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Revealed: Vat implications for services performed on foreign owned aircraft, vehicles, trains or ships

by , 13 January 2014
Do you carry out any services on foreign owned aircraft, vehicles, trains or even ships? If so, read on to discover the Vat implications.

South African Vat vendors often perform services for foreign-owned aircraft, vehicles, trains or ships.

These services include:

  • Cleaning;
  • Reconditioning;
  • Repairs and maintenance; and
  • Handling, piloting, salvaging or towing foreign-going ships or aircraft.

The Vat Act defines these as a foreign-going aircraft and a foreign-going ship.

So what are the Vat implications if you perform services on foreign owned aircraft, vehicles, trains or ships?

The Practical Vat Loose Leaf Service says Vat on any services you carry out for foreign-owned aircraft, vehicles, trains or ships must be at the zero-rate on the tax invoice.

For example, Fresh Air Cleaners, a Vat-registered vendor, provides a local airport with cleaning services for aeroplanes that land on South African soil from international destinations. It applies the zero-rate for Vat on its invoices if the aeroplanes are owned by foreign companies and registered in foreign countries.

But if an aeroplane owned by a local company and registered in South Africa arrives from a foreign country and is serviced by Fresh Air Cleaners, Vat must be charged at the standard rate of 14%.

Here's another example: South African Sea Repairs is a local company. It paints the hull of the 'Paradise', a foreign-registered ship that's berthed in the Durban harbour. Sea Repairs will levy Vat at the zero rate on its invoice. If a locally owned ship is serviced by Sea Repairs, Vat will be levied at the standard rate of 14%.

Now that you know the Vat implications for services done on foreign owned aircraft, vehicles, trains or ships, make sure you comply with Vat law to avoid penalties and interest.

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