Exporters face penalties for VAT transgressions

Problems with zero-rating of indirect exports
Exporters who incorrectly
zero-rate goods bound for
overborder destinations are
facing stiff penalties for
non-compliance with the
VAT law – and according to
Value Logistics divisional
director Stephen Segal,
it’s largely a question of
ignorance rather than a
conscious effort to sidestep
the regulations.
“The only time that the
goods can be zero-rated
is where the exporter is
in full control – where
they arrange for the
goods to move from
SA to the overborder
destination. They also
have to ensure that
the transporter who is
moving the freight gets
the correct clearance
documents at the border.
“If it’s one of Value’s
clients and we do the
export for them, they pay
us for the freight, we
do the export and all
the documentation,
transport it over
the border and
bring back proof
that it has moved
across the border.
That’s a direct
export where the
exporter is in
total control of
the goods.”
According
to Segal, Sars is
doing a number
of audits and
is beginning
to penalise
exporters for failing to
charge VAT.
The problem arises
with what are termed
indirect exports. “Where
the customer collects the
goods from the supplier’s
warehouse or the supplier
delivers them to the
customer’s nominated
warehouse in South Africa
– or that of a consolidator
– for export there is no
confirmation that the goods
have left the country. Zerorating
VAT is therefore
totally illegal. The minute
there’s a VAT query by a
customer and Sars does a
VAT audit, this is the first
thing they look at.”
Segal said most buyers
out of South Africa didn’t
want to pay VAT. “If they
can prove to Sars that the
goods have crossed the
border they are entitled to
claim back the VAT, but it’s
a process.”
Exporters also often
mistakenly
believe that
the UCR
number
exonerates
them. “When
you export
you quote
this number
and when
the goods are
paid for the
same number
is quoted
so that Sars
can verify what’s gone
out and what’s come in
– and this is all done
electronically.”
The problem is
that for every
export that
has been zerorated,
the
VAT has to
be brought
to account.
“The exporter
would also
have to pay
interest on
the VAT
– and for
them to
then claim
it back is virtually impossible
because they would have
to track down the export
documents.”
The issue was brought
to Segal’s attention during
regular client visits. “More
than 90% of the time
exporters are selling out
of their factories and zero
rating – which opens them
up to significant penalties.”
They’re also often unaware
that there is a 90-day time
limit from
the time a
consignment
is invoiced
until it leaves
the country.
“You can’t
invoice it
today and
ship it in six
months’ time.
And if they
don’t get their
money on
time they have
to bring the VAT to account.”
The regulations are
less onerous for air and
seafreight where goods are
required to be delivered
to one of the designated
harbours or airports. “You
don’t physically have to
pay the freight which is the
ruling for road transport.
“The exporter is liable for
the cost of moving cargo
from the warehouse to the
port or airport. Then they
can zero-rate it.”
The bottom line is – if
you want to avoid paying
the penalties, make sure
that you have the rules at
your fingertips.
INSERT & CAPTION
The only time that
the goods can be
zero-rated is where
the exporter is in full
control.
– Stephen Segal