VALUE ADDED TAX: ZERO-RATING OF FICTITIOUS EXPORTS
In terms of the Value-Added Tax Act South African vendors are entitled to levy VAT at the zero rate where they consign or deliver goods to any person in an export country. They are also, in terms of the Export Incentive Scheme under the Act entitled to apply the zero rate in certain circumstances where the goods are delivered to the recipient in South Africa who subsequently exports the goods and furnishes the South African vendor with documentary proof of export.
This concession is, however, being grossly abused, often with collusion between the supplier and the purchaser, with the latter furnishing false export documentation, while the goods find their way back into the domestic market. The most blatant evasion taking place is in regard to tobacco products and liquor.
The Minister of Finance has announced that the concession whereby liquor, cigarettes and other tobacco products can be purchased at the zero rate, in terms of the Export Incentive Scheme, for export by the purchaser from the RSA has been withdrawn with effect from today. The zero rate will still apply in respect of alcoholic beverages, cigarettes, cigars, cheroots, cigarillos and other tobacco products, but only where the South African supplier delivers the goods to the purchaser in the export country, or consigns them there and the supplier of the goods obtains and retains all export documentation. (Refer to General Notice No 422 of 1998 as well as to VAT Practice Note No 1 of 1998, published in Government Gazette No 18738 of today's date.)
Vendors who supply goods to traders who will subsequently export the goods are warned to be on the look out for false documentation and to report any cases of suspected fraud to their Receivers of Revenue.
Issued by:
The Commissioner for the South African Revenue Service
P O Box 402
Pretoria
0001