New requirements for input tax claims on importation of goods by a vendor

This article is reproduced with authority from MGI Bass Gordon GHF, Chartered Accountants (SA).
Tel: 021 405 8500
Article source


Currently, to claim back the tax levied on the importation of goods (import VAT) in terms of the Value-Added Tax Act (“VAT Act”), the vendor must provide the following:

1. Customs Declaration or other any other prescribed Customs document (usually the Bill of Entry); and
2. Proof that the VAT levied on the goods imported into the Republic has been paid to the South African Revenue Service (“SARS”) Customs either by the vendor, or that vendor’s agent.

In practice, requirement (1) above is contentious. This is because most vendors (including their clearing agents) make use of the deferred payment arrangement with SARS, which includes a window period of 30 days during which the import VAT levied can be paid. Therefore, while the import VAT is unpaid (because of a deferred payment arrangement in place), what truly constitutes an acceptable proof of payment to entitle the vendor to the import VAT claim?

While SARS, until now, has, in terms of the VAT Act, generally allowed vendors who account for VAT on an invoice basis to claim their import VAT on the earlier of invoice date (Bill of Entry date) or payment, it has also always been concerned about the mismatch of import VAT payment and claim arising from the deferred payment arrangement system which it operates with taxpayers. SARS expressed this concern in the following example:

If an importation is towards the end of a vendor (importer’s) tax period, there will be a timing difference/mismatch between the payment of the VAT to the agent and the proof that the agent actually paid the VAT to SARS (especially when that agent has a deferred payment arrangement- as most of them do). The problem seems to be that as long as the agent acknowledges to the vendor on a document (e.g. a tax invoice for services rendered) that the payment of the VAT on importation has been received, the vendor should, in principle, be allowed to deduct the VAT on importation as input tax despite the fact that the agent might not have paid it (or not paid the full amount) over to SARS at that time because of the deferred payment arrangement.

To remove the uncertainty as to what is acceptable proof of payment of import VAT to entitle the vendor to an import VAT claim, section 16(3)(a)(iii) of the VAT Act has been amended to the effect that a vendor can only claim the VAT levied on importation in the tax period in which the import VAT was actually paid to SARS. This amendment takes effect from 1 April 2014.

In response to the amendment above, vendors, whose imports are completely managed by their clearing agents must ensure that the clearing agent has actually paid over the import VAT to SARS in the tax period in which they intend to submit their import VAT claims to SARS. For vendors who make use of clearing agents but manage all payments involved, it will simply be business as usual in terms of monitoring payments to SARS. Overall, from 1 April 2014, the VAT levied on the importation of the goods can only be claimed in the VAT return covering the period in which the import VAT was actually paid to SARS.