South Africa and Swaziland recently concluded an agreement “on mutual assistance and co-operation and the prevention of fiscal evasion with respect to value-added tax”.
Historically, the proximity and porous borders between South Africa and its neighbours have tempted vendors to carry out purported exports to these countries when in fact the goods concerned either never leave South Africa or are routed back by illegal means. In this way vendors are able to claim the zero rate of tax, which applies to exports, when the standard 14% rate should apply. The agreement seeks to prevent this practice, at least between South Africa and Swaziland.
The respective governments have each agreed to establish a refund system administered by a Claims and Refund Manager to deal with claims and refunds. A memorandum of understanding will set out the operational procedures regarding refunds and claims. When a vendor in one state charges and collects VAT on exported supplies, the importer in the other state may claim a refund of the VAT. This is done through the tax authority in the importer state. Presumably the intention is that this tax authority will satisfy itself that the transaction is genuine and that the zero rate applies before authorising the refund and calling on the tax authority in the exporter state to remit the VAT to it. The refund will then be remitted to the importer.
By placing the process of refunds in the hands of the tax authorities, the hope is that the opportunity for fraudulent VAT claims will be minimised, if not eradicated.
