Customs and Excise highlights

A brief weekly overview of the Customs and Excise environment.

15 Jul 2016 5 min read Tax and Exchange Control Alert Article

Below are this week’s selected Customs & Excise highlights:

Amendment of form DA260 & annexures: Excise account for “Other Fermented Beverages …[&] … Spirits Products” for the various types of excise warehouses.

ITAC published its “Guidelines Pertaining to Rebate of the Duty On Rebate Provisions in terms of Schedule 4 of the Customs and Excise Act” (presumed should read schedule 3). The guidelines has regard to item “311.40/5513.21/01.06 for rebate of duty on woven fabrics used for the manufacture of school shirts”.

Draft Amendment Bills were published requiring comments by 8 August 2016, as follows (not a comprehensive list):

  1. Amendment of s35A of the Customs and Excise Act, No 91 of 1964 (Customs Act) as follows:
    The current diamond stamp marker on cigarette containers will be replaced by suitable marking and tracking and tracing numbering on relevant tobacco product containers.
  2. Amendment of s105 of the Customs Act to replace the calculation of interest from where part of a month is rounded to the entire month, to a basis of daily balance owing.
  3. Insert s119B to the Customs Act. The section relates to “Arrangements for Obtaining Undue Tax Benefits” and reads as follows:
    1. Notwithstanding anything in this Act, whenever the Commissioner is satisfied that any arrangement:
      1. has been entered into or carried out which has the effect of any person obtaining a tax benefit; and
      2. having regard to the substance of the arrangement:
        1. was entered into or carried out by means or in a manner which would not normally be employed for bona fide business purposes, other than the obtaining of a tax benefit; or
        2. has created rights or obligations which would not normally be created between persons dealing at arm’s length; and
      3. was entered into or carried out solely or mainly for the purpose of obtaining a tax benefit, the Commissioner may determine the liability for duty imposed under this Act, and the amount thereof, as if the arrangement had not been entered into or carried out, or in such manner as in the circumstances of the case the Commissioner deems appropriate for the prevention or diminution of that tax benefit.

    2. For the purposes of this section:

      ‘dealing at arm’s length’ means a transaction in the open market in which two or more independent persons acting in good faith, without regard to the liability for any tax, duty or levy, would freely and without conflict of interest agree to transact in the ordinary course of business;

      ‘arrangement’ includes any transaction, operation, scheme or understanding, whether enforceable or not, including all steps and transactions by which it is carried into effect; and

      ‘tax benefit’ includes:
      1. any reduction in the liability of any person to pay any duty;
      2. any increase in the entitlement of any person to a refund of any duty; or
      3. any other avoidance, postponement or reduction of any liability for the payment of any tax, duty or levy imposed under this Act or by any other law administered by the Commissioner.
    3. An arrangement is presumed to have been entered into or carried out for the sole or main purpose of obtaining a tax benefit unless and until the party obtaining a tax benefit proves that, reasonably considered in light of the relevant facts and circumstances, obtaining a tax benefit was not the sole or main purpose of the arrangement”.

      It will be interesting to see how the above section will be interpreted and/or utilised considering the common law rule that persons may structure their tax affairs in such a (lawful) manner as to pay less tax. The section may become a valuable weapon in the SARS arsenal, especially (but not limited to) the Valuation field within Customs.

4.  Amendment of s113 of the Customs Act prohibiting the importation and manufacture of
     cigarettes of a mass of 2kg/1000 cigarettes to 0.8kg/1000 cigarettes.

             5.  Insert item 412.09 in Schedule 1 to the Value Added Tax Act, No 89 of 1991, exempting
                  VAT on certain bonded goods in specified cases of vis major or other exceptional
                  circumstances. The item reads similar to the corresponding item in the Customs Act, as

Goods in respect of which the customs duty, together with the fuel levy (where applicable), amounts to not less than R2 500, proved to have been lost, destroyed or damaged on any single occasion in circumstances of VIS MAJOR or in such other circumstances as the Commissioner deems exceptional while such goods are:

a. in any customs and excise warehouse or in any appointed transit shed or under control of the Commissioner;

b. being removed with deferment of payment of duty or under rebate of duty from a place in the Republic to any other place in terms of the provisions of the Customs and Excise Act; or

                     c. being stored in any rebate storeroom:

Provided that:

(i) no compensation in respect of the customs duty, fuel levy or VAT on such goods has been paid or is due to the owner by any other person;

(ii) such loss, destruction or damage was not due to any negligence or fraud on the part of the person liable for the duty or VAT; and

(iii) such goods did not enter into consumption and the importer of those goods was not liable for the tax imposed in terms of section 7(1)(b) when those goods were initially imported”.

The item will be a welcome equivalent to the corresponding item in the Customs Act, especially for transporters of bonded goods and Customs bonded warehouses.

The National Treasury published a Policy Paper on “Taxation of Sugar Sweetened Beverages” (SSB). It proposes a tax on the mentioned products in variable manners, including a potential excise tax (likely on importation and local manufacture) of “in the region of R2.29 per litre of SSB, or R0.0229 (i.e. 2.29 cents) per gram of sugar contained in a litre of SSB”. Written comments are required by 22 August 2016.

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