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Value-Added Tax Act, 1991 (Act No. 89 of 1991)


Export Incentive Scheme



One of the principles of the South African VAT system is that VAT at the standard rate is imposed when movable goods are supplied in or imported into the RSA and VAT at the zero rate may be applied by a RSA vendor where movable goods are exported, provided satisfactory proof of export can be furnished.


Imports from and exports to countries other than Botswana, Lesotho, Namibia and Swaziland (the BLNS Countries) have been controlled since the introduction of VAT on 30 September 1991. As from 16 November 1998 imports from and exports to the BLNS Countries will also be controlled.


The term "exported" as referred to in section 11(1)(a) is defined in the Act in section 1, inter alia, as follows:


" ‘exported’, in relation to any movable goods supplied by any vendor under a sale or instalment credit agreement means--

a) consigned or delivered by the vendor to the recipient at an address in an export country as evidenced by documentary proof acceptable to the Commissioner; or
d) removed from the Republic by the recipient for conveyance to an export country, in accordance with the provisions of an export incentive scheme approved by the Minister; ".


A distinction must therefore be made between exports as defined in paragraph (a) and exports as defined in paragraph (d). "Exported" as defined in paragraph (a) can be classified as "direct exports" and "exported" as defined in paragraph (d) as "indirect exports".


Direct exports


(VAT Practice Note No. 1 of 1998 has been replaced by VAT Practice Note No. 2 of 1998):


Where a RSA vendor supplies movable goods and consigns or delivers them to a recipient in an export country he must, in terms of section 11(1)(a) read with paragraph (a) of the definition of "exported" in section 1 of the Act apply the zero rate (see VAT Practice Note No. 2 of 1998). The term "consigned or delivered" is defined in the Practice Note as follows:

i) "Physically delivered by the RSA vendor to the recipient at an address in the export country; or
ii) where the RSA vendor uses a cartage contractor (supplier's cartage contractor) to deliver the goods on his (the RSA vendor's) behalf to the recipient at an address in an export country, only if the supplier's cartage contractor is contractually liable to the RSA vendor to effect delivery of the goods and the RSA vendor is liable for the full cost relating to such delivery. "


Indirect exports (The Export Incentive Scheme)


Except as provided in Part Two of The Scheme, where the movable goods are delivered to the recipient in the RSA, VAT at the standard rate must be levied as from 16 November 1998, irrespective of whether the movable goods are intended for consumption locally or in an export country. Where the movable goods are exported through a designated commercial port, facilities are available for the VAT to be refunded to the qualifying purchaser by the VRA, provided the requirements as set out in The Scheme are complied with.


The Export Incentive Scheme, [originally published as General Notice No. 397 of 1992 (in Government Gazette No. 13949 dated 27 April 1992) and amended by Notices No. 169 of 1993 (published in Government Gazette No. 14593 dated 26 February 1993) and 422 of 1998 (published in Government Gazette No. 18738 dated 11 March 1998)], is now replaced in its entirety by The Scheme.


The Scheme


i) The Scheme requires, in Part One, that a supply of movable goods that are not exported by the RSA vendor be taxed at the standard rate and provides for the refund of the tar by the VRA only, at a designated commercial port, provided the requirements as set out in The Scheme are complied with.


ii) The Scheme provides in Part Two for a choice by the RSA vendor to charge VAT at the zero rate or at the standard rate.


iii) The Scheme also provides guidelines for a qualifying purchaser who exports movable goods to obtain a VAT refund and also for a REA vendor to furnish purchasers with information in this regard. The Scheme applies to indirect exports of movable goods but does not include services.




Where movable goods are temporarily admitted into the RSA for purposes of repair or servicing, the movable goods and services supplied in connection therewith may be supplied at the zero rate, provided that the non-resident must obtain a form VAT 262 at the point of entry into the RSA. The non-resident can then approach the RFA vendor from the outset on the strength of the VAT 262 form, duly endorsed by RSA Customs and Excise, and request that the supply be zero-rated. The form VAT 262 must be retained by the RSA vendor for a period of five years. The provisions relating hereto are contained in section 11(2)(g)(ii) of the Act and do not form Part of The Scheme.