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Customs VAT – Change of input claim timing rules

All Categories 09.02.15

The current requirements.

When importing goods into South Africa one of the many costs associated with the import is something called Customs VAT which is usually paid to the clearing agent with all the other expenses and import charges. This VAT may be claimed as all other input VAT provided you have documentary proof: tax invoice from the clearing agent, bill of entry and proof of payment of the tax. This payment of tax is usually made to the clearing agent and this was sufficient proof that the tax has been paid and is accepted by SARS in practise. The effect of this is that the taxpayer will claim the Customs VAT as soon as it is paid to the clearing agent.

New requirements

In addition to the above SARS will now require proof that the clearing agent has paid the Customs VAT to SARS from the taxpayer claiming the input which means that in order to claim the input the taxpayer will have to obtain from their clearing agent proof of payment to SARS of their specific VAT. While this may not seem a significant change as one would assume that the clearing agent pays over the tax to SARS upon receipt from the taxpayer this is not the case. Clearing agents operate a deferment account with SARS in which Customs VAT received during a certain month is paid over to SARS during the following month. This creates a timing issue with regards to the claiming of the input by the taxpayer (usually when invoiced and paid to the clearing agent) and the payment of the tax to SARS by the agent.

Timing of import payments

When importing goods it would be advisable for the taxpayer to be aware of the above input claim constraints. It would be wise to liaise with the clearing agent to ensure that the import documentation, invoice and payment of Customs VAT (by the taxpayer to the clearing agent AND payment of the tax to SARS by the agent) fall within the same VAT period in which the taxpayer wishes to claim the input deduction. Failing this the input deduction will only be able to be claimed in the taxpayer’s following VAT period potentially causing significant cash flow issues if the amount is material for the taxpayer.

Example

A imports goods and receives the import documentation and invoice from the clearing agent on 23 January 2015 and settles the amounts due on 1 February 2015. The clearing agent pays the tax over to SARS during March 2015 (the month after receiving the VAT from the taxpayer). A has a VAT period of Jan/Feb (B VAT period). Under the old rules the taxpayer could have claimed the input in this period as he would have documentary as well as proof of payment of the relevant taxes during this VAT cycle (Jan/Feb), but under the new rules would only be allowed to claim this input during his next VAT period being Mar/April 2015. This clearly illustrates a delay in claiming the input from the end of March 2015 to the end of May 2015.

Taxpayers who import on a regular basis, especially large Rand amount shipments, would be well advised to take note of the timing with regard to the cash flow implication of claiming the input.

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Since 1992

PFG and Associates (Pty) Ltd was founded in 1992 by Malcolm Freeth. Ever since the practice provides industry - focused accounting, tax and advisory services.


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