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Case study on zero-rated goods: Master Currency vs. SARS Supreme Court of Appeal

by , 28 May 2015
If you think that supplying goods or services in a duty-free zone means you shouldn't levy Vat you're wrong.

That's something Master Currency had to learn in Court after making the mistake to zero-rate their services.

Here's what happened:


What you can learn from Master Currency's Vat case


Master Currency operates foreign exchange facilities in the duty-free area of OR Tambo International Airport. It levied Vat at the zero rate on its charges to non-resident departing passengers. It did this in good faith as shops in the duty-free zone sell goods at the zero rate.

But then SARS came to visit.

It raised an assessment on Master Currency. And naturally, Master Currency's auditors queried this procedure. As a consequence, Master Currency asked for a ruling from SARS.

SARS said the services Master Currency provides are standard-rated and so SARS issued Vat assessments on the tax fraction of foreign exchange commission Master Currency earned.

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So where did Master Currency get their Vat wrong?

Whenever a local or foreign passenger buys goods in the departure duty-free shops, he's taking the goods out of South Africa. He'll use them in another country. So there's no Customs duty and the sale is zero-rated (e.g. liquor, cigarettes, etc.).

However, notice that the foreign exchange services for departing travelers in the departure lounge receive are for use in South Africa. Therefore, these must be standard-rated because goods for use in South Africa couldn't be zero-rated. The Supreme Court of Appeal dismissed the appeal. So the assessment from SARS remained in place.

Here's what you can learn from this case: When you charge Vat at the zero rate, you must prove to SARS you were entitled to do so! If you don't give documentary proof, it will charge you additional penalties and interest.

As for Master Currency, they should've first understood what a zero-rated supply was. If they did, they wouldn't have found themselves in this trouble. Keep in mind that supplies made to non-residents still physically in South Africa are standard rated.


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