Where a vendor exports movable goods from South Africa, the exports qualify for VAT at the rate of zero per cent. The Value Added Tax Act 89 of 1991 (VAT Act) draws a distinction between direct exports and indirect exports.
Direct exports are exports where the supplying vendor consigns or delivers the goods at an address in an export country and the supplying vendor is responsible for the transportation of the goods to the foreign destination. Indirect exports are exports where the foreign purchaser takes possession of the goods in South Africa, and the foreign purchaser exports the goods from South Africa to a foreign destination.
The application of the zero rate to the exportation of goods on a direct or indirect basis is, in terms of the provisions of section 11(3) of the VAT Act, subject to the vendor obtaining and retaining the documentary proof which is acceptable to the Commissioner. The Commissioner therefore has a discretion to determine what documentary proof he would regard as sufficient proof to substantiate the vendor’s entitlement to apply the zero rate.
With regard to direct exports, the Commissioner lists the documentary proof that must be obtained and retained by the vendor to apply the zero rate in Interpretation Note 30 (IN 30), the third issue of which was published on 5 May 2014. However, the Commissioner did not only list the required documentary proof that must be obtained, but also stipulated that it is a requirement to export the goods within 90 days (subject to certain exceptions) reckoned from the date an invoice for the goods is issued, or when any payment for the supply is received, whichever date is earlier.
IN 30 further stipulates that the Commissioner may extend the period if the goods are not exported within 90 days due to circumstances beyond the supplying vendor’s control. IN 30 states that “circumstances beyond the vendor’s control” would include a natural or human-made disaster, a serious illness of or accident concerning the vendor or in the case of a juristic person, a serious illness of or accident concerning the person responsible for arranging the export.
Indirect exports are governed by the regulations published in Government Notice R.316 in Government Gazette 3759 of 2 May 2014 (Export Regulations). Part One of the Export Regulations provide for the foreign purchaser to claim a refund of VAT paid on the goods acquired for export from the VAT Refund Administrator (VRA) where the supplier levied VAT at the standard rate. Part Two provides for the vendor to zero rate the supply of the goods which are exported by ship or air, and in specific circumstances by road or rail. The Export Regulations prescribe the documents which must be presented to the VRA in the case of a refund claim under Part One, and the documents which must be obtained and retained by the supplying vendor where the supplying vendor opted to zero rate the supply under Part Two. The Export Regulations also require that the goods must be exported within 90 days from the date of the tax invoice in the case of a refund claim, and the refund claim must be submitted to the VRA within 90 days from the date of export. Where the supplying vendor zero rated the supply under Part Two, the goods must be exported within 90 days from the earlier date of the issue of an invoice or the time any payment of consideration is received by the vendor.
In both instances contemplated under the Export Regulations, the Commissioner may extend the 90-day period within which the goods must be exported if the delay is due to circumstances beyond the control of the foreign purchaser. The Export Regulations define the term “circumstances beyond the control” to include a natural or human-made disaster, a serious illness of or accident concerning the foreign purchaser or the person duly authorised to represent the foreign purchaser.
Exporters are likely to experience difficulty in meeting the prescribed time periods for exports in IN 30 and the Export Regulations as a result of the COVID-19 pandemic and the measures put in place by the President. BGR 52 stipulates that this situation is considered to be circumstances beyond the control of the vendor, qualifying purchaser, or the person duly authorised to represent the qualifying purchaser, as contemplated in IN 30 and the Export Regulations respectively. BGR 52 accordingly extends the period within which the goods must be exported under direct and indirect exports by an additional three months. The period within which a refund claim must be submitted to the VRA under Part One of the Export Regulations, is also extended by an additional three months, to six months from the date of export.
BGR 52 only applies to supplies where the prescribed time periods in IN 30 and the Export Regulations have not yet been exceeded as at 26 March 2020.
In light thereof that the Commissioner considers the COVID-19 pandemic and the measures put in place by the President to be circumstances beyond the control of the vendor as contemplated in IN 30 and the Export Regulations respectively, one could argue that the same principles should equally apply to the application of sections 187(6), 187(7) and 218 of the Tax Administration Act 28 of 2011 (the TAA). Section 187(6) provides for a senior SARS official to direct that interest payable by a taxpayer as a result of circumstances beyond the taxpayer’s control, is not payable by the taxpayer. Section 187(7) provides that such circumstances include a natural or human-made disaster, or a serious illness or accident. Section 218 of the TAA provides for a penalty to be remitted where a taxpayer was incapable of complying with its obligations due to, amongst others, a natural or human-made disaster, a serious illness or accident or any other circumstance of analogous seriousness.