Do I have to pay VAT on exports?

One of our clients is based overseas and was told that even though his business was not operating in South Africa, he had to pay VAT on exports as his shipping terms were Ex Works.

We looked into the matter and found the following:

“As an indirect exporter, you are not obliged to pay VAT on exports.”

SARS VAT guide

An indirect export refers to a situation where goods are exported by the recipient (being a “qualifying purchaser” as defined) and that person removes or arranges for the removal and transport of movable goods to an address in an export country.

A supplier may elect to apply the zero rate on the supply of movable goods to a qualifying purchaser or registered vendor if such goods were delivered to either the port authority, master of the ship, a container operator, the pilot of an aircraft, or were brought within the control area of the airport authority, are situated at the designated harbour or airport and are destined to be exported from the RSA.

VAT at standard or zero rate?

Indirect exports are regulated by the export regulations published as Government Notice R316 on 2 May 2014 (in Government Gazette 37580) (the Export Regulations).123

• If an indirect export is subject to VAT at the standard rate the qualifying purchaser may claim a refund from the VAT Refund Administrator (Pty) Ltd (the VRA)124 as set out in the Export Regulations.
• Alternatively, the vendor may elect to zero-rate the supply of the movable goods, subject to certain requirements set out in the Export Regulations. See 12.1.2 of the SARS VAT Guide for more details.

12.1.1 of SARS VAT guide stipulates that:

Indirect exports The Export Regulations set out the specific procedures applicable to goods exported indirectly. In the case of indirect exports, the supplier will charge VAT at the standard rate, unless the supplier has elected to apply the zero rate under Part Two of the Export Regulations.

Part Two – Section A: 

This Part of the Export Regulations provides for a supplier to elect to supply movable goods to a qualifying purchaser at the zero-rate where the goods are initially delivered to a harbour, an airport, or are supplied by means of a pipeline or electrical transmission line in the RSA before being exported. A supplier who elects to apply the zero-rate as provided for in Part Two – Section A of the Export Regulations must obtain the relevant documentary proof as contemplated in the said Part to substantiate the application of the zero rate.