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Charged Vat at a zero-rate on exported goods? Keep these six documents

by , 12 August 2013
When you charge Vat at a zero-rate, you must prove to SARS you were entitled to do so. If you fail to provide documentary proof to SARS, it'll charge you additional penalties and interest. Don't take that risk. Make sure you keep these six documents to avoid SARS penalties.

A direct export is where the South African seller (vendor) delivers or arranges and pays for the delivery of goods in his foreign client's country, explains the Practical Vat Loose Leaf Service.

For example, let's say Princess Lucy of Luxembourg orders a matching set of earrings and a ring in diamonds and emeralds from the website of Barbie's Fashion Jewelry Boutique.

The jewellery costs R55 000 and the Princess pays with her credit card. Barbie must now ship (deliver) the goods to the castle in Luxembourg. Because of its value, Barbie decides to take the jewellery herself to Luxembourg. She then applies the zero-rate of Vat to her tax invoice, which she issues in Princess Lucy's name.

The reason?

The Princess's goods were a direct export.

But there's a catch.

She needs to show SARS that she was entitled to do so. And she can only do this if you have the following documents:

Are you aware of the documents you must keep to substantiate your zero-rating of directly exported goods?

  1. The order or contract between you and your foreign client. In this example it'll be the Internet order and documents that Barbie has on her website;
  2. Your copy of the zero-rated invoice. In this example, the original tax invoice goes to Princess Lucy;
  3. A copy of the VAT262 form or VAT266 form. This must bear an original Customs and Excise stamp;
  4. Customs export documentation such as CCA1 and DA550. You must complete these documents as the seller of the goods;
  5. Proof that your client received the goods. (In this case, a signed delivery note by the Princess); and
  6. Proof of payment. In this example, it'll be the transfer of funds from Princess Lucy's credit card to Barbie's bank account.

Remember, if you don't have your documents correct, SARS will see the zero-rated invoice as a standard-rated one. When it does this, it'll deem the amount must include Vat at 14%. Plus, it'll charge you additional penalties and interest. This means you'll end up losing money because you'll have to pay the 14% Vat out of your own pocket, cautions the Practical Vat Loose Leaf Service.

So keep these documents to substantiate your zero-rating of directly exportedgoods.



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