Sars open to talks over oil and gas rebate

Industry wants relief for temporary importation of equipment

The International Trade

Administration Commission

of South Africa (Itac)

has declined an industry

application for the creation

of a rebate facility for the

temporary importation of

equipment for the oil and

gas sector.

In a letter to industry Itac

explains that such a rebate

requires the endorsement of

the South African Revenue

Service (Sars).

Sars acting spokesman

Luther Lebelo said the

decision was taken not to

endorse the application

simply as there were existing

general provisions to cater

for the activities envisaged

by the oil and gas industry.

“For example storage in a

licensed customs warehouse,

for repair and manufacture

for export (rebate item

470.03) and temporary

admission (rebate item

490.90),” he said.

Various industry roleplayers,

however, maintain

that despite this a separate

rebate is required.

“The problem faced by

industry is that temporarily

admitted oil and gas

equipment is not specifically

mentioned in any of these

general rebate provisions,

and therefore such

equipment is subject to the

same onerous VAT security

requirements applicable to

all other goods, particularly

high risk goods,” explained

one stakeholder.

Issues around equipment,

vessels and aircraft servicing

the oil and gas industry

have been ongoing for

some time, with customs

experts calling for a specific

rebate item covering

temporarily admitted oil

and gas equipment to allow

for an easier operating

environment.

“The call for the new

rebate item was simply

to distinguish oil and gas

equipment from other

equipment. We don’t want

the oil and gas equipment

to be classed with other

so called high risk goods

and therefore subject to

the same VAT security

requirements,” said a

source.

“Goods can be stored

in South Africa for two

years, with legislation

making provision for some

extension on application.

The new customs

legislation however

contains special provisions

that oil and gas equipment

can be stored for up to

seven years, ie, two years

plus an extension for up to

five additional years. The

question now exists as to

how one identifies this oil

and gas equipment under

the current rebate.”

According to Lebelo,

item 460.23 in Schedule

No. 4 of the customs and

excise act, 1964, provides

for a rebate of customs

duty on all imported goods

for the exploration or

production of petroleum

in South Africa.”

The oil and gas industry

maintains there are many

pieces of equipment

being imported for the oil

and gas sector that have

multiple other applications

and can be used across

several industries which

is why there was a request

for a temporary admission

rebate item dealing with

oil and gas in particular.

Lebelo said the matter

was however not closed.

“If the oil and gas industry

remains of the view that

the existing rebate items

are unsuitable to the

industry, Sars is willing

to engage the industry

further in consultation

with National Treasury,

Itac and the Department

of Mineral Resources.”

INSERT

Temporarily admitted

oil and gas equipment

is not specifically

mentioned in any of

these general rebate

provisions.