the calculation of VAT at the standard rate. In 2003, a new system was implemented and the charging of VAT at the standard rate was turned off. The basis for that assumption was the perception that no VAT was chargeable in a duty-free area, a perception aided by complaints of non-resident customers (the previous concessionaire of the two bureaux was Absa Bank Ltd and the appellant had taken over a number of its employees, including its manager, who informed it that goods sold and services supplied in the departure area were deemed to be sold or supplied in international territory).
The result of this was that between 1999, when the appellant commenced operations at the two bureaux de change, and 2003, VAT was charged on its fees and commissions at the standard rate, but this was not done after October 2003, when the appellant’s own point of sale system was introduced.
During KPMG’s 2004 audit, it was noticed that VAT was not being charged and the matter was referred to SARS for clari cation. This resulted in an assessment where VAT was charged.
The appellant appealed against the assessment to the Johannesburg Tax Court, where the appeal was dismissed. The present case is an appeal against the decision of the Johannesburg Tax Court.
Matters to consider
1. Does the rendering of services in a duty-free area qualify for any exemptions, exceptions, deductions and adjustments in terms of the Value-Added Tax Act?
2. Do the supplies made by the appellant qualify as zero-rated supplies in terms of s 11(2)(l) or 11(2)(g) of the Value-
Added Tax Act?
Rendering of services in a duty-free area
The Act as it read during the period of assessment contained no reference to a ‘duty-free area’ or a ‘tax-free area’ and did not use a similar expression. It was suggested that judicial notice may be taken of the fact that many airports have areas where commercial transactions can be concluded free from government duties.
It is held to be an excessively broad proposition, full of uncertainty as to the nature of the ‘duties’ and ‘transactions’. No reliable evidence was presented to support this proposition, particularly in so far as services are concerned.
Section 11(2)(l)
This section provides for a zero-rating for services supplied to non-residents except where supplied in connection with land in the Republic, movable property inside the Republic or where the person is situated in the Republic at the time the services are rendered.
The appellant contended that the rendering of its services were zero-rated in terms of s 11(2)(l)(ii)(aa) because they were supplied in connection with movable property that was being ‘exported’. This, it was submitted, is suf cient to
SAIT CompendIum oF TAx LegISLATIon VoLume 1 739
CASE DIGEST 2012-2013