Amendments to the VAT Act – Goods abandoned to customs

The interaction between the VAT and the Customs and Excise Act necessitated this amendment.

The background to the amendment is that where goods are abandoned or destroyed under customs supervision, such goods are deemed by the C&E Act to have been cleared for home consumption prior to its abandonment or destruction. This has the implication that the goods are deemed to be imported for VAT purposes and that output tax becomes payable on the importation.

Where the goods are imported by a non-vendor or for purposes other than use in a taxable activity, the VAT will become a cost of importation in respect of goods that have never physically been imported into South Africa.

Where the goods are cleared in respect of a VAT enterprise activity it also does not necessarily follow that the VAT on the goods will qualify as recoverable input tax. It would need to be argued that it is a necessary concomitant of the business operations and that such goods have therefore been consumed in the course of the enterprise.

To overcome the unintended VAT outcome, such imports will be exempt from VAT w.e.f. 1 April 2014.

Information courtesy of:  LexisNexis South Africa

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