Exporter offers sage advice on VAT on exports

IF YOU think that you don’t need to pay value-added tax (VAT) on exports, you might have to think again, according to Ralph Mattheus, export manager of Aspen Centralised Warehouse in Port Elizabeth. Send it “ex works”, he told FTW, and you will get hit with the tax. “Many people are still unaware that the SA Revenue Service (Sars) expects you to raise VAT on exports if no documentary proof is provided that you – as the shipper – have delivered the goods directly to a foreign customer in his country.” It’s a result of a revision of the Sars procedure – and a 2006 rewrite of its original “Practice Note 30”. “We noted this change of procedure when a major client of ours in the US told us he wanted all his export shipments sent on an “ex works” basis,” Mattheus added. His company’s initial investigation of the VAT status of such shipments seemed to indicate that no VAT was liable. “Even a renowned clearing and forwarding agent replied to me on the above question that no VAT was applicable on exports,” said Mattheus. But, while this was true in every sense of shipping until 1998, things have changed quite a bit since then. And it took Aspen a lengthy consultation with the two trade and customs specialist consultant companies, KPMG and Deloitte, to eventually uncover the latest situation on VAT on exports. “It all depends on the Sars definition of 'direct' and 'indirect' exports,” said Mattheus. “And Sars' latest ex works shipments – where the supplier hands over the goods to an agent, or a carrier at an airport or seaport – as 'indirect' exports.” The definition of 'direct' falls into the wording of the practice note as: “the supplying vendor must – consign or deliver the movable goods to the recipient; at an address in an export country; and as substantiated by documentary proof acceptable to the Commissioner. As the supplying vendor is in control of the export and ensures that the movable goods are exported from the Republic, this export is referred to as a 'direct export'.” The best answer as far as Mattheus is concerned is for the supplier to ship the goods “free carrier (FCA)”. There are other alternatives involving the co-operation of the recipient, he added. “But we were advised by KPMG that these were very clumsy from a documentation point of view, and very time-consuming to get Sars to pay a refund of the VAT.”