A lot of us, including companies, purchase goods from the Republic of South Africa. When we collect those goods from RSA, we get charged RSA VAT and the same goods also suffer Botswana VAT on importation into the country. I want to analyse why VAT is payable in these different scenarios despite both countries belonging to the same Customs Union, the Southern African Customs Union (SACU). In this article, words importing the masculine shall include the feminine.
RSA traders are required to charge VAT on taxable goods. However, if they export the goods from RSA, such goods may be chargeable to VAT at 0% because they are exports. In general, exports attract VAT at 0%, which makes them cheaper to the buyer than if VAT was charged on them. For example, if goods costing R100 000 are exported, then their cost will remain at R100 000. However, if the goods do not qualify as exports chargeable to VAT at 0%, then they will cost R115 000, inclusive of the RSA VAT of R15 000. Consequently, they become more expensive to the Botswana buyer, at face value.
But why is it that some goods are subjected to RSA VAT whilst some are not? Well, RSA traders can only charge VAT at 0% if they are positive that they will obtain exportation documents sufficient to prove that the goods left RSA and crossed into Botswana through an RSA bill of entry (export) and a Botswana bill of entry (import). The RSA traders can only be certain that they will have both bills of entry if they are the ones delivering the goods to Botswana by road or when they consign them via rail, courier or air. It is only then that they can charge VAT at 0% to Botswana residents. If they are not certain that the goods will leave RSA, they charge VAT at 15%, making them more expensive to the buyer, again, at face value.
If a Botswana-based person travels to RSA to collect goods, the RSA traders won’t be sure that the goods will actually leave RSA, which means that they can’t apply the 0% on the sale and will charge VAT at 15%. This is the main reason why we get charged RSA VAT when we go there to collect the goods. However, the RSA VAT is claimable from SARS through a SARS refund administrator’s office based in Gaborone, and this explains my “at face value” clause. This means that the goods which cost R115 000 as stated and will effectively cost the importer R100 000 when the VAT refund is processed.
Even though goods may have suffered RSA VAT, they will also be subjected to Botswana VAT at the time of importation at the equivalence of R100 000 per the example above. The fact that Botswana and RSA belong to the same customs union does not affect VAT as SACU only impacts customs duties. The Botswana VAT is, however, not a cost to VAT-registrants as they can claim it from BURS through VAT returns if the VAT is not prohibited. However, the Botswana VAT becomes a cost to Botswana importers if they are not registered for VAT.
As has been noted, imports from RSA may suffer both RSA and Botswana VAT but the RSA VAT can be claimed back, which makes it not a cost to the importer. Further, Botswana VAT is only a cost to non-VAT registrants whilst VAT-registrants can claim it back. So, if you want to avoid the cashflow implications arising from paying both RSA and Botswana VAT, then try to get the RSA traders to arrange their own transportation or consign the goods in order for them to charge VAT at 0%.
Well, folks, I hope that was insightful and as Yours Truly says goodbye, remember to pay Caesar what belongs to Ceasar. If you want to join our Tax Whatsapp group or to know more about our eight tax e-books, send me a text on the cell number below.
Disclaimer: Jonathan Hore is a Managing Tax Consultant at Aupracon Tax Specialists. This article is of a general nature and is not meant to address the particular matters of any person. Feedback can be relayed to firstname.lastname@example.org or 7181 5836.