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Know when to charge Vat on passenger transport or face 200% penalties

by , 27 November 2014
If you're a transport company, you need to know about the Vat implications of the type of transport you offer.

You see, while the transport of fare-paying passengers in South Africa is exempt from Vat, this doesn't apply to all types of transport in SA.

According to the Vat Act, some types of transport are Vat exempt and others are subject to the normal 14% Vat rate.

If you apply the wrong Vat treatments to the type of transport you offer, SARS won't hesitate to slap you with a massive 200% penalty.

To help you avoid this problem, today we're telling you exactly when you can and can't charge Vat on passenger transport...

 
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I'd like to tell you how I saved R75 327 in Vat this year. No tricks. No evasion. Just two little things I didn't know I could claim.
 
By reading this letter, it will tell you how to avoid costly Vat mistakes, save you money, time and be your CEOs favourite person when you save the company R1 000s of Rands in Vat refunds this year.
 
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Four different transport types and their Vat treatments

 
1. Road transport;
2. Rail transport;
3. Air transport; and
4. Sea transport (e.g. Cape Town to Durban).
 
So how do you handle the Vat on these four different types of transport?
 

Here's how to handle the Vat on exempt transport 

 
Road and rail transport to fare-paying passengers within SA, is exempt from Vat. This means, as the owner of vehicles used for road and rail transport you'll never charge your passengers Vat on the price of their tickets. You don't even have to register for Vat. Your business falls out of the scope of Vat entirely. It's irrelevant if your turnover exceeds R1 million. 
 
As a result, you can't claim input tax on expenses relating to your transport service. For example, if you have a bus company and purchase a bus, you can't claim input tax on it.
 
But if you offer road or rail transport within SA and you cross-borders, you have to register for Vat, but only for the part subject to the zero rate. 
 
That means, if you offer any of these eight passenger transport services, they're classified as Vat exempt transport:
 
1. Taxis;
2. Shuttle services;
3. Bus fares;
4. Gautrain fares;
5. Metro rail fares;
6. Shosholoza Meyl fares; 
7. Ambulance charges (but not air ambulances); and
8. The Blue Train.
 
Just remember, if you offer any additional services, such as parking at the station, these have a completely different Vat treatment and are subject to Vat at the 14% standard rate.
 
So when will you charge Vat?
 
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Here's when you can charge Vat as a passenger transport provider

 
You'll only charge Vat if your passenger transport services operate via air or sea. These are both subject to Vat at the 14% standard rate.
 
This means, if you offer either of these services you have to register for Vat, as well as collect Vat on your passengers' tickets. 
 
This also means you can only claim input tax on these two types of transport. 
 
Now that you know when you can and can't charge Vat on your passenger services ensure you do so correctly. Otherwise, SARS will charge your 200% penalties.
 
For more information on Vat and passenger transport, check out the Practical Vat Loose Leaf Service.
 


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