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New additions in the Binding General Ruling. The Vat treatment on international short-term insurance

by , 07 May 2015
If your business is associated with the short-term insurance industry, SARS has a binding general ruling that affects you and how you deal with the Vat issues when treating local and international short-term insurance.

By a binding general ruling, we refer to a ruling written by SARS for a specific industry, on how to deal with various Vat issues.

Here's more information an the Binding General Ruling which sets out the Vat treatment of several issues, that have come to light in discussions between SARS and the short-term insurance industry.

The ruling clearly sets out what rate of Vat to use and when.

Let's look at the issue regarding short-term insurance in the international arena.

More precisely, the Vat treatment on international transport policies.

When you supply short-term insurance for international transport you must zero rate the supply (Section 11(2)(d) of the Vat Act).

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This is when the transportation is:

• From a place inside SA to a place outside SA;
• From a place outside SA to a place inside SA; or
• Between two places outside SA.

Before we go into how to apply the zero rate to international transport policies, let's first take a look at what they are.

What are international transport policies?

International transport policies also include:
• Stock through-put;
• Goods in transit;
• Travel coupon cover risk policies; and
• Marine insurance.

Let's explain each one in more detail.

1. Stock through-put insurance

This is cover for goods in a manufacturing process. This insurance combines the traditional marine cargo, inland transit and inventory insurance policies bought individually in the marine and property markets.

2. Goods in transit insurance (GIT)

This provides financial protection against the loss of, or damage to, goods your customers transport as part of their stated business activity.

3. Travel coupon cover risk policies

This particular aspect refers to insurance vouchers for travellers.

4. Marine insurance

Marine insurance covers boats or ships in case they sink.

For instance, if you supply marine insurance, you must charge the Vat at the zero rate. But only if you supply it:
• Directly to a person (and not through an agent),
who's not a resident of South Africa;
• To a person who's not a vendor;
• Cover is for goods transported from a point in South Africa to a point in another country or vice versa; or
• The policy covers the loss to a 'foreign-going ship'.

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