Overpayment of VAT on the importation of goods
(Media Release: Issued and provided by the South African Revenue Service)
There appears to be some uncertainty regarding the amount of input tax that can be deducted by a vendor (principal or importer) when a clearing agent makes an error in calculating the customs duty and VAT on an importation of goods which results in an overpayment of customs duty and VAT.
In particular, this situation may arise when the clearing agent does not obtain payment of the duties and VAT upfront from their client (principal or importer) but recovers that amount later after having used their deferment arrangement to process the payment.
Due to the volume of transactions processed by clearing agents on behalf of multiple customers, it sometimes happens that an incorrect amount of VAT is calculated, declared, and paid on the importation of goods. Examples include the application of an incorrect currency or exchange rate, or principals that give duplicate clearing instructions.
Applicable legal principles
VAT is levied on the importation of goods by any person into South Africa, subject to certain exceptions and exemptions set out in Schedule 1 to the VAT Act. The value on which VAT is payable on importation is based on the value determined under the Customs and Excise Act, 1964 (see section 13(2) of the VAT Act). The principal or importer, and not the clearing agent, is the person that is deemed to import the goods for VAT purposes and is also the person that is liable for the payment of the VAT on importation [see sections 7(2) and 54(2A)(a)].
The clearing agent merely makes the customs clearance declaration (such as a bill of entry) and facilitates the payment of the import VAT to SARS on behalf of the principal/importer in terms of a contract for services between the parties.
It follows that, when a vendor has acquired the imported goods for making taxable supplies, the vendor (principal or importer) is the only person that may deduct the VAT paid on the importation of the goods concerned, subject to the relevant documentary evidence. There is no provision in the VAT Act, which allows the clearing agent to deduct the input tax in relation to any VAT paid on goods imported into South Africa on behalf of their client.
Read the full VAT Connect Issue 17 newsletter here which includes information on legislative amendments, VAT on the importation of goods, securities lending arrangements as well as the discussion paper on VAT modernisation and VAT rulings.