Background

In May 2014 the South African Revenue Services (SARS) issued two directives that are critical for South African exporters of goods.

The directives deal with the compliance requirements for direct exports (i.e. exports where the South African supplier is responsible to remove the goods from South Africa) and  indirect exports (i.e. exports where the foreign purchaser is responsible to remove the goods from South Africa).

Why is this so important?

Generally speaking exported goods are subject to VAT at the rate of 0%. To apply the zero-rate, vendors must comply with various requirements, failing which the supplies are treated as standard rated supplies. Output tax then becomes payable at 14% notwithstanding the fact that no VAT was charged to the client.

What is the good news?

The best news is that the zero-rating applicable to indirect exports now also applies to exports by road or rail under certain circumstances. The period within which goods must be physically exported has been increased.  Provision has also been made for special circumstances recognising certain commercial realities. The period within which supporting documentation must be obtained has also been increased. Special concessions furthermore apply  for obtaining proof of payment for exports. The period in which documentary proof must be obtained to reverse output tax paid to SARS where exports have been treated as standard rated, has been increased from 1 to 5 years.

What is the bad news?

The specific documents that must be retained are not always clearly stipulated; it merely refers to Customs & Excise policy documents. The onus is now on VAT managers to understand and apply the Customs & Excise rules.

When are the new rules effective?

The new rules apply in respect of all exports invoiced or paid for on of before 2 May 2014.