Following our letter dated 09 November 2016, regarding VAT implications on additional or supplementary commissions from carriers, several of our members have now started to receive audit findings from SARS.
As you will recall from the communique, Shepstone Wylie Attorneys accompanied ASATA to a meeting with SARS to understand the organisation’s concerns and whether there could be an efficient and effective way to resolve the dispute. We also attempted to understand what SARS was focusing on and at the time of our letter to you, suspected that it only related to supplementary commissions, as prior to this meeting, SARS believed that the additional supplementary commissions were for the supply of some other service and that it should be subject to 14%, irrespective that the underlying service was either for the arrangement of local or international travel.
The arrangement of international travel is zero-rated in terms of section 11(2)(d) of the VAT Act and SARS’ view was that it does not automatically follow that the additional or supplementary commissions are also zero-rated in terms of section 11(2)(d).
Based on the SARS findings received to date, their position regarding the application of zero-rating is now clear. SARS believes that the service of arranging international transport is provided to the traveller, not the airline and that all commissions, overrides and rebates received from airlines is not consideration in respect of “arranging international transport” but for a separate supply, being the selling of tickets. As a result of this definition by SARS, they are of the opinion that commissions, overrides and supplier rebates received, do not fall with the ambit of “international transportation” or “arranging” thereof and therefore cannot be zero-rated.
ASATA’s current opinion is that commissions, overrides and supplier rebates in the case of international travel is also zero-rated because there is not another supply and that the arranging of international transport and the selling of tickets is one and the same thing.
What should you do if you receive a similar audit finding from SARS?
You will be required to respond to the findings within 21 days of receipt. We recommend that you apply to SARS for an extension. This should provide you with an additional 21 days to respond.
Engage your legal counsel and/ or auditors and request their assistance in drafting an appropriate response to SARS.
Prior to sending the response to SARS, we would request that your share it with ASATA. This will further guide and inform how the industry will look to respond to the matter, as a collective and whether or not we believe we have grounds to challenge SARS’s interpretation on the Act.