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Thread: Direct Exports Zero Rated for VAT

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    Direct Exports Zero Rated for VAT

    Assistance will be apprecited thanks - My question is:

    If I, as a RSA vendor do a direct export to a receiver in say Namibia, as long as I transport the goods to the receiver or pay a registered freight forwarding company to transport the goods across the border to the receiver I can have it zero rated for VAT. (Correct?)
    Now, if the receiver reimburses me for the transport costs (on his purchase Order to me as an additional item and I invoice him accordingly) will this be considered as tax evasion or something in that line? Please bear in mind that I pay the transporting company and can provide proof of payment, but I am nonetheless going to be reimbursed by the receiver in Namibia.

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    When you paid the transport company, did they issue you with a VAT invoice?

    What you do is raise a Zero VAT invoice for transport to the Namibian company, and allocate the reimbursement as a payment for transport. It should not be treated as a reimbursement, but rather an invoice for the transport. You will claim the VAT from the local transport company invoice company. The fact that the Namibian company reimbursed you for the transport is not an issue, as this is a valid transaction, as this would be seen as a payment for the service of transport. If they also include in the payment the VAT portion, this can be seen as profit in your books, which you would pay companies tax anyway. Remember in any accounting system, there is no reimbursement, with out a journal entry. Your invoice to them would balance the paperwork side of the company books for the Payment/reimbursement.

    To be morally correct, the payment from the Namibian company, should not include the VAT portion.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Thanks for the comprehensive reply.

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    Hello,

    I also have a question regarding direct exports if anyone is possibly able to help:-

    We currently export goods into Zimbabwe from RSA using a South African transport company. We zero rate the goods as well as the transport and claim the VAT back from the VAT invoices we receive from our transport and goods suppliers.

    Would it be possible for us to use a Zimbabwean based transport company to remove the goods from our supplier in RSA and deliver them to our client in Zimbabwe? How would this work from a VAT point of view on the transport, and would we still be able to zero rate the goods that we are exporting?
    What requirements would the Zimbabwean transport company have to meet?

    Hope someone can help with this.

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    Nothing wrong with what you have done, provided the transport RSA company directly ships the goods to Zimbabwe. The claiming of the VAT on the local transport invoice is the correct procedure.

    in the case that a Zim based transport company does the delivery of the goods, in most likelihood, they would issue a Zim based invoice for the services, which would require you to make a forex payment. There is no VAT claimable on this. Looking at it holistically, it is a much of a muchness to use either method. There is a small draw back on using a foreign transport company, in that you have to do a bank request to allocate forex payment for you.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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    Thank you very much.

    Is the bank request to allocate a forex payment just in order pay the Zimbabwean transporter?
    The reason we looking into this is because transport from here is so expensive, Zimbabwean transporters are offering cheaper rates.

    If we were a RSA based transport company and we had a foreign client who hired us to collect goods in the foreign country and deliver them to a RSA based company, would we zero rate the transport invoice as an export service or would we have to charge them VAT?

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    Quote Originally Posted by Export_Co View Post
    Thank you very much.

    Is the bank request to allocate a forex payment just in order pay the Zimbabwean transporter?
    Yes

    Quote Originally Posted by Export_Co View Post
    If we were a RSA based transport company and we had a foreign client who hired us to collect goods in the foreign country and deliver them to a RSA based company, would we zero rate the transport invoice as an export service or would we have to charge them VAT?
    Since you are invoicing a foreign company, it would be a Zero Rated VAT invoice, however if the local company pays the transport cost, then you invoice the local company.

    In most cases, the recipient of the goods usually pays for the transport. The deciding factor, is which company invoices for the services. If a RSA transport company, and the client is in RSA, then it will include VAT, if the client pays the transport company directly. If the Sender quotes transport, and invoices you for the transport, then you pay no VAT on the transport, as the sender pays the transport company directly.

    Just remember that when the goods crosses the border into RSA, then VAT is payable on the value of the goods, and on the import duty if any. In most cases this is paid directly to the clearing house that is used to clear the goods. Take note that the invoice from the clearing company, may have a large proportion of the invoice amount, allocated as VAT, and your accounting system, must accommodate this, and not calculate 14% VAT of the total invoice, as is normally the case on a VAT inclusive entry.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
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